A meme coin is a cryptocurrency that is inspired by an internet joke or meme. They are not meant to be taken seriously. Nevertheless, meme coins can gain enormous popularity due to the potential big wins. As the value of this meme coin rises, it will get more attention and investors will take their chances. The more online visibility and exposure for a meme coin, the greater the chances that the meme coin can increase exponentially in value. Elon Musk is pre-eminently the person who likes to influence the market with his meaningless tweets, whether or not he promotes meme coins. He did this several times with Dogecoin and Floki Inu, among others.
Lack of fundamental analysis #
Blockchain technology is a major technological revolution that can affect the entire society. Think of Decentralized Finance (DeFi), the use of smart contracts and the decentralization of almost all aspects. Despite this, there are also many cryptocurrencies that have virtually no fundamental analysis.
A fundamental analysis tells more about the objectives of a particular project. What problem does it want to solve? How can it positively change the future? What added value does it have? With meme coins we can answer quite briefly: the only thing that make meme coins great is the presence of a strong community, the word-to-mouth and the hype that every investor experiences. One for all and all for one.
Always extensively research the white paper of a new project. In the past there were meme coins where users paid a fine when they sold their coins, which was often a small percentage. This is anything but a good way to attract investors and is therefore an immediate indication that such an investment may not be worth it.
Lack of experience #
A meme coin often attracts the attention of new investors due to the exorbitant profits. Without any knowledge they take their chance hoping for a good outcome. Characteristic of these meme coins is that they often have a high circulating supply, but a correspondingly low price. A good example of this is Dogecoin (DOGE) which at the time of writing is highly ranked on CoinGecko and CoinMarketCap.
“That currency is still super cheap, just look at Bitcoin or Ethereum, it can still grow.” Due to the lack of knowledge, investors expose themselves to dangers and huge losses. It is not about the price of a token or a coin but about the market capitalization. This gives an indication of the growth opportunities.