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Memecoins are not really new, they have existed in the past just in different forms or types. Bitcoin was introduced in 2009 and for the first few years, it operated as the only cryptocurrency.
After bitcoin prices surged and it survived a few years, early adopters and programmers started to experiment with building along bitcoin: If someone can create a digital/crypto asset, what else can we build?
The cat was essentially out of the bag. Remember, bitcoin is open-source software so anyone can access the code and even suggest edits. However, the consensus rules incentivize more people from making unwarranted changes since others have to agree to the changes.
The first alternative coin (Altcoin) to be created after bitcoin was called Namecoin created in 2011. It was followed by Litecoin the same year. Both of these were proof of work (POW) coins just like bitcoin. Peercoin was created in 2012 and was the first to use POW and POS (Proof of stake) consensus mechanism (mining).
The majority of these early altcoins also functioned more like bitcoin in most sense such as being a payment mechanism or store of value. They differed in areas such as transaction speeds, some being privacy coins and different mining algorithms and distribution mechanisms.
The first memecoin
Dogecoin can be credited as the first major successful memecoin. It was created in 2013 and it did not try to be like Bitcoin but as a joke, it was initially intended just to be a parody of Bitcoin. Whereas others promised to revolutionize the world, doge tried to be fun. Its logo is based on the Shiba Inu meme, which is a well-known Japanese dog. Afterward, thousands of others have been created trying to replicate the success of Dogecoin. The Shiba Inu coin was also created later.
It was after the second bitcoin halving in 2016 that altcoins and eventually meme coins started to become a thing. Even as Bitcoin surged to an all-time high of $20,000 in December 2017, many alternative cryptocurrencies created during that era such as Ethereum, Ripple (XRP), and Litecoin among others saw a huge price movement. Initial coin offerings (ICOs) also surged with many cryptocurrencies being created.
Defi & NFTs
The growth of decentralized finance and Non-Fungible tokens (NFTs) also led to the explosion of memecoins. This is believed to be the time that memecoins truly went mainstream within the crypto world. Cryptokitties was the first popular NFT launched in 2017. It is a game and players can buy, breed, and trade their own virtual cats. The market was relatively calm until 2021 when NBA Top Shot was created and became popular. This opened a window for NFTs to be seen as a way to own digital art. Since then meme NFts exploded with thousands of NFTs such as Rare Pepes, and Nikamigos among others. As for Defi, Memecoins also created a way for projects to reward their users through staking, yield farming and providing liquidity.
But what are memecoins?
Memecoins can be defined as cryptocurrencies that drive their value from imitating or centered around internet memes or popular culture and viral trends. They take advantage or ride on top of popular trends to gain popularity. For example, Elon Musk is a famous entrepreneur who is vocal online. Several memecoins have been created in his name. A memecoin was created called $Musk in April 2023. It rides on the popularity of Elon Musk, a well-known figure who also shares memes online. Other known memecoins include: PePe, Shiba Inu, Dogecoin, MAGA among others. You can check some of the most popular ones on coinmarketcap.
Most of the creators and early adopters of memecoins know that they are mostly for fun and experimentation. If they become popular they can usually make a 1000X price movement within a short period of time. However, they are still a risky investment because most are usually rugpulls or pump-and-dump schemes. Some do not have valid tokenomics and with little to no utility they are most likely to die. Just like any internet meme, they could grow in popularity very quickly and fizzle out just as fast thereby becoming highly volatile investments. However, some have become widely adopted and have existed for several years. This is mainly thanks to the growing community around the coin such that they become part of internet culture. In this regard, it is important for any investors to know and understand the dynamics behind memecoins in order to make an informed decision.
Do your research
As an investor, it is important to distinguish between mainstream crypto assets such as Bitcoin and Ethereum and memecoins. The top-ranked coins usually have utility, have an audited code base, have millions of users and have a specific use case. However, they do not have the allure of memecoins because their price movements are not as rapid as those of memecoins. For example, bitcoin is up 60% in 2024 alone - April 2024. This is impressive when compared to traditional assets, but pales in comparison to a memecoin like MAGA (TRUMP) which surged 800% within 30 days in early 2024, from lows of $0.11 to all time high of $11.15. Since its launch it has surged 33,000%. It is currently trading at around $5 in April 2024.
If you search anywhere online you are likely to see headlines like ‘top10 memecoins to explode in 2024’ and other similar predictions. Since there are literally thousands of memecoins, it is really difficult to know which ones will explode. But different analysts always try to make predictions, mostly traders or insiders. The best way to leverage on memecoins is by making sure you are active on various online forums such as Reddit and telegram. Most communities on these platforms post predictions, analysis and announcements of these top and new memecoins. It is also important to be aware of internet meme culture, trends and be part of it.
Furthermore, it is important to understand the narrative driving the memecoin boom. For example, most coin analysts say that AI (Artificial intelligence) coins are likely to boom this bull market. This is similar to what ICOs were in 2017. Nonetheless, any memecoin can literally come out of nowhere, gain mainstream attention and go viral.
As a conclusion, it is always important to understand that memecoins are highly volatile but also potential lucrative investment options.
As we have seen in this article, memecoins as a concept is not really new but continuous evolution in the crypto landscape. From Altcoins as POW coins closely resembling bitcoin, to the rise of Ethereum and ERC-20 coins to Defi and NFTs, there has always been a trend following most bull run cycles like the one we are on currently. No matter the type of memecoin the bottom line is that they require a trend, a growing community, narrative that drives hype to keep growing. If you find yourself in that momentum, then ride it.
It is always advisable to diversify your investment in crypto. This means having a portfolio of highly proven digital assets like bitcoin, Ethereum, Solana, XRP among others and then the volatile but potentially lucrative like memecoins. The crypto industry is always tribal and people will try to advocate for their own coins, while others are maximalists and say only bitcoin is true crypto and should be the only one in your portfolio. What is true is that the crypto landscape is always growing. There are always new opportunities as well as challenges for investors while navigating the crypto landscape. For example most of newly minted memecoins will not be found in mainstream exchanges until they gain some meaningful traction. So as a crypto investor, you have to be aware of where to get them in different wallets such as metamask, which present security challenges even for seasoned investors.
Just make sure you always guard your coins- have them in reputable wallets, securely store coins you are holding for the long term in a decentralized non-custodial wallet and HODL- embrace the uncertainty- WGMI
