Memecoins — Is It An Opportunity or Plain Stupidity? | by VTECH | The Capital | Mar, 2025
The memecoin (aka Meme Coins) narrative in the crypto space is interesting because of the arguments for and against it. These are cryptocurrency coins or tokens that have no utility, other than to speculate on their price value.
More serious cryptocurrency holders hate memecoins and believe they have no space in the ecosystem (i.e. “Shitcoins”). If the pumps going into these coins were instead going to legitimate tokens, perhaps the market would be better off.
Why do memecoins like Dogecoin (DOGE) reach a market cap of $40+ Billion (in June 15, 2021)? Even more unbelievable, a project was associated with a country in promoting a memecoin that surged to $4.6 Billion in marketcap, making early holders rich in terms of unrealized value.
Although the expectations are unrealistic, people do make money from trading memecoins. There are people who will get rich, but others will lose a lot of money. One person’s gains are another person’s losses.
Memecoin price value rises as quickly as they falls. When they fall, many newcomers get hurt because they are left holding the bags.
There have also been plenty of scams (e.g. rug pulls) by bad actors who do not represent the ideals of cryptocurrency. This has put attention to memecoins, but in a negative light.
They are either an opportunity or plain stupidity that is allowed every criticism. Before we can conclude, it is worth some explanation.
The Memecoin Narrative
Memecoins do not really have any groundbreaking innovation other than transferring value on a blockchain. People trade them and hope that others buy so that the prices go up in value, making buyers rich.
The typical motivation of memecoin buyers is to get in early to make profit and become rich. It is the age-old “get rich quick” in a new type of market that is easy to penetrate since it has less barriers to entry.
One claim that buyers may have assumed is that memecoins help to generate passive income. This is not correct, because it is not a viable financial tool with dividends or sustainable yields.
There is no utility with memecoins in their present form. They were not created as sound investments but designed more for speculating. They can also be a mockery of traditional investment since they are the total opposite.
What keeps the memecoins going is a community that has grown around the hype behind the coins. There are people that are willing to buy them despite warnings of their volatility and uncertainty.
There are plenty of factors behind memecoin popularity, and it can be fueled by public figures who have influence. There is an Internet culture aspect involved which includes social media influencers, celebrities, and even heads of state.
A belief system built around a hype also helps to drive memecoins through the use of social media. A lot of the enthusiasm with DOGE was led in part by tweets on the X app (i.e. Twitter).
Memecoins started with the likes of DOGE, but also as ERC20 tokens on the Ethereum blockchain. Now the memecoin narrative has shifted to the Solana blockchain, as a memecoin factory.
After the Dogecoin hype, the memecoin mania continued with Shiba Inu (SHIB) and Pepe (PEPE). This was followed by memecoins with silly themes (e.g. dogs, characters, etc.) or novelties that have no particular purpose.
Similarity With Memestocks
They are like their memestock counterparts in the TradFi (Traditional Finance) world. Many memecoins and memestocks behave in the same way, through coordinated viral campaigns promoted by a community often via social media.
Critics say that these coins lack fundamentals when it comes to money supply. If you look at Dogecoin, it has no supply limit, which means that it is highly inflated. Others implement a sort of burn mechanism to deflate the supply, but the total circulating supply is already very high (in the billions).
It doesn’t seem to make much sense that the circulating supply is so high, but you can buy them cheaply like memestock prices. Buying at such low prices appears to be a bargain, but with no limit to supply, prices just don’t really increase unless there is some scarcity or deflation.
A strategy used in memecoins is to buy up as much of these cheap coins early on. Then when the hype builds and more buy the coin, the value increases, and this is when it can be sold for realized value.
The Community Building Aspect
While critics think that memecoins are just schemes, it has created an outcome of community building. The users have grown to become a community of like-minded people around ecosystems for some (not all) of the memecoin projects.
Memecoins create an alignment of interests due to the network effect based around the meme itself. It is like fans of collectibles like baseball cards or comic books. With memecoins, the holders have a fascination with the meme.
Some memecoins target specific use cases for the purpose of the coin. The issue is that the objectives are not clear and there are no sort of financial guarantees.
Community building is also good for bringing in liquidity to the crypto ecosystems where the memecoins are created. This has had a positive effect on both the Ethereum and Solana ecosystem, giving them utility around the minting and trading of memecoins.
A community-driven market is also keeping memecoins alive. Without the network effect, there would be no further liquidity in these markets. They usually disappear when they are exposed as scams or when buyers lose interest.
There are memecoin groups all over the Internet on social media sites like X and Instagram, messaging apps like Telegram, servers on Discord, and video streamers on YouTube. The power of community and network is exponential, which is why they gain popularity very quickly.
It Is A Risky Market
Let us not forget that despite some regulatory clarity (SEC announced memecoins as non-securities), crypto is a very risky and volatile market. The main concern is that when these coins pump, they can as easily dump. This has attracted the attention of scammers who want to take advantage of the situation.
Liquidity is determined not by utility, but from hype. This is from promoters of the coin who promise “too good to be true” expectations. This is like a Ponzi or pyramid scheme where there is an early bird advantage.
Those who came late give their money to those who came early during a dump, leaving newcomers rekt (i.e. losers). The system will not be sustainable unless you have new people who put money in the coins, but with no guarantees.
Losses are mounting due to projects that have become pump-and-dump schemes. This is compounded by leverage that has been put in the market. This is being addressed by regulators because of the allegations of fraud and insider trading.
It surely does not seem like a wise long-term investment or even for storing value. It can all be lost when a big whale (large holder) dumps the market. Then you have to wait for more people to come in with their money, but there are no guarantees that will happen.
This brings business ethics into question since it has the potential for people to lose a lot of money. The impacts can be societal, so this poses a challenge for regulators to continue to monitor this space.
What Is the Opportunity?
It is about getting in early to a memecoin project, and taking advantage of special offers like pre-token sale, airdrops, and promotional free tokens. The early birds get all the benefits, but this is at the expense of the later buyers.
This gives the early birds a chance of becoming rich from later token sales. This is about getting in cheap, while the memecoin is still new in the market. The demand will then lead to a hype cycle as more buyers purchase at a higher price.
It gives users with large holdings more power as token holders. They can manipulate the market by dumping a significant amount of the tokens, driving prices down. They can then buy back into the market to purchase the memecoin at a cheaper price and accumulate further.
The price swing dumps create a dip in prices that attract demand from new buyers. This is due to the philosophy of “buy low, sell high”. The demand for the memecoin is often due to hype from good marketing via social media and viral posts that reach the most number of people.
The ecosystems that emerged from memecoins have also created new roles. As a result, there are users in the ecosystem who benefit from the interest and activity around it. This ecosystem has created roles like community managers, coin ambassadors, and digital marketers who have taken advantage of the new opportunities and are often rewarded with the tokens they are promoting.
Some memecoin projects like Shiba Inu aim to deliver utility through their ecosystem. This can be a new opportunity for users to stake and earn yields in DeFi (Decentralized Finance), but the problem is that there are no solid applications other than for trading and speculation.
In summary, the opportunity in memecoins is about making quick and easy money. This attracts all types of people, including scammers unfortunately.
Is It Just Plain Stupidity?
Memecoiners are often mocked for their decision to buy something that is useless. They are looked down upon as a negative part of the crypto space by industry experts, because those who lose money from it do not tend to return to the market.
It is not fair to categorize all memecoin buyers as stupid degenerates. While it is not a very wise investment move, perhaps there needs to be an understanding of why there are memecoin buyers in the first place.
The money-making aspect of it is the primary motivation that brings buyers into this market. They are probably just trying their luck, like putting in money at the slots in a casino, and not putting their life savings on the line.
On the more extreme end, there are those who go much harder. This might be an actual medical problem like an addiction. Just like in gambling, these memecoiners just cannot stop and probably need help.
Conclusion
There is both an opportunity and actual stupidity when it comes to memecoins. There are those who know the game, while others are the victims.
Obviously, there is plenty of money to be made just by looking at the market cap of the top memecoins. Not all memecoins will be successful though, so it requires hype to drive massive buying.
It gives the belief that there is a chance to become rich, and that has already happened to some people. That only happens with the right information or understanding of these systems.
It can be an opportunity for scammers and hustlers too. Buyers should always be aware of this and be cautious when new memecoins hit the market. Otherwise, the list of victims to these bad actors will continue to grow, which should lead to more policing.
With that said, it is stupidity when you decide to invest all your money into a memecoin without doing proper research. When you lose money, there is no one else to blame but yourself.
Memecoins will evolve through time, with the latest trends in crypto, Internet culture, humor, and popular entertainment. These can present new opportunities, but there is always significant risk to consider.
