pic credit: Wall Street Journal
Cryptocurrency based on memes is causing a stir in the financial world. Shiba Inu, a meme coin, skyrocketed in value in October, increasing by over 1,100 percent in just 30 days. And eventually a market capitalization of roughly $41 billion.
I believe we've all heard stories about people who placed a small amount of money into something like Doge or Shiba early on and then became millionaires overnight. The rise and fall of Shiba Inu's measure is part of an increasing trend of meme coins, a type of cryptocurrency inspired by famous social media jokes, sarcasm, or gags.
Their rise in popularity reflects the actions of a growing class of cryptocurrency traders who have an outsized influence on market prices.
But what's driving the popularity of meme coins? And what trends are they influencing to reshape the crypto world?
So, in the cryptocurrency world, meme coins are similar to meme stocks. As a result, these are cryptocurrencies that have a tendency to surge in value very quickly and drastically as a result of internet hype.
It's necessary to go back to 2013 to understand the origins of the meme coin craze. Dogecoin was created as a joke at the time, based on the popular Shiba Inu dog meme. Dogecoin's value soared more than 15,000 percent for the year at its all-time high.
That means that if you had invested $100 in Dogecoin at the start of the year, you would have received more than $15,000 in return. Despite the fact that Dogecoin was started as a joke, many people have come to regard it as a serious investment opportunity.
Dogecoin served as a type of test case for meme coins, and its success has aided the growth of additional meme coins, such as Shiba Inu.
There are hundreds of various meme-inspired coins nowadays, and strong branding is essential to stand out. Meme coins are extremely community-driven, which means that social media excitement, publicity, and viral moments play a big role in their success.
Tesla CEO Elon Musk, for example, has been tweeting about Dogecoin on a daily basis, causing price spikes in the meme coin. So, in addition to the surge of meme coins this year, we've seen a subgroup of dog coins take off. So we had Dogecoin first, then Shiba Inu.
Then there's Floki Inu, who's been the subject of a lot of conjecture and excitement recently. That's because Elon Musk owns a Shiba Inu named Floki.
Another appealing feature of meme coins is how inexpensive they are. A Shiba Inu coin is a fraction of a cent, while a Bitcoin costs roughly $57,000 at the time of writing this article. Like Bitcoin, Ether, and other well-known cryptocurrencies become more costly, cheaper coins provide a way to profit quickly.
While all cryptocurrency investments are dangerous, meme coins are more so, with daily percentage swings in the double digits. Bitcoin is held for a longer period of time than Shiba or Dogecoin. As a result, I believe that this can add to a lot of volatility.
A lack of built-in scarcity is one cause for this volatility. Bitcoin has a limited number of 21 million coins, making it valuable in the same way that gold is valuable due to scarcity. Meanwhile, many meme coins are inflationary, meaning their supply caps are either infinite or incredibly high.
Shiba Inu, for instance, started with a cap of one quadrillion coins. That's one million billion. Over time, a nearly unlimited cap on supply can negatively impact value.
There is a limit to how many Bitcoins exist, so people may be enticed to keep theirs for a while longer. Many investors will trade short-term meme currencies like Doge or Shiba Inu in the hopes of making a quick profit.
While it is possible to profit from investing in meme coins, doing so is hazardous and can resemble gambling rather than actual investing. Investors must be cautious to ensure that they are investing in something legal. We've seen scams in the altcoin sector because I believe everyone is desperate to find the next Dogecoin or the next Bitcoin right now.
The utility is another factor to consider while investing in meme coins. So I believe that the large proponents of Bitcoin see it as having a lot of value since it can be used to transact in the real world. The difference with meme currencies, I believe, is that they have less real-world worth.
While the future of meme coins is unknown, their growth in popularity demonstrates that even the most unusual trades may yield significant profits. It's difficult to predict when or if this phenomenon will fade away. Retail investors, I believe, have shown to be a lot more persistent basis than many expected. I believe it will be a fascinating and entertaining experience to watch.