What Is a Meme Coin?
What Is a Meme Coin?
"Meme coin" is a term used to refer to cryptocurrencies named after characters, individuals, animals, artwork, or anything else that can be mimicked. Most are supported by enthusiastic online traders and followers and are generally intended to be light-hearted and fun. While meme coins may be entertaining to some, they are also highly risky investments and may hold little or no intrinsic value.
Dogecoin, Shiba Inu, and other currencies that may offer more entertainment than usability fall into this category. When buying or trading meme coins, it’s critical to understand the risks to help you avoid unexpected volatility and losses.
KEY TAKEAWAYS
- Meme coins are a type of cryptocurrency that’s highly speculative and supported by certain enthusiastic online communities.
- Examples of meme coins include blockchain-based coins and tokens such as Dogecoin and Shiba Inu.
- It’s possible to make or lose a large amount of money quickly when trading meme coins and other virtual currencies.
Watch Now: What Is Cryptocurrency?
Understanding Meme Coins
Meme coins are a cryptocurrency genre loosely defined as having an exuberant online community supporting the currency's growth. They are sometimes identified with animated characters or animal meme images. Some of the top currencies to gain meme coin status included Dogecoin and Shiba Inu. The category extends to lesser-known currencies such as Bonk, Pepe, Floki, Memecoin, Baby Doge, and Dogelon Mars. While these currencies earn fewer headlines, they still maintain nine-figure market capitalizations.1
As with other cryptocurrencies, meme coins rely on blockchain technology, a type of distributed database used to track virtual assets, including cryptocurrencies and non-fungible tokens (NFTs).
Most meme coins are purely trading instruments, unlike Ethereum and other utility currencies tied to specific blockchain features. Major cryptocurrencies such as Bitcoin, Ethereum, USD Coin, XRP, Cardano, Solana, Polygon, and Polkadot are generally not considered meme coins.
Utility is something meme coins don't often have. For example, ether is used to pay validators for verifying transactions on the Ethereum blockchain. Meme coins often use other blockchains—one of the more popular meme coins, Shiba Inu, is an ERC-20 token that runs on the Ethereum blockchain.2
Meme Coin Risk and Volatility
Cryptocurrency aggregator CoinMarketCap lists more than 1300 currencies in its Meme Coin section. However, about nine pages of these coins are not actively traded and are effectively worthless. Dogecoin, Shiba Inu, Bonk, Pepe, and about 50 others are the only currencies in the meme category with more than $1 million in daily trading volume.1
All are generally considered risky and volatile trading assets.
Some in the media and investing world characterize meme coins as elaborate pump-and-dump schemes—often, that is precisely what these coins are. On other occasions, they might only be meant as a joke but somehow attract followers and people wanting to invest money or use the token.
If you find distinguishing between meme coins, scams, and cryptocurrency confusing, you're not alone. It can help compare an actual white paper (like Ethereum's) to a meme coin's (like Bonk Coin). Find the project's development pages (such as on GitHub), and read some of the discussions. Also, read over any social media postings—like Reddit or X—there will be people and groups discussing the coins you're looking at.
Pros & Cons of Meme Coins
Pros
- Fun asset type to use to learn about cryptocurrency and blockchain technology
- Possibility of earning a profit if values rise
- Potential participation in an active investing and trading community
Cons
- High risk and volatility
- Accusations of being pump-and-dump scams
- May be technologically complex for some users
How Can You Buy Meme Coins?
You can buy meme coins using a cryptocurrency exchange. Centralized cryptocurrency exchanges such as Coinbase, Gemini, Binance, FTX, and Kraken let you buy and sell directly with other users through their online marketplaces. Decentralized exchanges like PancakeSwap require a cryptocurrency wallet that lets you maintain custody of the currency outside an exchange.
Can You Create Meme Coins?
Anyone with the necessary technical knowledge is easily able to create a cryptocurrency. However, turning a coin or token into a popular meme coin is complex and has only been successfully achieved a few dozen times.
What Are the Most Popular Meme Coins?
According to CoinMarketCap, the top five meme coins in terms of market capitalization are Dogecoin, Shiba Inu, Bonk, Pepe, and Floki.1
The Bottom Line
Meme coins are an interesting cryptocurrency asset but come with many risks. For most investors, it’s best to avoid putting in more than you can afford to lose. But there’s a tiny chance that if you pick the next big coin before online fans send it “to the moon,” you could become the next crypto millionaire. So, when it comes to risky meme coins, it’s best to proceed with caution and do your research.
