In addition to the hype around NFTs, the metaverse, and Play-to-Earn gaming, 2021 also marked the year of the meme coin frenzy.
Inspired by internet memes, the likes of Dogecoin (DOGE), Shiba Inu (SHIB), SafeMoon, and other tokens have taken over the crypto market last year to record massive gains in short periods.
Despite their increased volatility – even compared to most cryptocurrencies –, meme coins’ adoption has been growing steadily among retail investors and businesses.
Regarding the latter, Elon Musk has recently announced that SpaceX will soon introduce DOGE for merchandise payments, adding that it may be possible to use the cryptocurrency to subscribe to Starlink’s broadband internet in the future. Earlier this year, Musk’s Tesla started accepting Dogecoin for the electric car maker’s merch.
However, meme coin adoption is not exclusive to Musk’s companies.
In addition to Tesla and SpaceX, many enterprises have introduced support for SHIB and DOGE payments, including the video game retailer GameStop, the US cinema chain AMC Theaters, the Latvian airline airBaltic, and the Dallas Mavericks NBA team.
But what is the reason behind meme coins’ popularity, and what are the advantages and the downsides of adopting cryptocurrencies like DOGE and SHIB?
Dogecoin, the first-ever meme coin, was created in 2013 solely for fun and without any particular use case to solve.
Besides being centered around the «doge» meme, there isn’t anything unique about the cryptocurrency. It was forked from Lucky Coin (a fork of Litecoin), featuring an inflationary supply without a maximum cap.
However, DOGE started to experience increased adoption after Elon Musk first tweeted about the token in April 2019. In the following months, numerous celebrities and influencers have followed Musk’s footsteps, frequently praising and mentioning the cryptocurrency on social media.
As a result, tremendous hype was generated around Dogecoin, and many retail investors started pouring money into the cryptocurrency. This led to a massive but super volatile price surge in 2021, in which DOGE gained nearly 12,000% between January 1 and its all-time high on May 7.
Leveraging the hype around DOGE, numerous new meme coins have been launched since late 2020, with most of these projects featuring anonymous creators, funny names, inflationary supplies, and very low prices (often well below $0.01).
Moreover, after the «meme stock mania» in late 2020, the /r/wallstreetbets Reddit community’s crypto wing was created, contributing to the rising popularity of meme coins.
As we have seen during the 2017 ICO craze, where 80% of Initial Coin Offerings were identified as scams by researchers, the hype around new crypto trends often involves increased cybercriminal activity.
Since many meme coins have anonymous creators, they create an excellent opportunity for scammers to defraud their victims. With a fork of another project and a funny name, a new cryptocurrency can be made in a few hours and marketed to investors to lure in victims with schemes like pump and dumps, exit scams, and rug pulls.
Last November, the creators of Squid Game Token, a fraudulent meme coin project leveraging the hype around the popular Netflix Show, stole $3.36 million from investors as part of a rug pull, crashing the coin’s price by 99.99% in less than a day.
A few weeks later, cyber criminals running the Tsuzuki Inu meme coin project conducted another rug pull costing over $1.1 million for investors. In October 2021, the creators of the canine-themed AnubisDAO left with $60 million of money soon after a fully-funded token sale.
However, even with legitimate projects, meme coin investors face higher risks than most cryptocurrencies. As many of these initiatives were launched either as a joke or to capitalize on hype, creators didn’t put too much effort into network stability and security.
Furthermore, while meme coin projects have strong communities, the primary focus is often on speculation fueled by influencers and high-profile marketing campaigns like Floki Inu’s London tube ads that have since been banned by the UK’s Advertising Standards Authority (ASA).
Since hype has been the main factor behind their extraordinary bull runs, meme coins are among the most volatile digital assets that can experience massive price swings in short periods, which can lead to more significant gains but also greater losses for traders.
It’s safe to say that the primary use-case of meme coins is speculation.
With DOGE recording 12,000% gains in a little more than five months and SHIB featuring a nearly 20,000,000% ROI in 2021, the hype around these assets can potentially generate lucrative returns for investors willing to take higher risks.
However, as hype eventually disappears, projects must find new utilities to survive on the market in the long run. As a result, developers of Dogecoin, Shiba Inu, and other leading tokens in this field started expanding their ecosystems with more products and services where they would integrate their assets to make them more attractive to users.
An excellent example is Shiba Inu, where the project is building a full-fledged metaverse, NFT support, a layer 2 scalability solution called Shibarium, and the ShibaSwap decentralized exchange to offer new ways for users to use their SHIB tokens.
At the same time, Dogecoin’s developers are focusing mainly on the payments side, encouraging businesses to accept the cryptocurrency for their products and services so they can make their offerings more enticing for crypto users.
And some of the adopters have already reported good results in this field.
According to AMC Theatres CEO Adam Aron, DOGE, SHIB, cryptocurrencies like BTC, ETH, and BCH, along with newly integrated methods like Apple Pay, Google Pay, and Venmo, accounted for 35% of the firm’s online payments in Q1 2022.
Initially started as fun projects, meme coins have taken the crypto market by storm in the last two years.
Fueled mainly by speculation, retail investors have been pouring money into meme coins hoping for astonishing returns. Sometimes, they found great success in this field. In other times, the high volatility, fraudulent schemes, and the improper security measures of projects have cost investors significant money.
Since the hype around these cryptocurrencies can’t be maintained forever, leading meme coin projects have been investing in their ecosystems to introduce new use-cases for their tokens.
As large businesses are increasingly adopting them for payments, empowering meme coins with new utilities can create real value for users and a more sustainable model to survive in the future’s crypto market.