From novelty to asset: The unexpected durability of memecoins in cryptocurrency.

Memecoins and investment are terms that are rarely found together in a serious context.

Nevertheless, a year into the bear market, memecoins like Shiba Inu and Dogecoin have not only endured but have also performed comparably to, or even better than, numerous “serious” cryptocurrency projects.

Additionally, in spite of the tough market environment, memecoins boast some of the most rapidly growing and engaged communities within the cryptocurrency sector.

Market Cap of Doge&SHIB

While it is important to acknowledge potential pitfalls, such as the significant influence of whales over even the largest memecoins, can memecoins serve as a beneficial factor for retail investors in 2023?

Footprint Analytics collaborated with Alexander from PointsVille, Xander, the Founder of HumbleHedgeDAO, and Peter, Community Lead at ICHI, to engage in a discussion on Twitter Space.

1. Memecoins are advantageous for traders

Crypto traders thrive on volatility; it is this volatility that renders trading a lucrative market. No other type of token exhibits the same level of volatility as so-called memecoins, which are tokens lacking utility and based on memes. (However, this definition is evolving, as several memecoins are now developing utility.)

“Whenever Elon Musk shares a photo of a dog, it guarantees a 10% increase in several memecoins,” stated Alex, who noted that it is irrelevant whether one views this as positive or negative.

“The free market is indifferent to our opinions. And [the memecoin market] represents the most liberated market that exists. A memecoin has virtually no utility—with such volatility, it embodies the essence of the free market.”

In many respects, memecoins resemble luxury items, such as sneakers, where prices are influenced more by hype than by utility.

“The value aligns closely with market sentiment,” remarked Xander.

“How does something devoid of utility appreciate in value? Through sentiment. There are individuals in the space who understand how to leverage sentiment. It’s purely marketing. It may not be rational, but the market does not need to adhere to rationality.”

2. Memecoins are evolving beyond mere memes

Footprint has previously examined the Shiba Inu ecosystem. Initially launched in 2020 as a joke, the community has since developed an ecosystem around its L2, Shibarium, which includes a DEX, NFT marketplace, and DAO.

Price & Trading Volume of SHIB-Meme

Numerous memecoins also incorporate charitable initiatives as a fundamental aspect of their utility.

“Even though we categorize them as memecoins, if you observe Shiba’s progress, they are transitioning from a memecoin to a concept and actively engaging with Shibarium,” stated Peter. “If you have a dedicated team committed to the project, and they begin to build it out, you can genuinely evolve from being a memecoin to having a legitimate use case. That would be transformative—transitioning from a memecoin to a real enterprise.”

Memecoins continue to capture public interest, which is beneficial during bull markets and times of heightened volatility. Traders are keen on both the potential upside and shorting the tokens. However, the pursuit of utility is essential for maintaining value over the long term.

“Shiba Inu has attempted various initiatives with an NFT marketplace. Memecoins are utilized for humanitarian efforts that can draw attention. If an organization, foundation, or independent team invests further into a community or infrastructure, that infrastructure could offer additional services,” explained Alex.

“What would make the most sense for me would be video games. These are the closest things to memes and trading, in my view. The idea is to keep that community engaged, beyond trading, during a bear market or when volatility is low and the market is stagnant. P2E would be fitting for something like Dogecoin, which has no cap and can continue generating tokens.”

3. Trading memecoins necessitates accepting that whales create ripples

The top 100 DOGE-holding wallets control 70% of the total supply.

This is simply the nature of the space. Fortunately, whales act as rational participants in a free market—this means that unexpectedly dumping all their assets is unlikely. The growth of the community will also attract new liquidity.

However, traders should be aware of the underlying dynamics.

“I believe most traders understand that whales can create ripples, and they are attempting to ride those waves, following the whales to secure profits. Seasoned traders recognize that this is the strategy,” noted Alex.

“You’re navigating the distance between liquidity levels in the market,” added Xander.

“In speculative trading, that is your only safeguard, aside from perhaps the information you possess. Whales need to safeguard their interests [and are not simply going to sell off]. The protection lies in free market dynamics, so if you want to shield yourself, learn how free markets operate.”

4. Memecoins assist in onboarding new users into crypto

The blockchain sector is filled with complex jargon and technical advancements that can deter newcomers. Nevertheless, memecoins still operate on the fundamental principle of crypto—the decentralization and self-custody of value.

“They’re generally easy to comprehend,” stated Xander. “You can still utilize them as a means of value exchange—you can send them anywhere globally without an intermediary.”

“I find it quite impressive that we have, in the crypto realm, these simpler coins that are user-friendly. As an entry point, these memecoins are effective because there’s not much to grasp about them—though SHIB is starting to change this. You don’t need to read a whitepaper on DOGE.”

Peter also remarked that memecoins “offer a pathway for individuals who are not well-versed in crypto to enter the space:

“Everyone’s familiar with Bitcoin; that’s almost like the traditional stuff. But they encounter these memecoins, which feature amusing images, and it’s visually appealing. And that serves as effective marketing for crypto to the broader audience.”

“It’s a very straightforward way to engage and become part of Web3. If you’re a speculative investor, you’re participating in Web3. You’re contributing to the ecosystem’s vitality by being involved. Thus, I believe it’s a good way to start.”

This article is contributed by the Footprint Analytics community from the Meme Token Dashboard.

The Footprint Community is a space where data and crypto enthusiasts from around the globe assist each other in understanding and gaining insights about Web3, the metaverse, DeFi, GameFi, or any other aspect of the emerging blockchain landscape. Here, you will find active, diverse voices supporting one another and propelling the community forward.

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The post From joke to investment: The surprising resilience of memecoins in crypto appeared first on CryptoSlate.