Memecoins, or meme cryptocurrencies, began as a cultural phenomenon with the launch of Dogecoin (DOGE) in 2013, impressed by an web meme and a critique of the wild crypto market on the time.
Dogecoin was developed by software program builders Billy Markus and Jackson Palmer as a joke to mock what many noticed as an irrational funding hype surrounding cryptocurrencies.
Memecoins began as a type of social token. They had been typically created and promoted by on-line communities or people with a shared curiosity or humorousness. The social ingredient of memecoins performed a big function of their success and adoption. Different causes for his or her reputation may very well be the sizeable whole provide and low token costs.
A decade later, memecoins are a multibillion-dollar ecosystem, widespread as a high-risk, speculative funding.
From DOGE to Pepecoin (PEPE), memecoins have come full circle. From their preliminary inspiration as parodies of cryptocurrencies to now being the identical parody they had been mocking, attracting irrational speculative funding to drive up costs.
Pepecoin’s reputation helped it explode to a market cap of over $1 billion, however inside days its market worth shrunk by greater than 40% to beneath $600 million.
Paradoxically, the idea of memecoins has change into a meme itself. Whereas there are all the time tales about how a random dealer turned a couple of hundred {dollars} funding into thousands and thousands; for that one fortunate dealer, many others lose their life financial savings.
2021 bull run a turning level for memecoins
The 2021 bull market remodeled memecoins from parodies to professional funding choices. Earlier than 2021, memecoins had been primarily social media primarily based, with robust web communities driving their reputation. This modified when the unofficial DOGE ambassador emerged — Elon Musk.
Musk turned an ardent supporter of DOGE, and the group behind it declared him the venture’s unofficial CEO. The Musk-Doge relationship began as a continuation of the meme idea. Musk mentioned on many events that he liked memes and, subsequently, liked the concept behind a cryptocurrency like DOGE.
With the 2021 bull run fueled by elevated institutional curiosity in cryptocurrency and Bitcoin (BTC), Musk began pitching DOGE because the true web forex. The tech billionaire’s backing did wonders for the memecoin, with its value surging 23,000% in 2021.
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With the Dogecoin surge, the memecoin frenzy turned a brand new phenomenon within the crypto market. This lured many new members — from seasoned merchants to common individuals — to the crypto market, hoping to experience the bullish wave. Different memecoins began to emerge, with many newly minted tokens recording multidigit value surges, typically simply primarily based on a tweet from Musk himself.
The 2021 memecoin frenzy made many new crypto millionaires and attracted new merchants to the ecosystem. In a yr that noticed memecoins break into the highest 5 cryptocurrencies by market cap, there was no scarcity of tales about merchants shedding their dwell financial savings after shopping for tokens at market tops or believing Musk would proceed to affect costs positively.
Multitudes of recent merchants tweeted at Musk to put up about DOGE; nonetheless, as quickly because the frenzy died down, the token misplaced over 90% of its worth.
For the reason that DOGE craze of 2021, the market has been inundated with tens of hundreds of memecoins and “shitcoins” attempting to change into the following Dogecoin or Shiba Inu (SHIB).
Anjali Younger, the co-founder of the community-focused blockchain utility growth platform Abridged, instructed Cointelegraph that the present memecoin frenzy is all about managing worry of lacking out (FOMO).
“One essential bit is managing FOMO. There are lots of approaches on methods to deal with it, and it’s greatest to seek out the one which works for you. For some, formulating a shopping for thesis and sticking to it or solely investing what they’re ready to lose helps. That being mentioned, it’s vital to say that with cryptocurrency working 24/7, it’s straightforward to get swept up within the fixed inflow of stories and buying and selling exercise. While you succumb to FOMO, be taught your lesson and transfer on. After which get again to managing that FOMO,” she defined.
Period of nameless meme tokens full of scammers and rug pulls
Along with the memecoin hypothesis frenzy, observers had been involved concerning the dangers posed by the brand new cryptocurrencies.
New nameless memecoins typically include many good contract vulnerabilities, together with closed-source contracts, proxy contract mechanisms, tradeable logic with pause performance (rug pull threat), and setting excessive promote taxes hindering token gross sales. These vulnerabilities can probably lead to losses for merchants.
Gracy Chen, managing director at crypto change Bitget, instructed Cointelegraph that whereas authentic memecoins like DOGE and SHIB nonetheless have a strong group base, new closed-source and nameless meme tokens are largely scams.
“Many of the new period memecoins are nameless in nature with many contract vulnerabilities. Some memecoin issuers think about numerous chips in a single EOA [externally owned account] handle or distribute them throughout a number of addresses below their management, which poses important dangers of short-term dumping. When buying and selling memecoins, particularly newly deployed ones, it’s important to train excessive warning and do your personal analysis,” Chen defined.
The darkish facet of the frenzy turned evident in 2023, with a number of new rip-off tokens being launched within the garb of being a meme forex.
In Might, blockchain analytic agency PeckShield launched a report warning the crypto group to be cautious of faux meme tokens. The safety agency listed 24 rip-off meme tokens created within the first week of Might.
#PeckShieldAlert We’ve detected a sequence of #rugpulls involving the creation of ~24 Rip-off #MEME Tokens inside the final 10 days. #SHITMEME, #BENS, #WorldCoin, #MONKEYS, #ERDR, #Magneto, #STARK, #ZAT, #LADYBOY, #USACOIN, #WLD, #POGO, #Miniclip, #PORN, #FROGS, #RNDT, #PSYOP,… pic.twitter.com/KlBX5k9Go6
— PeckShieldAlert (@PeckShieldAlert) May 23, 2023
ZachXBT, an internet sleuth identified for exposing scams, highlighted how one account created 114 rip-off meme tokens in simply over a month.
One other widespread memecoin rip-off stemmed from the moderator of the favored buying and selling subreddit r/WallStreetBets. The group created a memecoin known as WSB Coin (WSB), claimed it was the official memecoin of Wall Avenue Bets, and launched it on Might 2. The WSB token’s builders asserted that 10% of the cash could be put aside for the subreddit, with no allocation for the workforce.
On Might 4, the moderator dumped a big chunk of the meme token available on the market, and inside two days, the token’s value plummeted from an all-time excessive of $0.00067279 to an all-time low of $0.00004827 on the time of writing.
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In keeping with Satoshi Nakamoto’s authentic imaginative and prescient, the aim of crypto is to resolve conventional finance’s limitations and supply higher entry to everybody. Whereas some individuals have achieved monetary freedom by means of memecoin hypothesis, taking a look at historical past, most individuals find yourself on the shedding facet.
Kadan Stadelmann, chief technical officer at Komodo, instructed Cointelegraph that there are two primary the reason why the present development of memecoin funding is unhealthy for the crypto ecosystem:
“First, it dilutes the potential funding that may in any other case go towards severe tasks which have extra progressive tech and actual use instances. Second, many portfolios will lose worth because of both not promoting on the high or chasing rip-off tasks.”
