According to data from the global crypto data platform CoinMarketCap, these meme coins collectively accounted for approximately half of the total trading value, which amounted to $113 million, on the top three Indian crypto exchanges within a 24-hour period ending at 7 pm on March 5th, 2024. This surge in trading activity is notable, considering that prior to this uptick, these ‘penny-stock-like’, highly volatile coins held around a 30% share in the overall value of crypto trades in India.
The sudden spike in trading activity commenced on March 3rd 2024, indicating a renewed interest among investors in these speculative assets. Meme coins, characterised by their whimsical origins and erratic price movements, have attracted a significant portion of the trading volume on Indian exchanges, highlighting the growing appetite for high-risk, high-reward investments in the cryptocurrency space.
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However, while these coins offer the potential for substantial gains, they also pose considerable risks due to their unpredictable nature and lack of underlying value. Consequently, investors may be concerned if it is worth investing in meme coins. To provide a wider audience with valuable insights into the evolving dynamics of meme coin trading and its implications for the broader cryptocurrency market, Economic Times, in collaboration with Mudrex, presents the Crypto Academy – an insightful virtual webinar series designed to guide enthusiasts and investors through the intricate nuances of crypto investments.Join Gopal Dutt Vashisht in the third episode of Crypto Academy focussing on the topic “Should you invest in meme coins?” and delve into the scope of building portfolios amidst the recent surge in meme coin trading on Indian cryptocurrency exchanges. In this episode, Vashisht also educates his audience on how the resurgence in the global crypto market, led by record highs in Bitcoin and Ethereum, meme coins like Shiba Inu (SHIB), Dogecoin, Floki, Vita Inu, Doge Bonk, and PepePAD have captured significant attention.Watch the full session here :
Crypto Academy EP 3: Should you invest in meme coins?
Meme crypto tokens, originating from internet memes and viral concepts, embody a casual and humorous approach to cryptocurrency. Notable examples include Dogecoin (DOGE) and Shiba Inu (SHIB), which have gained prominence through their roots in internet culture. These tokens often achieve fame through the powerful influence of social media platforms and endorsements by influential figures, leading to rapid price surges driven by speculation and the fear of missing out (FOMO). The sense of community and fun associated with meme tokens further contributes to their popularity, as investors are drawn to the idea of being part of a movement or shared joke. Despite lacking tangible assets, meme tokens utilize blockchain technology, providing security and transparency similar to traditional cryptocurrencies. However, their market value can be highly volatile, driven primarily by hype and community sentiment rather than intrinsic value or utility. While some meme tokens are beginning to develop ecosystems and utility beyond their meme status, investing in them remains a high-risk, high-reward endeavor, necessitating careful research, diversification, and risk management strategies.
What are meme coins?
Vashisht begins this conversation by explaining the origin and significance of meme coins in the overall market. As the name suggests, meme crypto tokens derive their identity and value from internet memes or viral concepts. They often start as jokes or parodies of existing cryptocurrencies but can quickly gain traction thanks to their humorous appeal. Dogecoin (DOGE), featuring the iconic Shiba Inu dog, was a pioneer in this space, originating from a popular internet meme. Similarly, Shiba Inu (SHIB) followed suit, leveraging the same cultural reference to establish its own community and value. Vashisht explains, “Unlike traditional cryptocurrencies like Ethereum, which serve practical purposes, meme tokens are created for fun. For instance, Dogecoin, created in 2013, is based on a popular internet meme. These coins thrive on the buzz and virality of the memes they’re associated with, attracting investors’ interest.”
Why do meme crypto tokens get famous?
Vashisht explains the phenomenon of the virality of meme crypto tokens. He explicates how these coins owe much to the power of social media and influential personalities. Tweets or endorsements by celebrities and well-known figures can spark frenzied buying activity, driving prices to unprecedented levels overnight. The sense of community and belonging created by meme tokens also plays a crucial role, with investors drawn to the camaraderie and shared humour inherent in these projects. Additionally, the fear of missing out (FOMO) often propels investors to jump on board, further fueling the tokens’ popularity.
He says, “Their communities largely drive the popularity of meme tokens. These communities promote and trade these coins, sometimes spreading misinformation and myths, which can mislead investors. Speculative trading based on market trends and FOMO further exacerbates the situation, attracting immature investors seeking quick profits.”
What are meme crypto tokens based on?
Unlike traditional cryptocurrencies, meme tokens are typically not backed by tangible assets or projects. Instead, their value hinges primarily on community support and speculation. Vashisht cautions that despite their playful origins, meme tokens use blockchain technology, ensuring the same levels of security and transparency found in more serious digital assets.
Do they hold any value?
Vashisht notes that meme tokens’ market value is notoriously volatile, driven largely by hype and sentiment rather than fundamental value or utility. However, some meme tokens are starting to develop ecosystems and utility beyond their meme status. For instance, projects centred around decentralised finance (DeFi) applications or non-fungible tokens (NFTs) aim to create intrinsic value and longevity for these tokens.
Should some part of the portfolio be parked in meme coins?
Vashisht mentions that investing in meme tokens is undeniably high-risk, high reward. While the potential for significant gains exists, so too does the risk of substantial losses. As such, meme tokens should only constitute a small, speculative portion of a well-diversified portfolio. Thorough research and caution are paramount, and investors are advised to invest only what they can afford to lose.
He says, “Investing in meme coins is high risk with potentially high rewards. However, it’s essential to be cautious and not invest more than you can afford to lose. Diversification and risk management are crucial, allocating a portion of your portfolio to meme coins while spreading the rest across safer investments. For diversification, creating a basket of meme coins and combining them with more stable investments can provide a balanced return while hedging against the volatility of individual coins.”
“Lastly, investing in meme coins should be viewed as a long-term commitment. Market sentiment and practical applications influence their value, requiring patience and periodic reassessment rather than short-term speculation. Additionally, setting stop-loss orders around 12-15% of your total exposure and establishing an exit strategy is essential to managing risk effectively,” he further adds.
To sum up the discussion, Vashisht says that meme crypto tokens offer a playful and sometimes lucrative avenue for investors to engage with the crypto space. However, they come with inherent risks and should be approached with careful consideration and moderation. As internet culture continues to influence the financial world, meme tokens stand as an example of the whimsical and unpredictable nature of both memes and markets.
With this, the third episode of Crypto Academy also wrapped up. To know more about the various facets of the ever-evolving crypto market, tune in for the upcoming episodes of the Crypto Academy—a virtual webinar series—yet another initiative as part of its dedicated Crypto section, to make the world of crypto accessible to a wider audience.
