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Memecoins are high risk but can also provide high rewards.
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Since the early days of the internet, memes have had a viral effect.
Memecoins, born as simple digital jokes, have taken a turn in the world of cryptocurrencies. They were originally created to make fun of the financial system and digital assets themselves, but today they are traded as if they were any other “serious” asset.
In this sense, the largest Cryptocurrency exchange in the world, Binance, has made a investigation that allows us to know – according to the data analyzed by company specialists – what has led these currencies to attract so much interest and capital.
At first, memecoin creators were looking for nothing more than entertainment. These cryptocurrencies emerged as internet memes without much value, created not to be taken seriously.
However, the scene changed radically with the boom of 2021when memecoins gained popularity and began to skyrocket their value in the market, as described by the Cryptopediaeducational section of CriptoNoticias.
Today in 2024, Binance has seen such explosive growth that it has led the industry into a “meme-season” dedicated to these assets.
Growth of memecoins
The essence of the memecoins It goes beyond simple entertainment. According to Binance, many seek to reflect the core values of the cryptocurrency industry, such as decentralization and transparency.
At the same time, they show a clear priority on financial gains, which to some extent minimizes the importance of technological innovation.
From 2022, the market capitalization of memecoins has gone from 4% to 11% of the total cryptocurrencies less Bitcoin/” target=”_blank” rel=”noreferrer noopener”>bitcoin (BTC), ether (ETH) and stablecoins, although it is far from the levels of 2021, when Dogecoin (DOGE) and Shiba Inu (SHIB) reached market capitalizations of $80 billion and $39 billion, respectively.
That is, the ratio between the combined market capitalization of memecoins and altcoins has almost tripled since 2022, but is still below its 2021 peak of 12%, as can be seen in the graph below.
Combined market capitalization of memecoins. Source: Binance.
The technology behind memecoins
Although memecoins may seem simplistic, they are built on a complex ecosystem of cryptocurrency networks that includes cryptographic validators and decentralized applications.
“As we explore the humorous and whimsical world of memecoins, it is important to remember that, without the technological progress achieved over the last decade, the highly decentralized digital substrate that has given life to the current diaspora of memecoin flora and fauna “it wouldn’t exist.”
Binance, cryptocurrency exchange.
Memes, deeply rooted in internet culture since its inception, found fertile ground in the digital economy and in technology enthusiasts. cryptocurrencies.
The influence of the global context
The rise of memecoins is not just the result of a globalized digital culture; It also has roots in macroeconomic factors.
During the COVID-19 crisis in 2020, central banks implemented expansionary monetary policies, increasing the money supply and triggering significant inflation.
In the following graph you can see how between 2020 and 2022, The total global money supply increased by more than 25%from 81 trillion US dollars to 102 trillion US dollars.
Global money supply in US dollars. Source: Binance.
Faced with the devaluation of money, investors, especially among millennials and generation Z, which represent 94% of cryptocurrency buyersthey began looking for alternative value assets.
In this context, memecoins have emerged as an attractive option, especially for young people, who They see in these assets an alternative to the traditional financial system.
The value proposition of memecoins
Memecoins offer a direct and accessible connection to internet culture, without traditional ties to the financial system.
This type of asset is reminiscent of Ethereum-defi-inversiones/” target=”_blank” rel=”noreferrer noopener”>ICO (Initial Currency Offering) of 2017, the exchange states in the report, where a roadmap and a motivated community behind a narrative drove value.
Although ICOs have been regulated today, memecoins follow a similar path, bringing communities together around collective beliefs that boost your future potential.
Another factor in favor of memecoins is that unlike technological cryptocurrencies, this type of asset allow retail investors to quickly understand your proposition.
“The everyday, unsophisticated retail investor can much more quickly understand the principles behind a coin powered by a cute or catchy meme, compared to a technically complex new Layer 2 solution or a DeFi primitive.”
Binance, cryptocurrency exchange.
Capital is flowing into new memecoins “faster than ever,” Binance details. “It took WIF 104 days to go from $0 to a market cap of $1 billion. SHIB took 279 days and DOGE took 8 years,” he explains.
For this reason, Binance assures that, if current trends persist, memecoins “may continue to grow in popularity and attract growing interest within the cryptocurrency market.”
Creation of memecoins by year. Source: Binance.
Added to this is the simplicity of creating meme cryptocurrencies. In 2024, platforms like pump.fun of the Solana network and SunPump developed on the Tron network, they are simplifying the creation of memecoins, as reported by CriptoNoticias.
This way, allow users to flip their coins without prior technical knowledge and sell them within their own platforms.
With intuitive and low-cost interfaces, these platforms have contributed significantly to the growth of the meme-season.
The risks of investing in memecoins
Binance warns about the low survival rate of memecoins. 97% of these cryptocurrencies born in recent years have lost practically all their valueand only a few like DOGE and SHIB have maintained a strong presence in the market.
The extreme volatility of memecoins, dependent on trends in social networks and online communities, makes them one of the riskiest assets in the cryptocurrency world.
Reliance on market sentiment to support its value creates a high speculation cycle, and This concentration on memecoins poses a risk to innovation in the sector.
As Binance points out in its report, an over-allocation of capital towards assets without significant technological developments can reduce incentives to create new long-term value solutions.
To stay relevant, the most successful memecoins must foster unique narratives that have lasting appeal to their community.
In this sense, Democratization and equal access to investment since its inception are key factors. The possibility of participating in a project from its creation allows retail investors to build a relationship of loyalty towards the asset.
As Binance notes, “the rise of memecoins is a demonstration of the ability of cryptocurrency networks to unite individuals globally, fostering communities around tokenized assets.”
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