Memes can be described as the current pop culture on the internet. These digital assets, often inspired by viral humouress moments or internet trends, have taken the crypto market by storm. But amidst the hype and potential for quick gains, lies a darker side riddled with high risk.

What Are Memecoins?

Memecoins are digital currencies that draw inspiration from popular memes, viral jokes, internet celebrities and even Donald Trump! They often lack substantial technological innovation, utility or intrinsic value, relying heavily on community buzz and social media hype for their success. Some of the most well-known memecoins include Dogecoin, Shiba Inu, and Floki.

The Memecoin Frenzy of 2024

The year 2024 has witnessed a continuation of the memecoin craze (“memecoin mania”) via pre-launch sales contracts, mirroring the initial coin offerings (ICO) boom of 2017. However, this surge has also attracted increased scrutiny from financial regulators.

The Financial Conduct Authority (FCA) in the UK, for example, has expressed concern about the misleading or excessive risk-focused marketing tactics often employed to promote memecoins. Promotion often takes place on social media platforms and the hype often exceeds the utility if any in a memecoin.

It’s vital to remember that digital assets are inherently complex and volatile. The memecoin space is even more unpredictable driven by mere statements from influential users of social platforms with little or no awareness of the implications a mere ‘like’ can lead to. Anyone in this space should engage with the full knowledge that no reliance can be placed on any value these digital assets may hold or perceive to hold at any point in time.

Extreme caution and thorough research are always recommended.

Memecoins and the Solana Shift

The Solana blockchain has emerged as a popular hub for memecoin launches. This trend is evident in the surge of trading volumes on Solana over the past three months. The number of daily active addresses on Solana has more than doubled from 600,000 to 1.4 million users. Congenstion has caused delays in token launches for “pre-sale contracts”.

Solana’s fast transaction speeds and lower fees have made it a more attractive option for creators and traders of memecoins. This however leads to more and more mainstream users potentially being caught in the hype some projects create and if users are new to the space, it is easy to see how they can be misled or fall victims to a FOMO frenzy. In some instances millions of people invest in a pre-contract sale and are left with nothing in return and no recourse to any compensation.

Risky Business

While the potential for sky-high returns can be tempting, memecoins are infamously risky investments. Pump-and-dump schemes, rug pulls, and extreme volatility are rife in this corner of the crypto market. The value of a memecoin can rise or plummet dramatically in mere hours or days, often driven by hype and speculation rather than any underlying utility. A tweet from Elon Musk can trigger a significant price increase and value in a memecoin.

Navigating the Memecoin Landscape

The memecoin culture can be a double-edged sword. On the one hand, it has fostered a strong sense of community, humor, and accessibility around crypto. On the other hand, this same playful nature can mask the serious risks involved.  Before diving into the memecoin craze, here are some insights to consider:

  • Is there a sudden surge in community numbers?
  • Other than owning a memecoin, what value am I gaining?
  • Is there a smart contract?
  • Long term v short term

The Bottom Line

If you’re considering engaging with memecoins, proceed with utmost caution and be prepared for rapid price swings.  Don’t succumb to FOMO. Take the time to conduct your own research, understand the risks, and always invest responsibly. Memecoins might offer the promise of outlandish gains, but they also come with the potential for devastating losses.