Fun coins reign supreme in the crypto world
Published: Tuesday, Jul 2nd 2024, 11:30
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Cryptocurrencies such as Bitcoin and Ether have roughly doubled in value over the last twelve months. In terms of price gains, however, many so-called meme coins are outperforming the established industry giants.
"When Lambo?" is once again booming within the crypto scene. The phrase is often used in jest to ask when one's own crypto coins will reach the equivalent value of a Lamborghini. Some investors are likely to have come a little closer to this goal - at least for the time being - thanks in particular to the recent price volatility of meme coins.
"Compared to other areas of the crypto ecosystem, meme coins have shown a remarkable outperformance," comments Adrian Fritz, Head of Research at 21Shares, on the upswing. Meme coins have not only outperformed large blue-chip crypto assets, but have also outperformed other sectors.
Dogecoin as Blaupause
While Bitcoin as "digital gold" or Ethereum as a "decentralized world computer" assert a serious function, meme coins focus on entertainment. "Meme coins are a fascinating socio-cultural phenomenon that shows the possibilities of blockchains beyond purely financial applications," explains Dominic Weibel, Head Research at Bitcoin Suisse. This "new form of cultural expression" is sparking a buying frenzy among small investors in particular, supported by the enormous reach of social media.
The best-known representative of the species is the "Dogecoin", which has been in circulation since 2013. Originally programmed as a parody of Bitcoin, the coin with the dog logo climbed above the 1 cent mark in 2018 thanks to promoters such as Elon Musk and a strong social media community, reaching an all-time high of 70 cents in 2021. The "Doge" thus provided the blueprint for the growing number of imitators.
The second major dog coin "Shiba Inu" skyrocketed even more spectacularly in 2021. With an investment of just a few dollars, you could become a millionaire - provided the timing was right. Today, both traditional meme coins are a long way from their former highs. Nevertheless, both have kept pace with Bitcoin and Ethereum in terms of price performance over the year and have firmly established themselves in the top 20 cryptocurrencies.
"Completely useless"
A major newcomer in the sector is Pepe Coin, which has only been circulating on various exchanges for just over a year. According to its own advertising, the "most memeable memecoin" uses the frog Pepe by cartoonist Matt Furie as its identifying symbol. The coin is advertised on the homepage by an unknown team of developers as "completely useless", it is "only for entertainment" and promises "no financial return whatsoever".
After a meteoric rise, the 420.69 trillion Pepe coins currently have a market capitalization of USD 5 billion, making "Pepe" number three behind "Doge" and "Shiba Inu" with USD 18 billion and USD 10 billion respectively. In addition, "dogwifhat", "Floki", "Brett" and "Bonk" are also still above the 1 billion US dollar mark, despite the significant losses since their highs in April.
According to the "Coingecko" platform, the meme coin sector is currently worth around 50 billion. However, with a share of only around 2% of the total market, the sector plays "a rather minor role", says Weibel from Bitcoin Suisse, limiting its significance.
Many new launches
Due to their great success, numerous development teams and venture capitalists are currently working on a plan to launch the next "100x" or even "1000x" coin on the market. Thanks to simple tools, meme coins can now be created and put into circulation on decentralized exchanges without a great deal of programming effort. Ethereum alternatives such as Solana, where transaction fees are significantly lower, are often chosen for this purpose.
In view of the current abundance of meme coins, however, the industry's soldiers of fortune are also becoming increasingly selective. Large insider holdings, for example, which simplify price manipulation and promote so-called "pump-and-dump" strategies, are not appreciated. Instead, when launching a coin, more attention is paid to a "fair distribution" within the community before the listing on a major exchange such as Coinbase or Binance is expected to ignite the hoped-for price fireworks.
Politi-Fi as a trend
In addition to the numerous variants of dog, cat and frog coins, politics is also playing an increasingly important role, fueled by the ongoing election campaign in the US. Since August 2023, for example, the "MAGA" meme coin, which features the likeness of Donald Trump, has been actively traded - with great success, as the 2400% price increase since the beginning of the year shows.
The trend labeled "Politi-Fi" seems to be becoming more and more established and, in addition to "Jeo Boden" and "Doland Tremp", there are numerous other similar alternatives to choose from. It is often difficult to draw a clear dividing line between satire, name-dropping and targeted political propaganda.
However, Adrian Fritz does not predict a great future for this type of coin. "These coins are based on current events and are therefore more short-lived." However, some people would use these memes as indicators to bet on the outcome of elections.
Expression of the zeitgeist
The experts agree that the hype surrounding meme coins is likely to die down again in the foreseeable future. "There will certainly be a consolidation and volumes will decrease," says the 21shares expert. However, "meme coin rallies" usually occur in cycles and waves, and it is therefore likely that further waves will follow.
Weibel from Bitcoin Suisse does not expect the fun coins to disappear completely either. "They will remain with us for a while as an expression of the zeitgeist." In the longer term, however, core technologies and the increasing institutional acceptance of cryptocurrencies will play a more important role.
Many serious investors are likely to stay away from this "asset class" in the future, especially as the possibility of a total loss hangs over every investment as a sword of Damocles. For others, however, the meme coins also bring back that touch of anarchy, razzmatazz and gold-rush atmosphere to the crypto sector that was lost when Bitcoin and Ether were established as "investable assets" for major investors.
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