If you entered the cryptosphere in 2021, you must have heard about the infamous Shiba Inu (SHIB) and other meme coins. Those assets inspired by the codes of the web culture took the crypto space by storm over the last 9 months and are getting increasingly popular amongst new crypto-enthusiasts. In this article, you’ll discover their origin and their viability as an investment.
What is a meme token?
Fundamentally, meme coins or meme tokens are crypto-assets inspired by the broader web pop culture. Developers designed traditional crypto-assets to innovate and enhance the capabilities of the legacy financial system, but meme tokens are purely humoristic and speculative assets, which isn’t bad in itself but makes meme coins riskier assets.
Even if the SHIB token from Shiba Inu is the most well-known meme coin, the first meme coin dates back to 2013 and is the Dogecoin (DOGE). According to CoinMarketCap, there are over 250 meme coins out there, and their number keeps increasing each week.
The performance of this type of asset is closely linked to their fame on social media and the hype created around them by influencers. In essence, meme tokens are community-driven assets that rise and fall according to their popularity.
Dogecoin (DOGE), the precursor of meme coins
Launched by Jackson Palmer and Billy Markus in 2013, Dogecoin (DOGE) was nothing more than a joke between two friends. The two developers only intended to create a cryptocurrency in the image of the funny dog of the year, the meme of the moment, a Shiba Inu.
Eight years later, the joke stuck, and the DOGE has a market capitalization of $34 billion and holds 10th place in the crypto rankings, making the Dogecoin (DOGE) the most lucrative joke in human history. At the time of press, one DOGE is worth around $0.25 and is up more than 10,000% in 2021.
According to the legend, both co-founders sold all their DOGE, and Billy Markus used his profits to acquire a modest Honda Civic.
Shiba, Floki and SafeMoon, the challengers
In 2021, Elon musk reignited the meme coins trend by tweeting several times about the DOGE. Shortly after Musk’s tweets prices systematically jumped. This mark of interest led to a new wave of meme tokens. The figurehead of this new trend is the Shiba Inu (SHIB), also based on the Shiba Inu canine breed. Currently, the SHIB holds 11th place of the crypto ranking by market cap with a capitalization of $29 billion.
Since, the meme coin community perceives Elon Musk as the father of meme coins, the “Dogefather” as he calls himself, numerous meme coins are linked to trivia around his person. For instance, the Floki Inu (FLOKI) is named after Musk’s dog: Floki.
One last example of a meme coin would be SafeMoon (SAFEMOON). This is a good illustration of a failed meme coin, or instead a meme coin that has been unable to retain its community. In April and May 2021, SafeMoon was gaining tremendous traction, but after the whole crypto market experienced a downtrend, investors fled the project causing the prices the crash.
Should you invest in meme coins?
After observing the meteoric rise of meme coins, many crypto investors are asking themselves the same question: Should I invest in meme coins myself?
The answer is YES, if you respect some rules. Even some Bitcoin maximalists, calling each and every crypto asset a shitcoin, have invested in these assets, either as a joke or in the expectation of profits.
Since meme tokens are among the crypto ecosystem’s best-performing assets, it would be foolish to deprive yourself of these investments. In 2021, the Shiba Inu (SHIB) went up by 89,202,235%. Meaning that each dollar invested in SHIB in January would be worth over 800,000$ in November 2021. If you want to make profits with memic crypto-assets, you should respect two rules:
- Don’t bet the farm. This a popular saying in the financial markets. It means that you shouldn’t go all in on a given asset. When you choose your meme coins, allocate 1 to 2% of your crypto portfolio to them, this way you will be able to profit from them while limiting the risk.
- Take profits. Watching your favorite crypto asset on its way to the moon is an exciting experience, but to actually benefit from the rise you have to sell at some point. Consequently, you have to set your price target before investing and sell when the asset is going to the moon. If you never sell, you never make profit.
To choose the most promising meme coins, you can perform some sentiment analysis using LunarCrush. You learned earlier that meme coins are deeply linked to their communities, and their price appreciates according to how many people are discussing them over social media.