Some basic facts:
- Shitcoins currently have a market cap of 33 billion.
- An estimated 90% to 95% of shitcoins are considered dead, already.
- Dogecoin is considered to be the first major shitcoin and was created in 2013, but did not become mainstream until the end of 2020. They currently hold a 27 billion market cap, the majority over the overall cap.
- A shitcoin is a cryptocurrency inspired by internet memes, jokes, notable personalities and existing cryptocurrencies. They are typically worth fractions of a penny, and have no utility.
Just how irrational is buying shitcoins:
- With the recent jumps in shitcoins, 62 % of all crypto investors expect to get rich off of crypto.
- 58% of investors with less than 10,000 dollars expect to get rich.
- Only 18% don’t think they will get wealthy on just their crypto buying alone.
Just think about that, a market that is propped up by almost 7 in 10 people thinking they are going to get rich quickly by doing it with little work and a small initial investment.
So far, there have been some get rich quick stories out there, but, most of them have to do with pump and dumps and scams, not the actual investor getting rich. That is not what this article is about, though. We are talking about why people think the way they do about shitcoins.
Guan Yang, who created his own crypto, Stalwartbucks, has this to say about shitcoins, “Like baseball cards or NFTs, joke currencies can be viewed as collectibles. When enough people are interested in them, and assign them monetary value, they morph into an asset class. We have a craving to do that with almost anything.
While this may help explain why shitcoins can increase in their price, it doesn't mean that it makes sense that they have value. Things are worth what people are willing to pay for them, and with no utility, shitcoin prices is based on emotion and not utility, which is a recipe for disaster.
There is some precedent for this type of meteoric rise in the price on something that does not appear to have real value behind it. Baseball cards and other collectibles can have a price that real world economics can’t explain. Historically, everything from tulip bulbs to pineapples to face jug pottery have seen crazy jumps in prices but you don't see anyone retiring off those items now. It's even worse for shitcoins, while I cant go create a Honus Wagner baseball card from the early 1900s worth 4 million, I can create a shitcoin in just a few minutes.
So what is the long term problem with all this? It is that while Bitcoin, Ethereum and other crypto try to claw their way into the mainstream, this idea of getting rich quick on shitcoins that have no value will make this extremely hard. When will this shitcoin mentality end and allow for crypto to continue on its road to acceptance?
First, the get rich quick money that is coming in from this will have to burn itself out. Education and smarter investors will need to also eliminate the scammers by taking away their ability to make money. It is only then that the real value of legitimate projects will stabilize at the proper level and crypto becomes viable.
Now, I get that you might be saying that the shitcoin market cap is only a small fraction of the current overall value of crypto. This is not just about a dollar amount. The title of this was the "Psychology of Shitcoins." I say it is more about the taste people have in their mouth about crypto when they hear that Dogecoin is up 5000 percent or that there are cryptos called “Loser Coin” and “Sad Cat Token.”
My guess is that pretty much all shitcoins will be dead soon, with the exception a few that have a following based on something other than monetary or a utility value. I don’t think this can happen soon enough.