Memecoins are digital currencies that are based on well-known internet memes. This is done in order to attract investors. The meme coin has no purpose, no roadmaps, no promises, and no expectation of profit. This will be a great choice for investors who are interested in memes and community involvement.
Before diving into the risks of meme coins, let’s have a comprehensive knowledge of the popularity of meme coins. After that, we have discussed the potential risks or dangers associated with memecoins. Read the article to learn about them.
Why are Memecoins popular?
You know that Memecoins have gained popularity among cryptocurrency enthusiasts. There are some factors contributing to this. Come let’s have a look at that.
- Meme culture: Biologist Richard Dawkins proposed meme-like cultural ideas. Meme culture is something that shares ideas and influences opinions in a witty way. Everything is shared to create fun and a sense of community.
- Social media influence: The attention is also derived from social media, through celebrities, influencers, or even politicians. If such influential figures tweet, post, or mention on social media about the awareness and demand of meme coins, it will positively influence the growth of meme coins.
- Community support: Memecoins have a supportive community that creatively produces memes, videos, songs, or artworks, which contributes to their popularity.
- Speculation and FOMO: Due to their low liquidity and extreme volatility, meme coins may see significant price swings. Memecoins have the ability to attract investors who are interested in quick profits or who display a Fear Of Missing Out (FOMO) on the next big thing.
Examples of Memecoins
The top 10 meme coins are listed below, have a look.
- Dogecoin (DOGE): Market cap $14.42 billion, price $0.09854
- Shibu Inu (SHIB): Market cap $7.97 billion, price $0.000135
- Pepe (PEPE): Market cap $3.16 billion, price $0.000007494
- Dogwifhat (WIF): Market cap $1.48 billion, price $1.48
- Bonk (BONK): Market cap $1.19 billion, price $0.00001709
- Floki (FLOKI): Market cap $1.17 billion, price $10.0001223
- Brett (BRETT): Market cap $747.13 million, price $0.07486
- Dogs (DOGS): Market cap $627.97 million, price $0.001206
- Popcat (POPCAT): Market cap $565.59 million, price $0.566
- Book of Meme (BOME): Market cap $412.09 million, price $0.005952
Key risks associated with Memecoins
1. Possibility of losing all the money invested
- Crypto assets show high volatility in their value, with sudden rises and falls. Always be cautious, as you could lose all the money you have invested.
- Crypro assets are highly chaotic and they are associated with potential risks such as cyber-attacks, firm failure, and financial crime.
2. Certain risks associated with meme coins
The value of crypto assets is determined by both community interest and online trends.
Risks linked with meme coins are as follows:
- Volatility: This point we have mentioned several times. Because of this volatile nature, meme coins will experience uncertain price fluctuations. The meme coin value depends on the influence of social media trends, celebrities, and other factors.
- Utility: Since meme coins are driven by community interest, online trends, and speculative trading, they might face a lack of utility.
- Market manipulation: Meme coins are prone to the risk of market manipulation that includes the ‘pump-and-dump’ scheme.
- Transparency: A limited source of information about development teams, goals, and financials will result in a lack of transparency and affect assessing the credibility and prospect of meme coins.
- Emotional investment: Most of the investors have an emotional connection with meme coins which will result in making impulsive decisions. This will eventually lead to losses.
3. Do not expect protection if something goes wrong
- Since meme coins don’t come under the UK regulatory regime, investments you made here are not protected.
- Even the complaints regarding this are not considered by the Financial Ombudsman Service (FOS).
4. Unable to send the investment in need
- There is no assurance that you can sell crypto assets easily within the given time. To sell a cryptoasset various factors align in place.
- Several other factors that resist you from selling crypto assets in need are the operational failings that include technology outages, amalgamation of funds, and cyber attacks.
5. Complexity of crypto asset investment
- Since investing in crypto assets is intrinsic, it is difficult to understand the risks underlying the investment.
- Do thorough research before investing.
6. Spread your risk
- Don’t invest money in a single type of investment. It is recommended to put money in different types of investments, this will reduce the risk to some extent.
- As a general rule, avoid allocating more than 10% of your funds to high-risk ventures.
Price is artificially inflated followed by a sudden crash.
Also Read: Why Green Cryptocurrencies Are The Future Of Digital Assets?