Is meme coin a worthy investment or just another rug pull? Despite the doubts, meme coins continue to thrive and can be a good investment plan if you know how to invest in it the right way.

With the rise of bitcoin and cryptocurrency, many people have tried to make their own crypto projects and tokens. From stablecoins to internet-inspired meme coins, many people have joined the bandwagon. Today, we will talk about one of the fastest-growing cryptocurrencies on the internet (at least in terms of hype), the meme coins.

Investing in Meme Coins


Do You Know Meme Coin?

Before we delve further into the opportunities and risks of meme coins, let's start by understanding the history of meme coins and why they are growing so fast. Just like its name, meme coins are meme-inspired coins. It means they are based on popular multimedia like photos, videos, GIFs, etc. that are used as memes. One notable example is "Dogecoin, an electronic currency consisting of a Shiba Inu dog that is used as a meme in the 2010s. This meme has become so popular that it became an icon in its time. As the popularity of cryptocurrency started to rise, some people turned the image into a crypto coin.

The making of Dogecoin may be started as a joke, but its spot in the top-tier cryptocurrency list said otherwise. The market has acknowledged the value of Dogecoin and other similar coins like SHIB (Shiba Inu Australia) as worthy cryptocurrency investments. In fact, Dogecoin reached a capitalization of $85 million in 2021 and still is a popular cryptocurrency today.


Why You Should Invest in Meme Coin

Despite their origin, many people actually found a good opportunity by investing in meme coins. Let's just take Dogecoin as an example. Even the CEO of Tesla, Elon Musk, has used Dogecoin as one of his investments. So why is this Dogecoin so popular?


High Supply and Easy Transaction

Unlike Bitcoins, most meme coins have an almost unlimited supply. That means you can mine them anytime as long as the coin value still exists. They use relatively low energy to mine too, around 0.12kWh compared to other crypto coins that use 60-700kWh per transaction. Also, some of these coins have a very quick transaction confirmation time, around 1 minute compared to Bitcoin's 10 minutes.


Promoted by Influencers

Since meme coins are made to pay homage to memes, of course, their reputation is also tied to some influencers' sentiments. Thus, the most popular meme coins got the support of internet communities.


The Future Big Crypto

With just how fast the value of meme coins is growing, they can be seen as the future of big crypto. They can be used as a long-term investment plan since they are much cheaper compared to other cryptocurrencies.


The Downside

Now here is the thing. Almost all meme coins are not made as "real" cryptocurrencies. Take an example from the first meme coin, Dogecoin. Unlike the usual cryptocurrency, Dogecoin is made solely as a fun and friendly internet currency. In fact, its existence is a satirical joke of the existing bitcoin and cryptocurrency at that time. However, the power of popularity has made it the actual tradeable electronic currency we know today. So, they are actually not that valuable in real life and are only useful in electronic and internet-based trades.

It is also important to note that meme coins are very prone to fraud, hacks, and exploitation. Dogecoin experienced major theft in 2013, while other coins like Squid Game-inspired coin and Tsuzuki Inu coin have been found as rug pull projects incurring millions of losses to the investors. While Dogecoin and SHIB have longer lifespans than other meme coins, we never knew when they will lose their popularity. Remember, hype and internet sensation have always been the key driver of these meme coins. As their popularity fades away, the coin's value will plummet and basically becomes the next Squid coin.


So You Still Want to Invest in Meme Coin?

If you are still interested in investing in meme coins, it's better to note these tips to ensure you didn't lose your money:


Learn to Differentiate Real Meme Coins and Fake Meme Coins

Since the rise of Dogecoin, many other meme coins have been appearing with many of them using Dogs as mascots. There is Mona Coin that uses the Ascii art character "Mona" as the mascot. People might also know the Pepe Cash, the meme coin using Pepe the frog as its mascot. These coins are a few of the quite well-known meme coins in circulation that are quite popular. Other than that, we might have known about the Squid Coin, the very famous rug pull crypto project based on the series Squid Game.

So, how do we differentiate between a real meme coin project that is worth investing in and the rug pull scheme? You may start by seeing the project's goal, the developer's track record and reputation, the validity of the liquidity pool, and last but not least, the transparency of the project.


The Project's Goal
Since internet communities and influencers play a very crucial part in popularizing and increasing the value of meme coins, it is very important to see the goal of each project. If the whole community's goal is just to pump the value of the coin higher by encouraging new investors, it might be just a scheme to rob your money. This is almost like a Ponzi scheme where the first investors got the highest win.

As a comparison, Dogecoin and SHIB have unique community goals. The former is used to pay homage to the doge meme, while the latter is a project based on love for Shiba Inu dogs. Their long-term and clear community goal, as well as real engagement plans with the community members, played a huge role in raising their values. Seeing the future development of each meme coin is very important to avoid short-lived meme coins like the Squid Coin.


Check the Developer's Reputation and Track Record
Reputation is a very vital factor in the crypto industry in general to determine the viability of a product or a platform. Without the positive reputation and track record of the developer, it is very safe to say that cryptocurrency is just another rug-pull project. Surely, it is quite hard to find detailed information about many developers' teams, but you can start by seeing the tokenomics of each meme coin, which refers to the token distribution of cryptocurrencies.

There are instances where a few people or even just one person holds the majority of the meme token. This major token holder can be a determinant for the rise and fall of the coin's value. If the major token holder decides to dump the coins, the whole value will go down. So, it is very advisable for traders to go for a meme coin with no single investor holding more than 5% of the whole token supply.


Check the Validity of the Liquidity Pool
Another important thing to consider is the liquidity pool of the tokens. Most meme coins are distributed via Automated Market Makers (AMM), so during the launching, the developer will create a new liquidity pool for investors to purchase the token. This liquidity pool is a smart contract that allows investors to swap cryptocurrency without needing a third party to order or counterparty it. The developer will put another cryptocurrency like Ethereum, Bitcoin, or Litecoin to be traded with the meme coin in the liquidity pool.

Many can become liquidity providers, but it comes with risk. If the provider doesn't have an appropriate safety system, they can withdraw the liquidity anytime. If such an accident is to happen, investors won't have any means to exchange their meme coin which loses its value rapidly. Thus, it is very advisable for traders to check whether the liquidity pool is held by burn addresses, which shows that the liquidity has been permanently locked.


Check the Transparency and Audit Status
Last but not least, traders need to see the transparency and audit status of the meme coin project. Just as mentioned before, it is very easy for a developer to turn a seemingly profitable meme coin into a rug pull project. So, it is very important for the cryptocurrency to be audited by a reputable third party. This is to ensure the developer doesn't have any back door that allows them to initiate an exit scam. Any meme coin lacking a reputable third-party audit might just be another fraudulent scheme. The complete audits are usually shared across social media platforms and can be easily found by a quick internet search.


Trade Smartly

As a very volatile asset, it is important to trade smartly to ensure you got all the benefits. Speculation is the main fuel of meme coins' prices. That's why you need to make sure you don't miss that chance of buying low and selling high.


Diversify Your Investment

A smart investor won't put all their eggs in one basket. To avoid major loss, try to diversify your portfolio and invest in multiple meme coins. You can also start to invest in more stable cryptocurrencies like Tether, Ethereum, or Bitcoin. A recommended portion for meme coin investment is 5% of your total portfolio.


Long Term Investment

It is very advisable to see meme coin as a long-term investment plan. Short-term price swings might give you a heart attack, but think of the future rates of these meme coins. Dogecoin and SHIB have proven that their value continues to steadily rise despite their daily rise and fall. So if you invest in meme coins, hold them for dear life and wait for the correct opportunity to sell. It is also recommended to not invest based on fear of missing out (FOMO) and greed. Most meme coins have almost no limit of supply, so you can always take it easy and read the market before taking an action.


Sentiment on Social Media

Lastly, always check the sentiment of social media. Meme coins use hype and popularity as their mean of success. Community engagement and market sentiment are very essential to determine the price movement. To gauge this parameter, you can start looking at Reddit, Discord, or Twitter dedicated to the specific meme coin.

Many economists and financial advisors might have seen meme coins as potential scams with no future. But in the right way, meme coins can actually be a desirable investment for new investors and traders. However, keep in mind that there are many things to consider while investing in meme coins since their values are solely based on internet hype.


Speaking of internet hypes, the year 2021 has sparked numerous cryptocurrency viral news. Some of them were exclusively recapped in the 10 Most Viral Crypto Stories in 2021.