Memecoin and investing are not words that are often seriously discussed together. However, in a bear market year, memecoins like Shiba Inu and Dogecoin not only survived, but performed as well as many "serious" cryptocurrency projects, if not better.
Additionally, despite the challenging market environment, Memecoin has some of the fastest growing and most active communities in the cryptocurrency space.
While one also has to recognize landmines such as even the largest memecoins have massive whale influence, are memecoins a positive force for retail investors in 2023?
Footprint Analytics joined Alexander from PointsVille, Xander, founder of HumbleHedgeDAO, and Peter, community lead at ICHI, for a discussion in the Twitter space.
Memecoin has always been friendly to investors
Cryptocurrency traders need volatility; volatility is what makes trading such a valuable market. And none is as volatile as a so-called memecoin, or a meme-based token that lacks utility. (However, this definition has to be revised, now that several memecoins are building utility).
“Anytime Musk posts a picture of a dog, that guarantees a 10% return on a bunch of memecoins,” Alex said, adding that whether you think it’s a good thing or a bad thing, None of this matters.
“The free market doesn’t care about our opinions. And the ‘memecoin market’ is the freest market that exists. A memecoin has almost no utility – for something so volatile, it’s the nature of a free market.”
In many ways, memecoins are similar to luxury goods, like sneakers, where the price is not tied to utility, but to hype.
"Value is in line with market sentiment very well," Sand said.
“How does something that has no utility gain value? With emotions. And you have people in the field who know how to ride emotions. That’s marketing, pure marketing. It doesn’t make rational sense, but the market doesn’t need rational meaning. "
A meme coin that goes beyond internet hits
Footprint previously reported on the Shiba Inu ecosystem. While the token started out as a joke in 2020, the community later built an ecosystem on its own L2, Shibarium, including a DEX, NFT marketplace, and DAO.
Many memecoins also feature charitable donations as a core part of their utility.
“Even if we classify them as memecoins, if you look at Shiba’s progress, they’re pretty much from memecoin to concept to doing things with Shibarium,” Peter said.
“I think if you have a team that is really loyal to the company and they start building it, you can actually get out of that memecoin space and have an actual use case. That would be a game changer – from A meme coin transformed into a real company.”
Memecoins are still pretty good at grabbing attention, which is great during bull markets and high volatility times. Traders are interested in both upside and shorting the coin. However, for long-term preservation of value, the pursuit of building utility is necessary.
“Shiba Inu is trying to do quite a lot with an NFT marketplace. Meme coins are used for humanitarian things, which can attract attention. If some organizations, foundations or independent teams invest further in some communities or infrastructure, That infrastructure could be capable of providing other services," Alex said.
“Personally, the ones that make the most sense to me are console games. Those are the closest things to memos and deals, in my opinion. The concept is that in a bear market, or when volatility is low and the market is boring, to keep that Community, beyond transactions. P2E makes sense for something like Dogecoin, which has no cap and keeps creating tokens.”
Trading Memecoins Requires Accepting Waves From Big Players
The first 100 wallets holding Doge hold 70% of the total supply.
It's just the reality of this space. Luckily, whales are rational actors in a free market - which means that random throwing of all their holdings is unlikely. The growth of the community will also board the new Liquidity.
However, traders should understand this dynamic.
“I think most traders know that whales make waves and they’re trying to ride them, follow them and make a profit. Experienced traders understand that’s how you operate,” Alex said.
"You're navigating the distance between Liquidity levels in the market," Xander added.
“When it comes to speculative trading, that’s the only protection you have, other than maybe information you know. Whales need to protect their interests ‘not to flip.’ Protection is what drives the free market, so if you want to protect yourself, learn how the free market works.”
Memecoin helps users enter the crypto circle
The blockchain space is full of incredibly dense jargon and technical developments that can scare off newcomers. However, memecoins still operate along the core premise of cryptocurrencies – decentralization and self-custody of value.
"They're easy to understand, for the most part," Xander said. “You can still exchange them for value — you can send them anywhere in the world without a middleman.”
“I think it’s really cool in the crypto space that we have these simpler tokens that are easy to interact with. As a ramp, these commemorative coins work because there’s not a lot of knowledge about them – Although SHIB is breaking the mold. You don’t need to read Doge ’s Whitepaper.”
Peter also added that Memecoin “provides a transition into the space for those who don’t know much about cryptocurrencies.”
“Everybody’s heard of bitcoin; it’s pretty much old school. But they see these commemorative coins, and they have these funny pictures and they’re eye-catching. It’s good marketing for crypto to the average person.”
“If you’re a speculative investor, you’re part of Web3. You help the ecosystem thrive by being part of it. So I think it’s a great way to get your feet on the ground.”
