Meme Coin Explained

What Is a Meme Coin?

A meme coin is a cryptocurrency term for popular currencies, sometimes depicted with comical or animated memes, that are supported by enthusiastic online traders and followers. While meme coins may be fun, they are also highly risky investments and may hold little or no intrinsic value.

Dogecoin, Shiba Inu, and other currencies that may offer more entertainment than usability fall into this category. When buying or trading meme coins, it’s critical to understand the risks to help you avoid unexpected volatility and losses.

Understanding Meme Coins

Meme coins are a cryptocurrency genre loosely defined as having an exuberant online community supporting the currency’s growth. They are sometimes identified with animated character or animal meme images. During the recent cryptocurrency boom, top currencies to gain meme coin status included Dogecoin and Shiba Inu. The category extends to lesser-known currencies such as Baby Doge and Dogelon Mars. While Baby Doge and Dogelon Mars earn fewer headlines, they still maintain nine-figure market capitalizations.

As with other cryptocurrencies, meme coins rely on blockchain technology, a type of distributed database used to track virtual assets, including cryptocurrencies and non-fungible tokens (NFTs).

Most meme coins are purely trading instruments, unlike Ethereum and other utility currencies tied to specific blockchain features. Major cryptocurrencies such as Bitcoin, Ethereum, USD Coin, XRP, Cardano, Solana, Polygon, and Polkadot generally are not considered meme coins.

Meme Coins Have High Volatility

Cryptocurrency website CoinMarketCap lists more than 300 currencies in its Meme Coin section. However, many are not actively traded and are effectively worthless. Dogecoin, Shiba Inu, Dogelon Mars, and Baby Dogecoin are the only currencies in the meme category with more than $1 million in daily trading volume. All are generally considered risky and volatile trading assets.

While ether is required to perform transactions on the Ethereum blockchain, most meme coins don’t offer additional value beyond collecting and trading. Other meme coins are not truly coins, but tokens operating on another blockchain. For example, Shiba Inu is an ERC-20 token operating on the Ethereum blockchain.

Some in the media and investing world characterize meme coins as elaborate pump-and-dump schemes. This accusation should make investors wary of meme coins and should lead people to enter these markets with extreme caution.

Pros & Cons of Meme Coins

The Bottom Line

Meme coins are an interesting cryptocurrency asset, but they come with many risks for losses. For most investors, it’s best to avoid putting in more than you can afford to lose. But there’s a very small chance that if you pick the next big coin before online fans send it “to the moon,” you could become the next crypto millionaire. When it comes to risky meme coins, it’s best to proceed with caution.