Why Are Memecoins So Popular? A Deep-Dive
Seen as a disdain by many crypto advocates, memecoins are indeed an indispensable part of the crypto space, showing crypto’s spirit of unboundedness.
The Biggest Memecoin Has A Longer History Than Ethereum
The term ‘memecoin’ straightaway describes the satirical nature of this token category: they capture the brilliance of (mostly) internet jokes and turn them, with the help of blockchain">blockchain technology, into something profit-able.
Going back in the history of crypto, we can say that memecoins have been around for almost a decade. Dogecoin (DOGE), the biggest memecoin, was created in December 06, 2013 as a payment system shenanigan symbolised by the internet meme that went viral the same year. 18 months later, Vitalik Buterin launched Ethereum’s first mainnet.
The original photo used for doge memes. Source: Know Your Meme
Creators of DOGE wanted to demonstrate their scepticism over Bitcoin and its grand ambition to replace the existing payment systems. Ironically, Reddit made DOGE a hit whose market cap instantaneously reached US$3 million and the second-most popular electronic currency used for online ‘tipping’ a.k.a giving thanks or praises to online good deeds, to the point where its volume surpassing that of Bitcoin, Litecoin, etc. in January 2014.
Despite the rise of new crypto categories, for example DeFi, GameFi, or NFT, DOGE still has a seat at the Top 10 table with a market cap of US$9,859,172,173 (as of October 31, 2023).
As seen in the chart, Dogecoin alone makes up 0.74% of the global crypto market cap. At the beginning of 2020, this figure is only 0.13%, meaning DOGE market share has increased by 5.7 times over the span of three years compared to the crypto market size growing by 6.9 times.
At this point, bet you’ll be asking: what are dog-themed coins and why are they demonstrated separately? We examine the list of Top 50 memecoins by CoinGecko, and the results are astonishing. 26 in this Top 50 are based on a doggo meme, and 7 out of 10 largest memecoins by market cap have a doggo theme.
When we combine the market cap of all doggo tokens in the Top 50 (excluding DOGE), the sum represents a good 1.25% of the global market cap, which is even higher than DOGE’s. With DOGE? The aggregated market cap of dog-themed memecoins implies a growth of more than 15 times for this niche.
Hardly anyone can resist a cute pup. Hence DOGE, SHIB, and other dog-themed coins have a real strong community, sometimes aggressive even, allowing them to stand the test of time. However, if we take a careful look at the Top 10 - and the Top 50 as well - there are four other subcategories of memecoins including Elon Musk-related (FLOKI, ELON, X), Reddit-related (WSM, BAN), Pepe the frog-themed (PEPE, PEPE2.0), and memecoins whose names look like those big cryptocurrencies (BITCOIN, XRP8). The last subcategory is trending this year, with HarryPotterObamaSonic10Inu (BITCOIN) needing just 164 days since its genesis to climb to the US$100 million mark, market cap-wise.
The whole story portrays blockchain’s inherent nature of freedom. Not only digitally, financially, but also in the form of expression. Feel free to create some weird-named tokens based on any of your favourite memes or ridiculous ideas, for they never matter. As long as people can get how ‘fun’ it is, they’ll put up the money for some humour.
Beyond A Joke
We have to be honest that most memecoins holders don’t see them as a fun purchase. Rather, they try to capitalise on the gains once they’re ‘in’ for the joke. This phenomenon often leads to FOMO and emotional investing, which can be detrimental to both your mental and financial health. There’s a better way, though: find out about the launch date or initial listing of upcoming memecoins, farm or scoop some at decent prices and place the sell order to lock in your profits. If you land it correctly, these following numbers could very well be your portfolio’s ROI:
Top memecoins’ performance on Bitget in 2023. Past performance does not guarantee future results.
Let’s take some time to look at the state of the memecoins category. Since the beginning of 2023, the number of searches for PEPE has remained on par with BTC, whereas DOGE’s levels are slightly higher than ETH’s, and the frequency at which people look for the word memecoins skyrocketed towards the end of Q3. An explanation for this lies in the nature of the marketing process for memecoins, i.e. the buildup of hype and viral-ness of projects.
In the notable case of DOGE, the anticipation around this memecoin as well as its price trend are heavily influenced by one single person: Elon Musk, holder of over US$3 billion in DOGE per some unofficial sources. Earlier this year, he had briefly changed Twitter (now X)’s logo to Dogecoin’s. In 2022, Tesla began to accept DOGE as payment for merch, but the option wasn’t available for long. All in all, that sparked the hope of DOGE (and memecoins in general) being used in commercial transactions or, in other words, memecoins owners being able to make real-life payments with their holdings.
Before we can even consider the possibility of memecoins being used as money, it’s necessary to check their velocity, i.e. the rate at which each token changes hands within its ecosystem. This metric provides insights into the credibility of the token (and its ecosystem, if any), the market liquidity, and its potential to become a currency. As the token velocity here is calculated using exchange data and the majority agree on cryptocurrencies being assets, the metric is very different from the traditional concept of money velocity.
Yet we can still make a rough comparison to see how fast cryptocurrencies versus US-Dollar move within their own ecosystem (economy for fiats). Take M2 as the benchmark because M2 includes money in circulation and interest-paying assets as well. The velocity of Bitcoin and Ethereum are way higher than the M2 velocity (they are represented by the y-axis on the right), considering their volume is aggregated from all exchanges, that is, global markets. The only one to (kind of) match M2 velocity is DOGE’s, though its standard deviation is 20 times higher than that of M2. This result implies that either interest in DOGE or activities in its ecosystem varies greatly - not a good sign for a currency or an asset.
Another extreme can be seen with the low velocity of other memecoins. On the one hand, BTC and ETH are being traded at a real quick speed; on the other hand, all cryptocurrencies regarded as an asset/an investment stay put for a long time, therefore having low velocity.
Now, as investments, memecoins should have some relationship with the largest cryptocurrencies of Bitcoin and Ether, Bitcoin in particular because its dominance in the market has never been lower than 40%. We use the three largest dog-themed coins by market cap to see if they can give any hints on how to predict memecoins’ prices. Of course the correlation between DOGE, SHIB and FLOKI are positive, but it’s interesting to see Dogecoin and Shiba Inu go in the opposite direction to Bitcoin, given the context of 2023 only.
Calculated using data from January 01, 2023 to October 31, 2023.
One possible answer to the question of why Dogecoin tends to move away from the biggest cryptocurrency is that DOGE is in dire need of use cases, which makes it extremely susceptible to any announcement from a mogul like Elon Musk. Imagine a bear market and somehow the billionaire tweeted about DOGE used for platform incentive payment on X - DOGE would 100% soar. It’s different for SHIB because the developer team has recently launched their L2 network named Shibarium, together with new dApps and games. At that time Bitcoin was still back and forth between US$26,000 and US$27,500, thus the rise in SHIB prices must be the main factor behind the negative correlation between SHIB and BTC.
Except for FLOKI, the remaining four in the table now all have their own blockchains and are expanding their ecosystems, although Dogecoin is not compatible for multiple applications and its best shot is to become a payment option.
Memecoin Killer?
Also not backed by value principles like Bitcoin and Ethereum are fan tokens. Most of them were launched in 2020 or 2021 when sports clubs started to explore blockchain uses and issued by football and e-sport clubs. There was a time when some predicted the sunset in memecoins’ land with fan token emergence, but in our humble opinion they are completely uncorrelated.
Memes is an integral part of the internet and likewise, memecoins are essential to the digital space. That’s not to mention cases where jokes turned into payments (DOGE) or serious efforts (SHIB). When it comes to fan tokens, we are witnessing a new way of interaction between organisations and their fans, like how the Argentine Football Association fan token (ARG) pumped after Messi and the Argentinian team won the World Cup 2022. It’s not just about monetary gain, it’s about showing support for the football hero. There is no conflict between the purpose and use cases of memecoins and fan tokens, so it’s wacko to say fan tokens are memecoins’ ‘killer’.
At Bitget, we pave the way for crypto’s future by supporting all legitimate projects and constantly expanding our product offerings to onboard more people. You can get your own memecoins or fan tokens by going to Bitget Spot Trading and choose the corresponding category as shown below:
Hover the pointer on the trading pair, select USDT and click on the box next to Inno to see other categories.
The Fan token category is below the Meme one, so scroll down on the drop-down menu.
In the same manner, look for the Meme category on Bitget Futures Trading:
If you are looking for upcoming new listings on Bitget, check out our announcement centre everyday and mark the date of initial listing events! Remember to have some humour when buying any memecoin, unless you are a technical analysis expert. Memecoins are highly volatile and speculative, but sometimes the joke can turn into a jackpot - who knows?
Simply create an account, and start exploring the incredible Bitget-Verse today!
