Memecoins and investment are words you don’t often hear in a sentence together without sarcasm.
However, a year into the bear market, memecoins such as Shiba Inu and Dogecoin have not only survived, but performed as well or better than many “serious” crypto projects.
Additionally, despite the tough market conditions, memecoins have some of the most vibrant and active communities in the crypto space.
While people also need to recognize landmines, such as the huge influence of whales on even the largest memecoins, are memecoins a positive force for retail investors in 2023?
1. Memecoins are great for merchants
Crypto traders need volatility; volatility is what makes trading valuable. And no type of token is as volatile as so-called memecoins, or a non-useful, meme-based token. (However, this definition needs to be revised, with multiple memecoins now creating utility.)
“Every time Elon Musk posts a photo of a dog, it guarantees 10% earnings on a bunch of memecoins,” said Alex, who added that it doesn’t matter if you think it’s a good or bad bad thing.
“The free market doesn’t care about our opinions. And [the memecoin market] is the freest market there is. A memecoin has almost no use – with something so volatile, it’s the essence of the free market.
In many ways, memecoins are similar to luxury goods, like sneakers, where prices correlate not with utility but with hype.
“The value is very much in line with market sentiment,” Xander said.
“How does something worthless gain value? With feelings. And you have people in space who know how to turn up the sentiment. It’s marketing, purely. It doesn’t make rational sense, but the market doesn’t have to make rational sense.
2. Memecoins extend beyond just being memes
The footprint previously covered the Shiba Inu Ecosystem. While the token started 2020 as a joke, the community has since built an ecosystem on its L2, Shibarium, including a DEX, NFT, and DAO marketplace.
Many memecoins also make charitable donations an essential part of their usefulness.
“Even though we categorize them as memecoins, if you see Shiba’s progress, they pretty much go from memecoin to concept to do things with Shibarium,” Peter said. “I think if you have a very loyal team to the business and they start building it, you can really get out of this memecoin realm to have a real use case. It will be a game changer from a memecoin to a real business.
Memecoins continue to grab people’s attention, which is great during the bull market and times of high volatility. Traders are both interested in rising and shorting the tokens. However, the quest to build utility is necessary to retain value over time.
“Shiba Inu has tried to do a lot of things with an NFT market. Memecoins are used for humanitarian things that can attract attention. If an organization, foundation or independent team invests more in a community or infrastructure, this infrastructure could provide other services,” said Alex.
“What would make the most sense to me would be video games. Those are the closest things to memes and trading, in my opinion. The concept is to keep that community out there, beyond trading , when it’s a bear market, or volatility is low and it’s a boring market P2E would make sense for something like Dogecoin, which has no cap and can keep tokenizing.
3. Trading memecoins requires accepting that whales make waves
The top 100 DOGE wallets hold 70% of the total supply.
It’s just the reality of space. Fortunately, whales are rational players in a free market, which means there is unlikely to be a random dumping of all their assets unexpectedly. Community growth will also incorporate new liquidity.
However, traders need to understand the dynamics.
“I think most traders know that whales can make waves, and they try to ride them, follow the whales and make a profit. Experienced traders understand that this is how you roll,” Alex said.
“You walk the distance between liquidity levels in the market,” Xander added.
“As far as speculative trading is concerned, it is your only protection, in addition to perhaps the information you know. Whales must protect their interests [and aren’t just going to dump.] Protection is the dynamics of the free market, so if you want to protect yourself, learn how free markets work.
4. Memecoins help bring new users into crypto
The blockchain space is filled with incredibly dense jargon and technical developments that can scare off newcomers. However, memecoins still operate on the basic principle of crypto-decentralization and self-custody of value.
“They’re easy to understand, for the most part,” Xander said. “You can still use them as an exchange of value – you can send them anywhere in the world without a middleman.”
“I think it’s really cool that we have, in the crypto space, these simpler coins that are easy to interact with. As an on-ramp, these memecoins are effective because there’s no not much to understand about them, although SHIB breaks that mould.You don’t have to read a white paper on DOGE.
Peter also added that memecoins “provide a transition for people who don’t know much about crypto to enter the space:
“Everyone is goodrd of bitcoin; it’s almost like the old school stuff. But they see these memecoins, and they have these funny pictures, and it’s eye-catching. And that’s good marketing for crypto to the general public.
“It’s a very easy way to get started and become part of Web3. If you are a speculative investor, you are part of Web3. You help the ecosystem to thrive by participating in it. And so, I think it’s a good way to get your feet wet.
This article is a contribution from the Footprint Analytics community of Meme Token Dashboard.
The Footprint Community is where data and crypto enthusiasts around the world help each other understand and gain insight into Web3, the Metaverse, DeFi, GameFi, or any other area of the nascent blockchain world. Here you will find active and diverse voices that support each other and move the community forward.
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