Memecoins started off as a cheaper and light-hearted alternative to Bitcoin. They take their names from the memes that inspire them and possess absolutely no utility. Despite their inherent ridiculousness, they have become immensely popular amongst the crypto community with Dogecoin having a total market cap of $8 billion. But why? The value of a memecoin depends entirely on their popularity within the community. As they are created, their founders will attempt to hype up their new currency on social media but their lifespan totally depends on the strength of their community base.
Memecoins can also boom when high-profile players endorse them, for example, Dogecoin surged in value after Elon Musk showed his support for the cryptocurrency. As Memecoins are yet to have any real utility, they are, for now, merely a way to make money and despite their humorous reputation, there are dangers involved in investing.
Memecoins are more volatile than other cryptocurrencies due to their unlimited supply and they are much more vulnerable to mainstream factors such as social media trends. Furthermore, a substantial amount of the supply is in a select few wallets, for example, 48% of all Dogecoins are held by seven wallets. This means large investors can manipulate the market or cause the coin’s value to collapse should they cash out their holdings.