Memes need no introduction today, but what about memecoins? These light-hearted tokens are busy grabbing headlines for their meteoric price rises, extreme volatility, and fun origins. Read on to learn about one of crypto’s most curious assets.
TL;DR
- Memecoins are inspired by popular memes and other jokes that gain popularity on the Internet.
- Memecoins hold no intrinsic value, have little to no utility purpose, and are created largely for entertainment purposes.
- The tokens share many technical similarities to Bitcoin, Tether, and other established coins, being built on blockchain protocols.
- Although they hold no value, memecoins can bring major returns — but also major price drops.
- They are incredibly volatile in nature, and should be approached with caution by traders.
What is a memecoin?
As their name suggests, memecoins are cryptocurrencies derived from popular Internet memes or other online jokes. They often pay homage to widespread memes, and sometimes carry the same name and symbolism.
Examples include the largest memecoin by market capitalization as of May 2023 ($10.46 billion), Dogecoin. The coin was released in 2013 as a tongue-in-cheek nod to the speculative nature of cryptocurrencies at the time and was based on the popular ‘doge’ meme. The coin features the same Shiba Inu dog featured in the meme it’s inspired by. More recent examples include PEPE coin, created in April 2023 in homage to Pepe the Frog, a meme of a cartoon frog dating back to 2005.
Memecoins are largely hype-driven, and fueled by social media exposure. They're intended to be fun alternatives to stablecoins and are produced mostly for entertainment. Memecoins therefore hold no intrinsic value or utility purpose.
What are the technical foundations of memecoins?
On a technical level, memecoins don’t differ much from established coins such as Bitcoin and Tether. They're typically built on blockchain technology and adopt smart contracts, such as Solana and Ethereum. Dogecoin, for example, was originally underpinned by Litecoin — a decentralized peer-to-peer cryptocurrency, before being refactored to Bitcoin. One difference is that memecoins often have either unlimited or extremely high supply, which explains their low prices per unit.
Why do people buy memecoins?
Generally, crypto traders who hold memecoins are driven by different factors, such as:
- The coin's entertainment value
- The appeal of getting involved in the coin's community
- The fear of missing out (FOMO) on what seems like a promising trade
- The intent to diversify their trading portfolio
Despite their light-hearted nature, some memecoins have brought serious gains to traders who’ve succeeded in timing their entry and exit right. That’s why some traders choose to hold a portion of their funds in memecoins — to have some exposure to a market with high risk but equally high reward.
How are memecoins traded?
Memecoins can be traded on established exchanges just as you would with other coins. OKX, for example, lists DOGE, SHIB, PEPE, and ELON, among others, allowing users to gain exposure to the tokens alongside the wider crypto assets and NFTs listed on our exchange.
Although memecoins can be accessed and traded with relative ease today, it’s important to recognize that meme tokens are highly volatile and therefore carry risk. Traders should do their own research and carefully consider their risk appetite before opening a position.
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