This week’s meme-stock pop hit the U.S. equity markets once again.
Two big players were caught in the 2021 meme-stock craze, GameStop Corp. and AMC had a sharp increase in share prices followed by a sharp decline after retail trading legend Keith Gill, often known as “Roaring Kitty,” posted a mysterious message on Twitter at the early start of the week,
GameStop jumped about 180% while AMC jumped 135%. However, both companies dropped off on Wednesday and Thursday, erasing those gains. Meme stocks are the type of equities that gain a cult following among regular investors; these communities are usually formed on social media. Meme coins are prone to dramatic price swings over brief periods, which are caused by the current buzz surrounding the token.
Usually, they have an infinite or vast supply, which leads to extremely cheap token values. Many memes coins’ value depends entirely on market emotion because they frequently lack underlying technology or a concrete use case.
Though these traits imply that meme assets have some sort of hidden worth or function, the reality is that almost all of them are devoid of any kind of special purpose or core value.
Rather, cryptocurrency buyers frequently purchase meme coins for amusement or to feel a sense of camaraderie. For most meme currencies, speculation is their only application.
Dogecoin (DOGE) is the most well-known and original meme coin. DOGE was founded in 2013 by software programmers, Jackson Palmer and Billy Markus, and was based on the well-known meme of the “doge” Shiba Inu dog.
Dogecoin’s creators claim that they invented it as a parody of Bitcoin. The founders acknowledge that they purposefully misspelt the word “dog” in the name “doge,” choosing it to make the cryptocurrency “as ridiculous as possible.”
But because of an enthusiastic user base, Dogecoin started to gain notoriety and even became somewhat of a cult, setting an example for other joke coins to come.
However, Dogecoin’s price didn’t soar until famous people started promoting it. Elon Musk, the CEO of Tesla, is the coin’s most well-known supporter.
Memes, which are known for their great volatility, provide investors a chance to invest with a high degree of risk and return. It is important to allocate cash that you can afford to lose completely, just like with any speculative asset. Investing just disposable money protects against probable financial loss and emotional grief because meme coins are unpredictable.
Although many other meme coins were launched with the expectation of establishing their communities and commanding exorbitant valuations, historical data have shown meme assets tend to suffer most during market meltdowns.
Investors should also be cautious about pump-and-dump operations, in which organized efforts artificially raise the price of a particular coin before it quickly drops, leaving unwary investors with a loss. Through diligence and discernment, investors can lessen the risks of these schemes.
The evidence seems to be stacked against meme coins being the next Dogecoin or Shiba Inu, yet during this bull market frenzy, the acute “fear of missing out” and the tantalizing upside were most apparent.
However, average traders attempt it to get wealthy. But it’s still crucial to think of these more as gambling rather than investments.
Meme assets are an important cultural phenomenon in financial markets. Participating in meme projects can be an avenue for those who value community-driven projects and the decentralization philosophy to give back to the dynamic and developing cryptocurrency market. But this kind of involvement needs to be balanced with caution, wise choices, and a dedication to ethical investing methods.