Memecoins refer to cryptocurrencies that are primarily created and used as a form of satire or parody, often based on internet memes or popular culture references. These digital currencies have gained popularity alongside the rise of cryptocurrency and blockchain technology.
Unlike mainstream cryptocurrencies such as Bitcoin or Ethereum, meme coins generally lack substantial utility or underlying technology. They often serve as vehicles for humor, social commentary, or speculative investments rather than fulfilling a specific practical purpose. Memecoins are typically created by individuals or communities and are often associated with online communities or social media platforms.
One of the most well-known examples of a meme coin is Dogecoin, which was originally created in 2013 as a joke but gained a significant following and market value. Dogecoin features the Shiba Inu dog from the "Doge" meme as its mascot. It became popular for its friendly and lighthearted nature, which appealed to a broad audience.
Trading Memecoins Can Be Very Profitable But...
Memecoins attract more investors because of the way some lucky traders have become millionaires overnight. Honestly, I think these stories can make anyone tempted to try their chance.
If you are a Twitter user and follow crypto topics, chances are you have probably seen at some point several posts of users flaunting their fortune made by trading meme coins. I personally lost more than 400 Dollars in less than 48 hours by trying to invest in some random memecoin.
There is no denying that some lucky investors really make a lot of money by trading meme coins, but no one seems to disclose their losses. It's a game where everyone seems to be on the winning side. In reality, more than 95% of memecoin traders lose money. Yeah, a lot of money. Of course, you won't see as many headlines citing people losing money because they generate fewer clicks for news outlets and fewer likes & engagements on Twitter.
The reality is that there are more losers than winners, but the media and social media buzz make it feel like otherwise.
Source: The Sun
Trading Memecoins May Not Teach You Any Investment Skills
Investing refers to the act of allocating money, resources, or capital into an asset, venture, or financial instrument with the expectation of generating a profit or achieving a long-term financial goal.
Long-term goals usually do not work with meme coins. Most of them decrease in value in the long run. Below is the performance of Bitcoin compared to Dogecoin. Notice that Bitcoin has been increasing and continues to increase in value over time, while Dogecoin had a major spike and crashed but struggled to reach that all-time high. Bitcoin broke its all-time high multiple times in its history.
Investors who invested in Bitcoin since 2017 are still making profits. Those who invested in Dogecoin before the spike are the lucky few winners. All investors who bought it after the spike certainly knew about it on TV or on social media. They probably lost a lot of money and gave up on cryptocurrency investment thinking it's not worth it. Yes, meme coins can easily bring new investors into the crypto space, but they could also deceive them and make them lose interest.
Trading Memecoins Is Very Stressful and Doesn't Seem Like an Investment
Investing should be boring with a long-term goal. When investing in something, you shouldn't constantly be checking how much you made or lost. Memecoins are very volatile and their token prices can change dramatically in a single day. This makes many investors check the price every time they can. The stress of losing your initial investment or the profit you made can lead you to trade with your emotions.
Investing in an asset is believing it will become more valuable sometime in the future. Usually, you don't worry much about the short-term price fluctuation of the assets. When you think long-term, you spend more of your time reading more about assets you invested in and want to keep up with any updates. You are then more motivated to buy more when the price goes down, maximizing your profits over time.
Memecoins trading won't teach you these skills. Instead, you will be more focused on what is trending on social media and assets that will likely go down or rug pull. If you are lucky enough to make profits in a meme coin, you are more likely to put that profit into another meme coin that could go down. You ask yourself why? I think this is because memecoin investment looks like playing the lottery. Have you ever wondered why most lottery winners become broke after winning millions? Making money requires many valuable skills that have to be learned. Investing and patience are some of those skills.
To summarize, I want you to be aware that meme coins could be a distraction in your investment plan. I personally don't hate meme coins and continue to trade some from time to time. But think of your investment journey as a long-term goal for your financial freedom. Only assets with good fundamentals will continue to grow, generating profits over time. Think 10 or 20 years from now. It may seem long but time flies past so fast you won't even realize it. If cryptocurrencies and blockchain are like the internet in the 90s, then some assets today could be the next Amazon or Google in their early days.