Learn all about memecoins; what they are and how to trade and invest in them

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What are memecoins?

Memecoins are a subcategory of cryptocurrencies centered around popular internet memes, pop-culture references, and viral online trends. They usually start as social or cultural experiments within the crypto community. Famous examples of these sorts of memes include the Japanese Shiba Inu dog “Kabosu” (SHIB) and “Pepe the Frog” cartoon (PEPE).

They typically gain value by becoming viral, which can be achieved through social media influence, online communities, and sometimes celebrity endorsements, rather than their underlying technological innovations or practical applications. Let’s take Dogecoin as an example: it started as a fun jab about how unpredictable the crypto world is. A guy in marketing came up with the idea, a programmer took the Litecoin code base -which is itself a fork of Bitcoin- and made some changes to it, and boom! Dogecoin was born. It was all about showing how simple it can be to create a new coin. No fancy tech or real purpose behind it; just an internet joke that somehow got huge.

Like other cryptocurrencies, memecoins operate using blockchain technology. This means they benefit from the blockchain’s inherent features, such as decentralization, security, and transparency. Each transaction is recorded on a distributed ledger, verified by network participants. Memecoins are a type of altcoin (alternative coin), which encompasses all cryptocurrencies that aren’t Bitcoin.

Creators of Memecoins often capitalize on popular themes to attract attention and trading volume from crypto market speculators. 

Many memecoins develop strong, active communities that support the coin through buying and holding but also engage in promotional activities, creating memes, and fostering a sense of belonging among members. This community aspect can be a powerful driver of a memecoin’s popularity that fuels its growth.  Because of this, some people consider this crypto category as a way to make quick profits through speculative trading, while others see them as extremely risky assets.

Memecoins listed at Bitso to keep on your radar. 

  • Dogecoin (DOGE): It’s based on the popular ‘Doge’ internet meme featuring a Shiba Inu, which it uses as its logo. This is a cryptocurrency that was forked from Litecoin in December 2013.
  • Shiba Inu (SHIB): It’s an experiment focused on decentralized and spontaneous community development of the Shiba Inu (yes, same dog as in Dogecoin) ecosystem. Unlike Bitcoin, which is meant to be scarce, SHIB intentionally boasts abundance, with a total supply reaching one quadrillion.
  • Pepe (PEPE): This memecoin is a cryptocurrency inspired by the popular internet meme of “Pepe the Frog”, incorporating elements of the internet culture into its blockchain-based ecosystem.

What are the risks?

Investing in memecoins carries risks that are somewhat unique to their nature and market dynamics, on top of the general risks associated with cryptocurrency investments. 

Memecoins are known for their extreme price volatility. While all cryptocurrencies can experience significant price fluctuations, memecoins, driven largely by social media hype and speculative trading, can see even more dramatic swings in value over very short periods.

But what is behind this volatility? Well, several factors contribute to this:

  • High circulating supply: Many memecoins have a vast number of tokens in circulation, which can dilute their value.
  • Unclear development paths: The absence of clear information about the development team and roadmap can signal a lack of direction.
  • Concentrated ownership: A significant portion of tokens might be held by a few individuals, posing a risk of market manipulation.
  • Limited liquidity: Finding buyers can be challenging, especially during downturns, leading to high slippage costs if you decide to sell.

Investing in memecoins should be approached with caution. Potential investors should conduct thorough research, consider diversifying their investments to manage risk, and only invest funds they can afford to lose. For further information on the risks involved with investing in cryptocurrencies, see our Risk Disclosure. 

How to buy a memecoin?

At Bitso, we’re all about making crypto accessible to everyone. That’s why we offer a range of Memecoins for you to explore.

  1. Go to your Bitso app.
  2. Deposit or make sure you have funds in your account.
  3. Select “Buy / Sell”.
  4. Choose the memecoin you want to buy:
    [DOGE, PEPE, SHIB, etc.]
  5. Type the amount you want, and choose the currency or crypto for making the purchase.
  6. Confirm the transaction and ready; that’s it!

Memecoins offer a fun and easy entry point into the crypto world. Their active communities are attracting a new generation of investors intrigued by the playful essence of internet culture. As the memecoin market progresses, Bitso remains committed to providing a safe and user-friendly platform for traders and investors to navigate this exciting path.