One term that has repeatedly been making headlines in the crypto world over the past few years is “meme coins.”
Not sure what a meme coin is or why you should care, but curious to learn more? You are in the right place.
In this meme coin newbie guide, we are going to explain exactly what meme coins are, what distinguishes them from other cryptocurrencies, the pros and cons of investing in them, and how you can get started. Let’s dive in!
What are Meme Coins?
You might think we could offer a simple definition for “meme coin,” but the reality is, we have seen multiple definitions. Here are a few:
- Meme coins are cryptocurrencies that are designed without a specific practical utility in mind
- Meme coins are cryptos that are supported by dedicated communities driving adoption
- Meme coins are cryptos that are humorous or connected to internet memes in some way
As you can see, there are limitations to using any one of these definitions on its own. Some meme coins do have utility (more on that later), even though most do not. Plus, plenty of non-meme coins have dedicated communities promoting them.
The third definition we have here is perhaps the most precise one. But we would take it a step further to say this:
A meme coin is a crypto that a community attempts to spread in a viral fashion, much like an internet meme.
So, it isn’t just that meme coins are based on memes; they are also supposed to function like memes.
The concept of meme coins might seem confusing at first, but once we go over a few examples, you will get the idea.
Meme coins are usually humorous and based off of internet memes. Moreover, they spread in a viral way like internet memes, and commonly are created without utility.
Why Do Meme Coins Matter?
You might wonder why cryptos that are created without a specific and tangible real-world application would have any relevance whatsoever.
But meme coins do matter, and sometimes, they end up having more economic relevance than you would expect. Here are a few reasons meme coins are worthy of attention.
- People Make Them Matter
For starters, meme coins are often self-fulfilling prophecies. A coin that might otherwise have gone completely unnoticed and faded into obscurity might explode into the spotlight for the simple reason that somebody brought attention to it.
A celebrity might take an interest in a meme coin and invest in it, comment that they think it will be big, or even just make a joke about it.
Suddenly, their tweet takes off, and before you know it, everyone starts buying the meme coin, driving up its value. A coin that was close to worthless a day before might suddenly be worth a lot.
So, meme coins matter because we want them to, and because people we consider relevant have an influence on us.
- They Can Be Fun And Exciting
Another reason that meme coins are important is that they are just a lot of fun. People enjoy the humor behind them and the strange and unexpected moments that can lead to individual meme coins becoming popular out of the blue.
Even just following these stories without a stake in them can be entertaining. But if you are invested in a coin that takes off, that is a whole other level of excitement!
- Utility Meme Coins Are Becoming A Thing
Finally, even though the majority of meme coins are not designed to fill a concrete function, that is not always the case. Some coins also were created without utility originally, but may be given utility later by their developers. When meme coins have a function, they are simply called “utility meme coins.”
For instance, one popular meme coin is Shiba Inu. Eventually, the community will have a metaverse to enjoy called the Shibaverse. Shiba Inu will be part of its infrastructure.
Another meme coin team that is working on a metaverse are the creators of Floki Inu. Their metaverse will be known as Valhalla, and Floki Inu will be a part of how it runs.
Meme coins may sound silly and pointless to those who are not into cryptocurrencies, but they are relevant for multiple reasons. Some have utility, while others matter for the simple reason that people decide that they do. That is the fun thing about being human – we get to inject meaning and value into things.
How Many Meme Coins are There?
It is hard to say how many meme coins are currently in existence. Most of the estimates we have seen suggest that there are several hundred at this time.
You might think that sounds like a lot, but actually, if the estimate is correct, it is a surprisingly small amount.
There are over 22,932 cryptocurrencies out there, and more being created every day. You would think that a larger chunk of those would qualify as meme coins, but 300+ is an astonishingly small percentage of the whole. The vast and overwhelming majority of cryptos are serious coins and tokens created for real-world applications.
Despite the huge amount of cryptocurrencies in existence, meme coins only make up a small slice of the pie.
Examples of Meme Coins
As we mentioned already, it will probably be easier to understand the concept of meme coins by taking a look at some well-known examples.
We will start with what is perhaps the most famous meme coin as of the time of this writing, Dogecoin, abbreviated as DOGE.
Software engineers Jackson Palmer and Billy Markus developed DOGE as a joke. Meme coins were not yet a thing at the time that they did this, but they found the speculative investments in cryptos amusing.
The name of the coin as well as the image that goes with it are references to the 2013 “doge” meme. The coin was released that same year. A community grew up around it rapidly.
The value of Dogecoin made a stupendous leap of 300% in a 72-hour period starting on December 19th, 2013. It then declined 80% three days after that. This is a great example of how insanely volatile meme coins can be.
Some of the coin’s success can be attributed to the interest that Elon Musk has taken in it, starting in 2020. Simply by promoting the coin, he was able to drive up its value. Case in point, the value of the coin shot up 20% when Musk first tweeted about it. All he wrote was, “One Word: Doge.”
Were Dogecoin a stock, Musk might have faced legal actions for doing something like this. But laws related to market manipulation do not currently apply to cryptos, so there is nothing to prohibit this behavior.
Another of the biggest names in the world of meme coins is Shiba Inu (SHIB). This crypto has not been around nearly as long as Dogecoin; it was created in 2020. No one knows who the person or team behind it is; they are simply referred to as “Ryoshi.”
Naturally, some people mix up Shiba Inu with Dogecoin since this coin also is named after a dog and features a dog icon, (the same exact breed, in fact).
The coin was developed as a direct competitor with Dogecoin, and even marketed itself as the “Dogecoin killer.” As with Dogecoin and other meme coins, Shiba Inu has shown extreme volatility over short periods of time.
One troubling thing about Shiba Inu is that just one wallet contains SHIB worth billions of USD. That is a lot of eggs in one basket. Imagine the impact that one person could have based on what they do with the SHIB that they own.
This meme coin was created in reference to the “Pepe the Frog” meme, and is quite new, having only been around since April 14th, 2023. In less than a month, it exceeded a market cap of $1 billion. The coin’s stated mission is “making meme coins great again.” The creators wrote, “$PEPE is a meme coin with no intrinsic value or expectation of financial return. There is no formal team or roadmap. the coin is completely useless and for entertainment purposes only.”
The swift growth in the market cap for Pepe really demonstrates how fast things can move in the world of meme coins.
Now you have a few examples of meme coins. You will want to spend some time reading about others; there are a lot of fun stories to explore!
Advantages and Drawbacks of Meme Coins
You understand the basics of meme coins now: what they are and how they work. But what are their advantages and disadvantages? Let’s check them out.
5 Pros of Meme Coins
- Potential For Profit
If the timing is right, you can theoretically make a lot of money by investing in meme coins. Imagine if you had caught that early surge in the value of Dogecoin, for example, or if you had been invested in it when Musk first started tweeting about it. You could have walked away with huge profits.
- It Is Easy To Buy Meme Coins
You just need to join an exchange, get a wallet, and make a purchase. It is no more difficult than buying any other type of cryptocurrency. If you are not sure what exchanges or wallets to choose, you can check out our reviews.
- You Can Spend Very Little If You Want
For reference, as of the time of this writing, the value of 1 DOGE is 0.077 USD. And that is actually pretty high for a meme coin. The price for 1 SHIB in USD at this moment is just $0.000009471! Imagine if you bought just $1 worth of SHIB what would happen if the value of 1 SHIB were to rise to $1 (though as we will discuss in a little bit, that is not going to happen). So, you do not necessarily need to risk a lot of money when you buy meme coins to still have a shot at decent returns.
- Meme Coins Are Fun
Entertainment is a perfectly valid reason to buy meme coins. You do not necessarily need to be trying to invest for your retirement here. You can just do it to have a good time.
- You Can Be Part Of A Community
For a lot of people, the social aspects of being involved in meme coin investments are their own payoff.
7 Cons of Meme Coins
- High Volatility Can Cost You
By now, you are probably fantasizing about making it big with meme coins, right? But do not forget that the opposite can happen. Meme coin volatility is a two-edged sword. It can lift you up to the stratosphere in hours, and it can wreck you just as fast.
- Market Manipulation Is Rampant
Due to the unregulated nature of the meme coin market, celebrities and other players can manipulate the markets without consequence. While this may sometimes play to your advantage, other times it might do the exact opposite. And unless you are a celebrity yourself, you do not have that kind of power. That puts you at a disadvantage in comparison to the big players who can shift the market just by making a tweet.
- There Is A Lot Of Pump-And-Dump
Speaking of market manipulation, pump-and-dump schemes are not uncommon in the world of meme coins. When you see a ton of hype for a specific coin, there is a possibility that is exactly what is going on. You do not want to get caught off-guard by this kind of thing.
- FOMO Can Drive Bad Decisions
A lot of people who get involved with meme coins struggle to regulate their emotions around their fear of missing out. If that describes you, you might find it difficult to rein in your impulses to buy and sell at the drop of a hat.
- Meme Coins Are A Huge Gamble
When you invest in a stock for a company, or even a regular cryptocurrency at that rate, you can do research into the fundamentals to decide whether or not it seems like a good buy. But with meme coins, you usually cannot do that, because oftentimes, those fundamentals do not exist. Since the coin has no purpose and transparency is limited (see below), there is just not much to learn about it. That makes it pretty hard to make an educated investment in a meme coin. You are pretty much just taking a total gamble unless you have some kind of inside information.
- These Coins Are Anything But Transparent
Their creators are frequently anonymous, and they may publish few or no details about their tokenomics, assuming any exist.
- Getting Out May Be A Challenge
The reason why is because meme coins are often plagued by low liquidity. Let’s say you notice the value of your coin holdings are dropping like a stone, and you want out immediately. It might take you longer than you would hope to actually sell off what you are holding, and during that time, the coin will keep losing value, as will the balance in your account. You can imagine how infuriating (and possibly panic-inducing) this situation would be.
There are a number of pros and cons of investing in meme coins. Later, we will go over some suggestions to help you balance them out in your favor a bit.
Can the Value of SHIB Reach $1?
There can be some limitations on what is possible with certain coins. Earlier, we asked you to imagine how much money you could make if the value of a single SHIB token were ever to reach $1. We also said we would explain why that will not happen.
As explained here, “As of the evening of Jan. 4, the price of one SHIB token was $0.000008537. If SHIB were to hit $1 by the end of 2023, this would imply a gargantuan return of nearly 12,000,000%. And at $1, Shiba Inu’s market cap, assuming there are the same number of tokens outstanding, would total a whopping $549 trillion.”
Alas, for that reason, SHIB is unlikely to reach $1. The post continues, “This makes it almost impossible for Shiba Inu to hit the $1 mark not just in 2023, but ever. In fact, the highest price SHIB has ever been at is just under $0.00009 in October 2021. Hoping for it to reach $1 is a loser’s game. Those who were lucky enough to get in at SHIB’s launch and ride it on the way up certainly made life-changing returns. But that’s a thing of the past.”
Do your homework before assuming that the price of a meme coin even can reach a particular value. Sometimes it is just not possible.
Should You Invest in Meme Coins?
Given the pros and cons of meme coins, is it worth it to invest in them? Maybe, maybe not. But that is the thing with meme coins — there is so much unpredictability and volatility in them that you never know how things will go.
If you get in on a volatile leap upward in price by purchasing the right meme coin at the right moment, you could hypothetically rake in some crazy returns, but if a coin’s value tanks while you are holding it, you might find yourself busting out overnight.
Invest in Meme Coins If…
- You are looking for potential fast profits, but are not scared off by potential overnight losses
- You acknowledge the high volatility and risk of meme coins
- You find investing in meme coins entertaining
- You want to be part of the meme coin’s community
- You are excited by an investment opportunity with low barriers to entry where even a small investment could hypothetically go far
Do Not Invest in Meme Coins If…
- The high volatility makes you anxious, and you think trading in meme coins will keep you up at night
- You do not acknowledge the risk associated with meme coin investments, and/or do not trust yourself to manage your exposure in such a way that you do not jeopardize your finances
- You are so easily influenced that you will buy anything that anyone says you should
- You do not have money to lose. Since meme coins are a gamble, you should never stake money you need for other things
Whether or not you should invest in meme coins comes down to your personality, finances and goals.
Best Practices for Investing in Meme Coins
Let’s say you do decide you want to go ahead and jump in on some meme coins. Here are a few recommendations that will help you make the most of the experience.
- Do Your Homework
There probably is not a lot of useful research you can do into a meme coin, considering the problems with transparency and the lack of utility, but do what you can.
Focus not just on the coin itself, but on the nature of the hype surrounding it. Ask yourself:
- Who is hyping the coin?
- How many people are hyping the coin?
- Why are they hyping this coin?
- How much visibility and influence do the people hyping the coin have?
- How likely is the coin’s value to climb in conjunction with that hype?
Hypothetically, the best case scenario would be one where you can somehow find out that an influential celebrity is about to start tweeting about a meme coin, but others have no idea yet.
Say, for example, that somehow you heard from a friend who heard from a friend who heard directly from Elon Musk that he is over Dogecoin and now is going to start tweeting about some other meme coin. If you believe that rumor holds weight, buying that coin might make a lot of sense.
Naturally, opportunities like that do not come along often, if at all. If you do run into a situation like that, it actually might be a once-in-a-lifetime chance.
On the other hand, maybe you keep seeing the same few people going on and on about a different meme coin all over Facebook, but they are just randoms that for whatever algorithmic reason keep appearing in your feed.
You may not want to let yourself get drawn in by the hype. It is likely they are not all over enough peoples’ feeds that they are actually going to be successful in their efforts. Plus, they are randoms, not celebrities. Even if people do see what they are saying, they may still not care what they think. As a result, the coin’s value might rise marginally or not at all. It might even drop.
- Do Not Assume History Will Repeat
One of the most important statements you will see regarding any investment product or opportunity is:
“Past returns do not guarantee future performance.”
It is so common for investors to believe that if something happened in the past, it is going to happen again.
This is an understandable error. After all, investing is in many ways the search for patterns. When you identify patterns in the markets, you can take an educated guess about when an asset’s price may rise.
But there is always risk involved, and even the best trade setups for the most stable, reliable assets can sometimes lead to losses.
Cryptocurrencies are not stable or reliable. In fact, they are extremely volatile and hard to predict.
So yes, maybe a meme coin mooned like crazy in value recently. Perhaps it even did it more than once, and it might do it again. But it just as well might not. It could even plunge in value right after you buy it.
- Acknowledge Your Risk
This is just an extension of what we said above. You can lose money investing in meme coins. In fact, more often than not, that is probably exactly what will happen, no matter how careful you are.
While there is nothing you can do to remove risk from the equation, what you can do is at least acknowledge that reality, and plan accordingly.
The people who get themselves into the most trouble investing in meme coins (or anything else, for that matter) are the ones who convince themselves that failure is not possible for them.
Maybe they think they received some kind of insider information that guarantees a return, or perhaps they just think their own genius is infallible. Either way, they usually end up losing big and then wondering what happened!
- Manage Your Exposure
Speaking of losing big in the crypto markets, that is something you should be able to avoid the majority of the time simply by managing your risk.
In investing, “money management” refers to the practices you use to determine your stake sizes.
You need to consider:
- What percentage of your crypto trading account you are willing to invest on any one meme coin
- What percentage of your overall finances you are willing to invest in cryptos
The trick is to keep these percentages modest. Let’s say you have $1,000 you want to invest in crypto, and you are trying to decide how much to put into a particular meme coin. It is a good idea not to put all $1,000 into that coin. Even $100 would be a massive risk with respect to your account size. Something like $20 would be more reasonable.
And actually, even just buying a few dollars worth of a meme coin in some cases may make more sense. Remember, if the coin does increase in value, it may shoot so high that even a tiny investment like that could turn into a surprising amount of money.
At least if you only risk a small percentage of your account on a meme coin and it tanks, you only stand to lose that small percentage. You then have the rest of your account still available for you to try investing in something else.
Basically, there is no reason for you to go broke gambling on meme coins. Just be careful, and you will be able to keep your losses down.
- Watch Your Investments Like A Hawk
With a lot of low-risk investments, we often take a “set it and forget it” approach. When you invest in mutual funds, for example, it is common to hold them for many years. During that time, the stock market will rise and fall. Sometimes you will gain and other times you will lose. But over the long run, hypothetically, you will probably gain money.
You may not always want to take a “set and forget” approach like that with crypto. Crypto, and meme coins in particular, are just so volatile.
Of course, some people do HODL their coins for a really long time, and do their best to ignore the crazy swings up and down in the meantime. That is a valid approach, but others take a shorter-term approach. The idea is to buy low and sell high, and to get in and out relatively quickly.
Because meme coins gain and lose value so rapidly, you need to keep an extremely close eye on them so as to avoid missing out on opportunities.
Imagine the following scenario:
- 1. You buy Meme Coin XYZ on Day 1
- 2. On Day 2, the value of Meme Coin XYZ jumps 500%
- 3. On Day 3, the value of Meme Coin XYZ falls 700%
If you stepped away from your investment on Day 2 before the price climbed, forgot about it, and then checked in on it on Day 3, think how upset you would likely be.
Not only did you lose a chance to get out at a massive profit on Day 2, but now you are at a sizeable loss.
You could continue holding onto Meme Coin XYZ; maybe you will luck out and be able to break even or profit. But in some situations, the chance is lost forever. Meme Coin XYZ may have been a flash in the pan, and might now just keep dropping in value.
The best way to avoid scenarios like this one is simply to check on your meme coin investments frequently. You can try setting up price alerts so that you will get a text or another type of alert if the price rises or falls to a certain threshold. That way, you can decide immediately what you want to do.
- Manage Your Emotions
As you can imagine given the example scenario above, you can be in for a wild ride sometimes when you are investing in meme coins.
One day you may be on top of the world. The next you could be down in the dumps. And sometimes those dips and rises in the rollercoaster may occur in a matter of minutes, not hours or days.
On top of that, while you are researching meme coins, you will be dealing with a constant deluge of other peoples’ emotions. The fear of missing out can get to be intense as you read stories about other investors getting rich in unexpected ways!
That is why one more critical piece of advice for investing in meme coins is to find ways to handle your emotions.
Note that we did not say you need to switch off your emotions or ignore them. A lot of people will tell you that you should, but we do not think that is entirely possible. In fact, repressing your emotions can sometimes just make them more powerful.
Instead, we suggest that you cultivate awareness of your emotions. The more you are attuned to your emotions, the more you will understand about how they might be trying to influence you. Here are a few tips to help you out:
- As you are reading about meme coins, pay attention to your thoughts and feelings. Are you feeling excited? Anxious? A mixture of both? Something else entirely?
- What are your feelings and beliefs about money in general, and how does investing in meme coins fit into the boarder financial and emotional picture in your life?
- Get into a habit of making observations of your emotional state throughout the day, both while you are doing investing-related activities and when you are busy with other things. Take notes about the earliest clues that you are experiencing rising agitation, whether you are feeling fear, hope, or anything else.
- Be on the lookout going forward for warning signs that your emotions are starting to get dysregulated.
- Have a plan for what you will do when you believe you are starting to get dysregulated. This might involve taking a few days off from reading about meme coins or buying new ones, etc.
Another trick I have learned that is helpful when dealing with hype and FOMO is to deliberately look for the other perspective.
Let’s say you do a bunch of research and talk yourself into buying a meme coin. Before you pull the trigger on the investment, take the additional step of doing some more research with the goal of talking yourself out of it.
Make a sincere effort. Do your absolute best to convince yourself that the investment is a bad idea.
If you succeed, it probably is a bad investment. If you do not, then maybe you really should move ahead with it.
Here is what is extra helpful though — if you do find a lot of compelling reasons not to buy the meme coin, those discoveries will probably douse some of the fires of your enthusiasm. So even if you decide to proceed, you will be doing so with a clearer head. That means that it will be easier for you to manage your money wisely and not bank more than you should on something that is not likely to pan out.
Investing in meme coins can be fun, and sometimes it can even be profitable. But to make the most of it and to avoid unnecessary losses, you need to acknowledge the high degree of risk involved and manage your money and emotions effectively.
How to Buy Meme Coins
- Open An Account On A Crypto Exchange Platform
The first step is to join a crypto exchange. On a crypto exchange, you can buy, sell and trade a wide range of cryptocurrencies, including meme coins.
Some exchanges offer wider selections of meme coins than others, so you will want to make sure you are signing up where you will find plenty of opportunities.
The sign-up process itself should just take you a few minutes; click on the button to register and fill in your basic information.
Of course, if you already trade other cryptocurrencies, this step and the two directly below are already taken care of, and you can press on.
- Verify Your Identity
After you sign up on the exchange, you will be able to verify your identity. To do this, you will need to submit:
- Proof of identity
- Proof of residency
The exchange will tell you the documents they accept for this Know Your Customer (KYC) process. Most of the time, you will submit them by photographing them with your device’s camera, and then uploading them directly to the exchange. The site will then let you know if you were approved, or if you need to try again (sometimes it can be hard to get a clear photo).
Once you have verified your identity, you will be eligible to make withdrawals from your account.
- Get A Wallet And Connect It To The Exchange
Along with an exchange that allows you to trade cryptos, you need somewhere to store the cryptos you own. That is what a wallet is for.
There are a variety of different types of wallets. You can find some recommendations here.
When your wallet is hosted by the exchange itself, you do not need to get a separate one unless you want one. If the exchange does not provide you with a wallet, then you will need to get one and connect it to the exchange.
- Connect Your Payment Method
If you already own some cryptos, you may be able to simply trade some of them for the meme coins you want to buy.
But if you do not want to do that, or there is no money in your account at all, then you will need to transfer outside funds to your exchange account to use to buy your meme coins.
Select a payment method that is convenient for you, and connect it with your exchange account.
- Do Your Research And Calculate Your Position Size
Now you are just about ready to start investing in meme coins. It is time to do the research we have talked about previously in this article.
If you decide to move forward, do some math to calculate how much of the meme coin you should buy to stick with your money management plan.
- Buy Your Meme Coins
You can now submit your order to buy the meme coin through the exchange. Hopefully your order will be filled quickly at the price you expect, but how rapidly it is processed will depend on the liquidity of the coin as well as the transaction speeds on the exchange platform.
You can get started investing in meme coins in just a few quick and easy steps.
Get Started with Meme Coins
Now you are in the loop regarding meme coins. You understand what they are, how they work, and the pros and cons of investing in them. Plus, you know how you can buy your first meme coins!
A lot of meme coin investments fail, but who knows? The next investment you make could be your ticket to the moon. It is a gamble, but if you set modest stakes and do not let FOMO get the better of you, it could be one that pays off.
If you are ready to begin, take a look at our reviews to find your crypto exchange where you can start investing in meme coins.
Frequented Asked Questions
- Question: Do meme coins have value?
Answer: The majority of meme coins have an extremely miniscule amount of value, and are infinite in supply with no cap for how many can be produced.
If you are investing in meme coins, however, you have the potential to profit off of the relative change in their value over time.
So, even if a meme coin is not worth a lot at the time that you buy it or the time that you sell it, if it has huge a huge jump in value over that time, you will see that reflected in your account.
- Question: Can a meme coin reach $1?
Answer: Hypothetically, yes, a meme coin’s value might reach $1.
- Question: What are the top 5 trending meme coins?
Answer: At the time of this writing, here are the top meme tokens by market capitalization:
- Dogecoin (DOGE)
- Shiba Inu (SHIB)
- Pepe (PEPE)
- FLOKI (FLOKI)
- Baby Doge Coin (BabyDoge)
Remember, by the time you read this, the situation could easily have changed, and you could see an entirely different list, so you will want to check the link to see what is currently ranking on top.
- Question: Is Cardano a meme coin?
Answer: No, Cardano is not a meme coin, though some people mistake it as such. It has practical utility for dApps and more.
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