Contrary to popular belief, investing in meme coins is a risky venture that can result in massive losses due to fraud, hacks, and exploitation. Fear of missing out and watching your new investment plummet as the meme mob moves to other shiny objects are also concerns.
Before we get into the specific characteristics to look for in a reliable meme coin, let’s define what a meme coin is. Meme coins, first introduced in 2013, are crypto projects based on meme-worthy themes and animals. For example, the Shiba Inu (a Japanese hunting dog breed) meme sensation (a picture of a presumably smiling Shiba Inu dog) that swept the internet in the early 2010s inspired Dogecoin (DOGE), the first-ever meme coin.
Notably, dogecoin’s success spawned a slew of other dog-themed coins, including the self-proclaimed doge killer (Shiba Inu token, or SHIB), which briefly outperformed the former in terms of market capitalization earlier this year. Meme coins, unlike traditional cryptocurrencies, aren’t usually judged on their utility to users. Instead, the coin’s ability to attract high levels of community engagement is emphasized. In essence, virality is the single most important criterion for determining meme coin success. With this in mind, how can you tell the difference between real and fake meme coins?
Although the utility isn’t emphasized, it’s a good sign when the community behind a meme coin project has something in common other than a desire to make money. When the entire community’s goal is to inflate the value of the coin by encouraging new investors to buy the token in the hopes of driving the price even higher, it’s a red flag. For example, SHIB’s community members all share a passion for Shiba Inu dogs, and one of their goals is to raise funds to help stray Shiba Inu dogs. Furthermore, to provide token holders with more utility, the project has implemented ShibaSwap, a decentralized exchange.
As a result, it’s crucial to learn about the project’s long-term goals and how the team plans to keep community members involved in the network. You can do so by reading the project’s whitepaper, looking at its roadmap (if one is available), and keeping up with updates on its official social media accounts.
Those familiar with the crypto industry know that a product’s or platform’s reputation is a critical factor to consider when determining its viability. As a result, it’s a good idea to figure out who the project’s main contributors are and what their track records are. Due to their decision to remain anonymous, it may be impossible to find information about the members of the development team. In these cases, you can base your research on the team’s design decisions, particularly tokenomics.
The token distribution of cryptocurrencies is referred to as tokenomics. Be wary of meme coins with a single entity controlling a large portion of the total supply. If a major token holder decides to dump (sell-off) their coins, the value of such digital assets is likely to plummet. As a result, it’s best to choose a meme coin with a circulating supply that isn’t concentrated among a small number of investors.
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