Understanding the Pros and Cons of Memecoins as an Investor

Memecoins

It doesn’t matter whether the space is on a bear or bull run, investors will always seize every opportunity to buy their favorite crypto assets. Although a greater part of crypto investors will be attracted to the big names such as Bitcoin (BTC) and Ethereum (ETH), some are also inspired by memecoins. 

Although ‘memecoins’ are now and again excused as jokes, a few crypto backers think they ought to be taken seriously. Dogecoin (DOGE), which is the largest decentralized meme token, Shiba Inu (SHIB), and other memecoins have made a ton of buzz in the crypto space. Some investors have also profited greatly from these investments. 

But are memecoins wise investments? Read along as we highlight the pros and cons of investing in memecoins. 

 

What are Memecoins?

Memecoins are cryptocurrencies that get their motivations from the web and online jokes. Dogecoin was the first meme currency produced (DOGE). Launched in 2013 as a spoof, DOGE was inspired by the iconic Doge meme of a Japanese Shiba Inu do. Some Memecoins are utilized to reward users for participating in social media tasks. They can also be used to promote content such as videos or images. For example, to promote your website or blog, you could use memecoins to incentivize people who like your content and share it with their friends on Twitter or Facebook.

Memecoins are also cryptocurrencies, but there is a difference between memecoins like Dogecoin and Shiba Inu and traditional cryptocurrencies like Bitcoin and Ethereum. This distinction is utility.

Digital currencies like Bitcoin and Ethereum were created to resolve genuine issues. The objective is to ultimately gain acceptance by vendors, foster another sort of decentralized cash, and change a few areas.

The majority of memecoins were developed as a means of making quick money and currently have no real use case. Some of these coins are famous because they get support from celebrities, and retail investors have driven up their values by broadly promoting them on the web. As a result of this, these currencies frequently increase rapidly despite having weak foundations.

Memecoins currently have no practical function, thus it’s doubtful that they will in any case exist in a couple of years. 

 

Investing in Memecoins 

Choosing to invest in a memecoin is risky but is not without reward. Memecoin investors can buy into the memecoin economy by investing in their memes. However, this is not without risk because there are so many different types of memecoins out there and they all vary greatly in value. Weighing the pros and cons before investing in a coin is part of what makes you a good investor. I’ll highlight the pros and cons for you so you don’t have to sweat on that. 

 

Pros of Investing in Memecoins

Several advantages make investing in memecoins an attractive option for investors. One such advantage is the asymmetric nature of cryptocurrencies including memecoins. What does this mean? 

This means that the profits of investing in crypto and the risks are not symmetrical. Whatever you invest in is what you stand to lose. But the profit you can make from a single investment can not be underestimated.

The value of memecoins is expected to increase over time, especially if the project has been successful and there’s demand for more products. This means you can expect your investment to grow significantly with little effort on your part.

Another advantage is that memecoins are easy to buy and sell because they don’t require any regulation by a central authority like banks or governments; thus, there’s no risk of intervention by these institutions if things go wrong with an investment opportunity that doesn’t pan out as planned.

Lastly, memecoins are one of the cheapest cryptocurrencies to buy out there. Their cheap prices encourage many people, especially newbies, to buy them, and buy many of it. In some cases, people’s first knowledge of and interaction with cryptocurrencies is through memecoins, not through Bitcoin or other altcoins.

 

Cons of Investing in Memecoins

Generally, investing in cryptocurrencies is risky. One characteristic of crypto that makes it risky is its volatility. 

While memecoins are a great way to invest in cryptocurrency, they also come with the risk of volatility. The price of a memecoin can fluctuate wildly over short periods — a fact that makes it unsuitable for long-term investments or those who need their money in the bank.

Additionally, small groups of individuals also control significant amounts of these memecoins in addition to having limited liquidity pools. Because of this, the prices of memecoins are frequently extremely volatile, greatly impacted by “FOMO” and online reaction. This makes memecoins susceptible to pump-and-dump schemes, in which a single person or group of holders pump up the coin, luring buyers and increasing the price before dumping all of their holdings on the market.

Another issue is that memecoins are not serious projects. Most of them are made by reproducing code from another kind of coin. They also do not generally have developer communities. This means that there is no continuous update on the security snd governance of the coin.

 

Top Memecoins You Should Know

  • Dogecoin (DOGE): Dogecoin is a cryptocurrency based on the popular “Doge” Internet meme and features a Shiba Inu on its logo. It is a Litecoin fork. Introduced as a “joke currency” on 6 December 2013, Dogecoin quickly developed its own online community and reached a capitalization of US$60 million in January 2014. Elon Musk is an outspoken supporter of Doge and this has had some impact on the value and volatility of Doge.
  • Shiba Inu (SHIB): Shiba Inu (SHIB) is a meme token which began as a fun currency and has now transformed into a decentralized ecosystem. The Shiba Inu team launched a decentralized exchange called Shibaswap with 2 new tokens, LEASH and BONE. LEASH is a scarce supply token that is used to offer incentives on Shibaswap. BONE is the governance token for holders to vote on proposals on Doggy DAO.
  • Baby Doge (BABYDOGE): Baby Doge Coin is a meme cryptocurrency designed to be deflationary and more scarce over time. All holders of Baby Doge will earn more baby doge that is automatically sent to their wallets by simply holding Baby Doge coins in your wallet. The community receives more baby doge coins from the fees generated from each transaction.
  • Dogelon Mars (ELON): Dogelon Mars is a dog-themed meme coin on Ethereum and Polygon. It follows the example of other dog coins such as Dogecoin, Shiba Inu, and Floki Inu.
  • Dogelon Mars: It plays on several popular themes in the meme coin space. Its name is a mixture of Dogecoin and Elon Musk, the billionaire entrepreneur who is an outspoken supporter of Doge. It alludes to Mars, a spin on the famous moon meme, implying that Dogelon will experience a massive upward movement.

Conclusion

Resolving to buy a memecoin is a big decision that should not be taken lightly. There are many factors to consider, such as how much risk you’re willing to take on, your investment goals, and more. 

Buying or investing in meme coins is like playing roulette in casinos. You can never tell when you might turn $100 to $10,000. Neither can you know when you’re going to lose all you invested in. Since they’re young, memecoins depend largely on social media influence and speculation. That should tell why Dogecoin surges whenever Elon Musk makes a tweet about it. That level of volatility is what makes memecoins fun and dangerous too.

We hope this post has given you some insight into the pros and cons of investing in memecoins and will help you make better investment decisions going forward. 

 

Credit: Ndianabasi Tom

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