Over the past week, the memecoin market has been pumping hard, with Shibu Inu coin ($SHIB) leading the pack. SHIB is another “dog coin” similar to the infamous Dogecoin ($DOGE), which saw its own pump earlier this year. When memecoins skyrocket like this, it causes a lot of controversy within the crypto space. While some people see memecoins as useless and dangerous, others see them as necessary for crypto adoption.
Who is right when it comes to memecoins? It really depends on perspective. But the more I witness this space, the more I’m beginning to think memecoins ultimately help the crypto markets. Here’s why.
What are memecoins?
Cryptocurrencies like Bitcoin are heralded for their practical use cases. This is because Bitcoin acts as a store of value and also a digital, decentralized payment system. What makes Bitcoin a good store of value is its artificial scarcity and deflationary nature.
On the other hand, memecoins often lack any real direction or practical use cases. Coins like SHIB and DOGE have ridiculous max supplies and are mostly inflationary. Developers designed them as jokes and they weren’t meant to be as big as they are. However, it’s impossible to predict human nature, and these joke coins have gone viral and seen massive investments.
Both SHIB and DOGE are currently ranked in the top 10 cryptocurrencies by market cap, which is a huge feat. Their market caps are higher than national banks. They are beating out cryptocurrencies that have been around for years and offer real utility to the blockchain network.
Due to their high supply, memecoins are often priced at fractions of a penny, making them attractive to investors who don’t have much capital. During a memecoin pump, a $10 investment can turn into hundreds of dollars in a matter of days.
Other popular memecoins include Safemoon and Dogelon Mars. There are dozens on the market, and new variations spring up every week. For whatever reason, memecoins seem to favor dog names these days. Perhaps that speaks to human nature in some way…
Why do memecoins matter?
As much as you try to ignore them, memecoins keep popping into existence and making news headlines. You’re bound to come across a memecoin hashtag after spending enough time on social media. At this point, memecoins are a part of popular Internet culture, just like traditional memes. Virality has found its way into cryptocurrencies, which seems appropriate for so-called “magic Internet money”.
In a way, memecoins are a giant advertising billboard for people who haven’t stumbled into the cryptocurrency and blockchain rabbit holes yet. Of course, some may enter the space for the wrong reasons, such as out of greed. But ultimately, newcomers end up gaining exposure to the utility tokens that are actually revolutionizing the world.
Furthermore, the insane profits reaped by memecoin holders will eventually go somewhere. Once the whales and retail investors dump their memecoins, they’ll likely scope out other ways to pump their bags. All of those utility coins that were sitting on the sidelines while memecoins pumped will look awfully attractive.
The downside
Of course, there is a downside to memecoin mania. To offer the opposing perspective to what I’ve previously written, consider the investors who hold their memecoin for too long. Serious FOMO floats in the air as people make life-changing money before our eyes. In particular, people new to crypto will often “buy the top”, fueled by the armies of HODLers that claim the price will keep going higher.
Unfortunately, massive gains and the mania surrounding them often precede unexpected sell-offs that leave novice investors holding bags of useless coins. As a result, we are likely to witness a lot of pain in the coming weeks.
Also, high-profile gains like this are likely to fall under the radar of government regulators seeking to stamp out anything that challenges their power. And cryptocurrencies definitely fall in that category, especially when people turn a few dollars into life-changing wealth.
In the end, memecoins are mostly gambles that lack most of the utility that other crypto projects like Ethereum and Bitcoin have. Instead, their prices are fueled by enthusiastic communities that generate FOMO. As seen from SHIB and DOGE, incredible gains will likely cause regulators to drop the hammer unnecessarily hard on the entire crypto space.
However, on a philosophical level, memecoins may be what cryptocurrencies need to fight the establishment and move people away from centralized powers. Money is power, after all, and memecoins generate a lot of it seemingly out of nowhere. Memecoins are indeed freeing thousands of people from poverty and debt, and their profits will most likely be recycled into the crypto markets.
It does suck to see a few lucky newbie investors outpace the hard work and research you’ve put in over the years. But consider that the goal is mainstream adoption and that your hard work will still pay off in the end. We can all dispute over who is right about memecoins, or we can celebrate everyone whose lives are being changed thanks to crypto.
Disclaimer: I do own some memecoins myself. This post is not an endorsement or investment advice.