A lot of meme coins saw explosive price gains in 2024, while hundreds of new tokens were launched on Bitcoin, Ethereum, and Solana blockchains. The considerable growth experienced by this corner of the cryptocurrency market has led to a lot of people potentially looking to invest in these unique coins. However, while they do provide massive potential growth, coins also tend to suffer greater volatility and carry higher risk than established utility coins like Bitcoin and Ether.
1. Meme Coins Are Sentiment Driven Alt Coins
There are thousands of meme coins available. All of which, including those listed on coins.meme/, are based on Internet jokes, memes, or trends. Their prices are governed primarily by the community that backs them, rather than any other market factors. Dogecoin, for example, was a relatively unknown meme coin before it gained substantial backing and was subsequently backed by the likes of Snoop Dogg and Elon Musk. However, not all coins have legitimate communities, and, unfortunately, the sector is rife with rug pulls and pump-and-dump schemes.
2. Meme Coins Have No Utility
One of the reasons for the huge price volatility experienced by meme coins is their lack of utility. Most coins, like Bitcoin, Ethereum, Ripple, and Binance Coin, are used to pay for the use of their respective networks or to establish decentralized apps or smart contracts on those networks. This means that while trading and investing might be the single largest use of these coins, they have some utility to help underpin their value. This isn’t true of most meme coins.
3. Some Tokens Are Breaking The Meme Coin Mould
While it is true that most meme coins hold no utility and don’t really serve any purpose, other than as an investment vehicle, some meme coins are launching that break this traditional model. As well as having meme-based artwork related to online jokes, they might be established as a layer-2 network, adding new protocol layers to existing networks. Alternatively, they could be used as the currency for a new play-to-earn game. This can give these new coins additional value, although this isn’t a guarantee of success or longevity.
4. Meme Coins Typically Have A Very Low Price
A handful of meme coins have a price of more than $1, but the vast majority are priced much lower than this wit Although the specific price of a coin doesn’t matter to investors, it is a lot more difficult for Bitcoin to 100x from its price of $100,000 than it is for a coin like Shiba Inu with a price of $0.0000217. $1 is generally set as a major milestone for these coins.
5. They Carry Very High Risk
Meme coins are very easy and inexpensive to set up. Literally, anybody can do it. While this means there can be a lot of innovative and interesting projects, it also means these cryptocurrencies are prone to scams like rug pulls and pump-and-dump schemes. Even those that aren’t set up as scams are susceptible to very high levels of price volatility, and this means they carry substantial risk for investors.
6. But They Can Also Carry Massive Rewards
A high level of price volatility means there is considerable risk, but it is this volatility that gives meme coins such potential for rewards, too. Speculative investors go hunting for the next meme coin that will 100x in price, as it can lead to massive returns in a very short space of time. However, not all coins will achieve these kinds of returns. In fact, it is very rare for 100x times returns.
7. Investors Need Compatible Wallets
Some well-established meme coins are available on centralized exchanges and this means users can leave them in their exchange hot wallet, but this isn’t recommended. Instead, users are advised to store their coins in software or hardware wallets. But, not all wallets are compatible with all coins. This is true of utility coins and major altcoins, as well, but users need to choose a wallet or wallets that are compatible with the meme coin they intend to buy.
8. Some Meme Coins Aren’t Available On Centralized Exchanges
Some coins can be bought on centralized exchanges like Coinbase and Binance. Many of the lesser-known and newer meme coins, however, cannot. These need to be bought directly from presales, or using decentralized exchanges. Both of these are relatively easy to use, but they do require additional research, especially for new users, and decentralized exchanges do not offer the same protection as major exchanges.
Conclusion
Meme coins have the potential to return big profits on relatively meager investments, but they also carry massive risks. Investors need to do extensive research on any coin before they purchase it, but this is especially true with coins, and their lack of utility means that even genuine coins can experience significant price drops, so careful investment is required
