What are meme coins?
Meme coins, or token projects tied to pop culture, have become a popular part of the crypto market.
Their purposes range from comedy, in the case of slapcoin, to scams, like Squid coin. Still more popular tokens like dogecoin (DOGE-USD) started out as an internet meme.
According to CoinMarketCap, meme coins command a nearly $18 billion market cap as of May 20. More than 60% of that value comes from dogecoin while 35% resides in Shiba Inu coin (SHIB-USD).
The value of meme coins can rise when they are listed on crypto exchanges where buying and selling can take place among a larger pool of participants.
Additionally, meme coins see their values rise when they’re used or accepted as a form of payment. For instance, the Dallas Mavericks announced in 2021 that they would accept dogecoin for ticket purchases. Then, in early 2022, Tesla (TSLA) listed a belt buckle on its online shop, priced in dogecoin. On both occasions, the meme coin experienced a noticeable uptick in value.
In cases where a meme coin is accepted as a form of payment for a good or service, typically a processor such as Bitpay may be enlisted to complete the purchase, as was the case for the Mavericks.
Memetic spirits
Because temporary hype can drive the minting of a token and rapid buying, meme coins tend to carry a higher susceptibility to scam attempts.
In moments of high visibility, meme coins have seen spikes in volume — for better or for worse — from a price perspective. This was the case when self-proclaimed “Dogefather” Elon Musk called dogecoin ‘a hustle’ during an appearance on Saturday Night Live. Subsequently, dogecoin experienced a precipitous decline in value, from which the meme coin has yet to recover.
As meme coin transaction volumes rise and fall, the tokens can affect the revenue of exchanges that carry the cryptocurrencies.
Dogecoin was the first meme coin to be cited in an initial public offering filing with the SEC when Robinhood (HOOD), a trading platform, disclosed the growth opportunity for the company was also considerably tied to dogecoin transactions.
“A substantial portion of the recent growth in our net revenues earned from cryptocurrency transactions is attributable to transactions in Dogecoin,” Robinhood’s S-1 filing stated. “If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition and results of operations could be adversely affected.”
Meme coins maintain a special place in the cryptocurrency landscape, but without inflows from institutional investors or the ability to showcase superior transactional efficiencies, this type of token may not reach the same value or adoption as other cryptocurrencies and stablecoins.
But the dog is cute.
