Memecoins and investment are words you don’t often hear together in a non-sarcasm sentence.
Yet a year after the bear market, memecoins like Shiba Inu and Dogecoin have not only survived, but have performed as well or better than many “serious” crypto projects.
Also, despite challenging market conditions, memecoins have some of the fastest growing and most active communities in the crypto space.
Doge and SHIB market capitalization
While people should also acknowledge landmine-like whales’ huge influence on even the largest memecoins, are memecoins a positive force for retail investors in 2023?
Joined Footprint Analytics Alexander of Pointsville, xandersFounder of HumbleHedgeDAO, and PedroCommunity Lead at ICHI, to discuss in a Twitter space.
1. Memecoins are great for merchants
Cryptocurrency traders need volatility; Volatility is what makes trading a valuable market. And no type of token is as volatile as memecoins, or a useless token based on a meme. (However, that definition needs to be revised, with several memecoins now generating utility.)
“Every time Elon Musk posts a photo of a dog, he’s guaranteed a 10% profit on a bunch of memecoins,” Alex said, adding that it doesn’t matter if you think it’s a good thing or a bad thing.
“The free market doesn’t care about our opinions. AND [the memecoin market] It is the freest market there is. A memecoin is almost useless, with something so volatile, it is the essence of the free market.
In many ways, memecoins are similar to luxury items like sneakers, where prices are correlated not with utility but with hype.
“The value is very much in line with market sentiment,” Xander said.
“How does something gain value without utility? Consent. And you have people in space who know how to handle the feeling. It’s marketing, purely. It doesn’t make rational sense, but the market doesn’t need to make rational sense.
2. Memecoins are expanding beyond being just memes
Footprint that previously covered the Shiba Inu ecosystem. While the token started in 2020 as a joke, the community has since built an ecosystem on top of its L2, Shibarium, including a DEX, NFT, and DAO marketplace.
SHIB-Meme price and trading volume
Many memecoins also make charitable donations a central part of their utility.
“Even though we classify them as memecoins, if you look at Shiba’s progress, they’re pretty much going from memecoin to concept to do things with Shibarium,” Peter said. “I think if you have a team that is very loyal to the company and they start to build it, you can get out of that realm of memecoin to have a real use case. That will be a game changer from being a meme coin to a real company.”
Memecoins continue to grab people’s attention, which is great during bull markets and periods of high volatility. Traders are interested in both the upside and shorting of the tokens. However, the search to generate utility is necessary to retain value over time.
“Shiba Inu tried to do quite a few things with an NFT marketplace. Memecoins are used for humanitarian things that can get attention. If any independent organization or foundation or team is investing more in some community or infrastructure, that infrastructure could provide other services,” Alex said.
“What would make the most sense to me would be video games. These are the closest things to memes and commerce, in my opinion. The concept is to keep that community 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 creating tokens.”
3. Trading memecoins requires accepting that whales make waves
The top 100 wallets with DOGE have 70% of the total supply.
This is just the reality of space. Fortunately, whales are rational players in a free market, which means they are unlikely to randomly dump all their assets unexpectedly. Community growth will also bring in new liquidity.
However, traders need to understand the dynamics.
“I think most traders know that whales can make waves, and they are trying to ride them, following the whales and making a profit. Seasoned traders understand that this is how it goes,” Alex said.
“You’re walking the distance between liquidity levels in the market,” Xander added.
“When it comes to speculative trading, that is your only protection, other than perhaps the information you know. Whales need to 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 to add new users to cryptocurrencies
The blockchain space is filled with incredibly dense jargon and technical developments that can scare off newcomers. However, memecoins still work on the central premise of cryptocurrencies: 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 great that we have, in the crypto space, these simpler currencies that are easy to interact with. As a gateway, these memecoins are effective because there isn’t much to understand about them, although SHIB is breaking this mold. 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 get into the space:
“Everyone isthird from Bitcoin; that’s almost like the old school stuff. But you see these memecoins, and they have these funny images, and it’s eye-catching. And that’s good marketing for cryptocurrency to the general population.”
“It’s a very easy way to participate and be a part of Web3. If you are a speculative investor, you are part of Web3. You are helping the ecosystem thrive by participating in it. So, I think it’s a good way to get your feet wet.”
This piece is contributed by the Footprint Analytics community from the Meme Token Dashboard.
The Footprint community is where cryptocurrency and data enthusiasts from around the world help each other understand and learn about Web3, the metaverse, DeFi, GameFi, or any other area of the nascent world of blockchain. Here you will find diverse and active voices supporting each other and moving the community forward.
Footprint website: https://www.footprint.network
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