What Is Memecoin?

Introduction

Memecoins may be the most dynamic and controversial of all cryptocurrencies, they are highly praised by those who love them while haters keep slandering them on the other side.

What is Meme

Understanding “meme” is a necessary start to explaining memecoin.
The word meme itself is a neologism coined by Richard Dawkins, originating from his 1976 book The Selfish Gene. Dawkins likened culture to the genes of living beings, and believed that the evolutionary processes of copying (imitation), mutation, and selection also existed in the inheritance of culture. In this case, memes can be called “cultural genes”, which you can also simply regard as “slang” or “joke”. It may refer to an Internet meme, typically an image, that is remixed, copied, and circulated in a shared cultural experience online.

Types of Memes

Being the basic unit of cultural transmission, a “meme” comes into being when you can’t help imitating and spreading a certain one. There are countless types of popular memes on the internet, for example, a picture of a sad frog, the famous music video of Rickroll, and even MAGA has become a meme.

Meme and Memecoins

Memecoins, as the name suggests, refer to tokens born to homage to a certain meme. Rather than paying attention to the actual value or ecological construction, memecoins are always simply built for fun. There are at least 320 memecoins, with a total market cap of about 2% of the total crypto market according to Coinmarketcap. Dogecoin and Shiba Inu Coin stand out in terms of market capitalization and community recognition.

Source: Coinmarketcap (data for July 12, 2022)

Features of Memecoin

1. Highly volatile
   Compared to mainstream cryptocurrencies, the prices of memecoins are more volatile as they are strongly influenced by external factors such as news of interest and community sentiment due to the limited landing scenarios, which also demonstrates the strong speculative nature of memecoins. Therefore, overnight popularity and overnight crashes are common with memecoins.

2. Low value with a huge supply
   The value of a single memecoin can be low as most memecoins tend to have a huge supply or no upper limit, this is why a large number of memecoins can be held at a small cost. However, to some investors, especially speculators, who prefer to bet on multiple memecoin at the same time at low cost, the disadvantage becomes the advantage instead.
   While others criticized it as a risky gamble, speculators are unable to stop because of the high returns. If $8,000 were invested in 2018 when the Shiba Inu coin was first introduced, that investment would be worth $5.7 billion by the peak price in October 2021, for an overall return of more than 7,000,000%.

3. Closely tied to the community
   While community sentiment can influence price, the community can also determine the character of a memecoin. Dogecoin used to be a popular tip token on Reddit, as well as used by community members for charity purposes. “ShibArmy”, the staunch supporters of Shiba Inu Coin, are constantly speaking out for SHIB on social media.

The History of Memecoin

Dogecoin: The origin of memecoin

Dogecoin, which was created in 2013, can be seen as the first memecoin. The two founders, Jackson Palmer designed a gold coin logo printed with the popular Doge Meme at that time, and Billy Markus completed all the programming work based on the Litecoin code. Dogecoin gained a lot of popularity because of its humor at its inception, however, the price of Dogecoin never took off between 2013 and 2020 while it was only considered as a “tip token” used to reward others on Reddit and Twitter.

Source: https://dogecoin.com/

Learn more about Dogecoin, please read: What Is Dogecoin?

2021 could be dubbed the “Year of Doges”. This year started with the well-known GameStop short squeeze, which refers to the long-short tug-of-war between U.S. retail investors and Wall Street fund companies over GME. The retail investors, who won the eventual victory, then turned to Dogecoin, pushing its price up nearly 10 times in a single day. After that, Elon Musk’s participation pushed the carnival to a peak. Musk tweeted frequently to suggest he was bullish on Dogecoin, which spurred the price all the way up and reached an all-time high of $0.68 on May 7.

Crypto space zoo and the “dogecoin killer”

Imitations appeared one after one seeing the spectacular rise of Dogecoin, animal-themed memecoins such as dogs, pigs, apes came into being overnight, which created the famous “crypto space zoo” in the first half of 2021.
Shiba Inu coin (SHIB) finally succeeded in the fierce competition and is now known as the “second most popular memecoin”. The market value of SHIB surged by the dual effect of Musk’s tweets and ecological benefits as its price increased more than 10 times in October 2021, no longer hovering at $0. As the only memecoin that once surpassed DOGE, SHIB is better-known as the “dogecoin killer” who overtook DOGE and became the ninth largest cryptocurrency with a market capitalization of $39.5 billion in October.

Source: Coinmarketcap

At a time when the enthusiasm for speculation has faded out and most animal-themed coins reached the edge of collapse, Shiba Inu coin still maintains a strong consensus. Moreover, as an ERC-20 token built on Ethereum, Shiba Inu Coin is also trying to develop its own ecosystem, which includes the decentralized exchange ShibaSwap and its own metaverse Shiberse.

Memecoins and the Chaos of Crypto

Memecoins are the source of wealth, as well as the source of chaos.

The chaos of market manipulation

As mentioned above, the price of memecoins is heavily influenced by community sentiment, and any statement or action by community leaders matters.
On January 29, 2021, Musk posted a cover of a joke magazine called “DOGUE” on Twitter, and DOGE rose to $0.05;

On February 4, he praised DOGE as “the people’s crypto”, and released a PS-processed picture about Doge to pay tribute to the classic scene in the movie “Lion King”. On the same day, the price of Dogecoin reached $0.08;
On May 10, Musk called Dogecoin a “Hustle” on a variety show, which led to a 34% drop in the price of Dogecoin in a single day.

The chaos of clout chasing

Memecoins are iterating at an extremely fast pace, and it seems to be the cheapest and most efficient marketing solution to follow the trend so as to attract more attention, which results in the chaos of clout chasing. At the same time, the speculators of memecoins are likely to have reached a certain irrational consensus that they will buy the corresponding minecoin once a specific event occurs.
On October 4, 2021, Musk tweeted a photo of his dog Floki and the price of the Floki coin soared by 240% within 20 minutes.

Another ludicrous example occurred during the Chinese New Year, at a gala hosted by CCTV, an actor called himself the “Dog King ‘’ of the Metaverse in a skit. Subsequently, Doge King, the eponymous memecoin surged more than 500 times shortly, with a 24-hour trading volume of more than $10 million. The irony is that this little-known memecoin did not even have a white paper.

The chaos of rug-pull scam

Squid Game, Netflix’s most-watched series released in September 2021, took the top spot for hits in more than 190 countries. Copied by the cryptocurrency community, the eponymous memecoin Squid Game was released on October 29 at 1 cent, and increased 2,000 times within 24 hours to $2.22. However, this token suffered a flash crash on November 1, 2021, with the price skyrocketing thousands of times before suddenly dropping below $0.001.

The example of Squid Game can be seen as a typical “rug-pull” scam, in which the team behind it defrauded about $3.38 million.

Conclusion: Beware of Pandora’s Box

As a concentrated reflection of the joking spirit of the Z generation, memecoins also embody the weaknesses of human nature, including greed, conceit, and blindness.
The price of minecoins is driven by people’s emotions and consensus, which also change easily. Their prices will naturally rise in a bull market, however, when the market turns to bear, they will be dropped by the speculators like a hot potato.
Do Your Own Research (DYOR) is strongly recommended before trading memecoins while paying attention to controlling the risk exposure.