Meme Coins Explained – Their Rise, Workings and Future [2023 Guide]

Meme coins, as the name suggests, are cryptocurrencies based on internet jokes, viral memes or popular culture symbols that have gained a cult-like following online.

While critics initially dismissed meme coins as a flash-in-the-pan gimmick when Dogecoin first emerged in 2013, the astounding rise of coins like Shiba Inu and Dogelon Mars has proven that meme coins are here to stay as a crypto niche.

The cumulative market capitalization of all meme coins currently stands at over $25 billion, underlining their popularity among both retail and institutional investors. But how did these joke coins get so big and do they have a viable long-term future?

Let‘s find out.

A Brief History of Meme Coins

It all started as a parody in 2013 when software engineers Billy Markus and Jackson Palmer created Dogecoin (DOGE) based on the viral ‘doge‘ meme. The meme features a funny-looking Shiba Inu dog with multicolored comic sans text around it.

Dogecoin was intended as a light-hearted critique of the hype surrounding mainstream cryptocurrencies back then. But the coin based on a dog meme soon cultivated an online community of its own and saw significant price rallies, especially during the 2021 crypto bull run.

Following Dogecoin‘s unexpected success, developers started experimenting with more meme-based cryptocurrencies, leading to a Cambrian explosion of such coins in subsequent years.

Popular examples today beyond Dogecoin include Shiba Inu, Floki Inu, Dogelon Mars etc, most featuring either dogs or Elon Musk references as internet in-jokes.

The cumulative market cap of the top meme coins currently stands at over $25 billion, underlining the scale and popularity this niche has achieved.

Now let‘s analyze some of the top meme coins and their growth stories.

Top Meme Coins

Dogecoin (DOGE)

As the pioneer in this niche, Dogecoin continues to be the most popular meme coin with a market cap of over $11 billion. Its current price stands at $0.081, up 15% in the past week.

Dogecoin set several new highs through 2021, rallying from $0.005 in January 2021 to an all-time high of $0.68 in May 2021. This was a massive 13000% price surge within 5 months, led by endorsements from the likes of Elon Musk.

Even today, Dogecoin accounts for over 44% market dominance in the meme coin category, underlining its endurance as the OG meme currency.

Shiba Inu (SHIB)

Launched in August 2020 as a simulated fork of Dogecoin, Shiba Inu has emerged as the top competitor to DOGE‘s meme coin dominance today.

Inspired by the same Shiba Inu dog breed that Dogecoin is based on, SHIB significantly outpaced its rival in 2021 growth – rallying a staggering 75 million percent within a year!

From $0.000000000073 in Sept 2020 to an all-time high of $0.00008845 in Oct 2021, Shiba Inu delivered once-in-a-lifetime gains for early investors before entering a cool-off period.

Today, SHIB market cap stands at nearly $6.5 billion, accounting for almost 25% of the cumulative meme coin market share. The recent crypto market recovery has also boosted SHIB prices by over 45% since Jan 2023.

Floki Inu (FLOKI)

The next meme coin seeing surging interest is Floki Inu – inspired by Elon Musk‘s own Shiba Inu pet named Floki.

Floki Inu was launched within minutes of Musk tweeting in June 2021 that he had named his pet Floki. This immediately led to a flurry of social media hype and investor FOMO.

FLOKI prices recorded 1000X growth in 2021, rallying from $0.000000001 to $0.00001 within months. This meme coin themed on Elon Musk‘s pet currently has a market cap of over $200 million.

Beyond Elon‘s tweets, the Floki Inu project has rolled out multiple real-world utilities around education, content creation and metaverse gaming to sustain value and adoption.

Other Notable Projects

Here are some other meme coins that have gained traction:

  • Dogelon Mars (ELON) – $257 million market cap
  • Samoyed Coin (SAMO) – $71 million market cap
  • DogeCola (DOGECOLA) – $43 million market cap
  • Baby Doge Coin (BABYDOGE) – $609 million market cap

As visible, while Dogecoin and Shiba Inu dominate the rankings, there is no dearth of new meme coins attracting investor dollars and managing to carve out a niche.

Riding on quirky names, cutesy mascots, Elon Musk references and community-building, meme coins as a collective are here to stay despite all the skepticism aimed towards them.

Now let‘s analyze how these meme coins work under the hood and what‘s fueling their popularity.

Understanding Meme Coin Workings and Hype Factors

While meme coins leverage the same blockchain technology as mainstream cryptocurrencies do, most of them start more like a social experiment than a traditional crypto project.

Let‘s examine some of the typical characteristics of meme coin projects and how they manage to gain traction:

Built for Virality First

Most meme coins start with an internet meme, joke or cultural symbol that already enjoys pre-existing popularity. This gives them an initial base of potential fans to kickstart the project.

Creators further design quirky logos, mascots and token names to resonate with young internet crowds. For example, the images of cute Shiba Inu dogs appeal greatly to meme lovers even if the project has no real use case yet.

Such viral branding and positioning sets the base for community building in the next growth phase.

Community-Driven Growth

Meme coins derive a lot of their value from online communities that organically spread around it. Be it on Reddit, Twitter or group chats – coins like Doge, Shib and Floki have benefited immensely from word-of-mouth buzz rather than paid promotions alone.

Such community-led amplification creates a self-fulfilling prophecy where more people buy into the coin seeing others do the same. Soon mainstream media also starts covering these viral phenomena, completing the virality loop.

Influencer Endorsements

Celebrity influencers like Elon Musk have been key to wider meme coin adoption beyond internet sub-cultures.

Elon Musk‘s tweets on Dogecoin alone led to massive price rallies throughout 2021. NHL franchise Dallas Mavericks accepting DOGE payments also boosted usage.

Shiba Inu similarly counts crypto entrepreneur Vitalik Buterin among its early backers. Such big names signal credibility to doubters and attract corporations and investors beyond just retail buyers.

All this put together creates a hype cycle that feeds on itself – memes attract online communities, communities attract celebrities and all this visibility spurs retail investor FOMO.

While many projects fail to sustain interest post the hype, meme coins as an asset class have shown remarkable endurance so far. Now let‘s explore how one can invest in these coins.

Buying Meme Coins – Process and Platforms

Despite warnings around risks, many new investors wish to buy meme coins too as part of their crypto portfolio for potential windfall gains.

For beginners, here is the typical process to invest in any meme coin:

Step 1) Get on a Crypto Exchange

As meme coins are primarily available on crypto-only platforms, your first step is to sign up on exchanges like Coinbase, Binance, Kraken etc. Both mobile apps and web platforms work.

Verify your identity by submitting KYC documents before you can start trading. This is mandatory on most mainstream exchanges.

Step 2) Fund Your Trading Account

Once signed up, you need to add money to your trading wallet to buy meme coins. Leading exchanges allow card payments, wire transfers or stablecoin transfers for this.

For example, you can directly transfer USDT stablecoins from an external crypto wallet to fund your Binance account within minutes. The process is quicker than a traditional bank wire transfer.

Step 3) Search and Buy Meme Coin

With a funded trading account, you can now directly search for the meme coin you wish to buy from the exchange menu bar. For coins already listed, this is straightforward.

For newly launched coins, you may have to first transfer supported base currencies like BNB, ETH etc to your Metamask or Trust wallet. Then use a DEX like PancakeSwap to trade that for your target meme coin.

Either way, buying meme coins only needs a few clicks once your account is set up on supporting platforms.

Now that you know how to buy meme coins, do note that investing in these assets carries higher risks than mainstream crypto coins and should form a smaller portion of your portfolio.

Risks Around Meme Coin Investing

While meme coins can generate eye-popping returns during hype cycles, one must account for these downside risks before investing:

  • Extreme Volatility – With no real utility backing most projects, prices are at the mercy of online chatter. This causes extreme price fluctuations even in a single day.

  • Lack of Fundamentals – Viral hype eventually fades if not backed by fundamentals. Meme coins lack use cases, capped supply policies etc that help determine objective value.

  • Regulatory Threats – Financial regulators keep a close watch on this niche due to high risks. Sudden legal clampdowns can cripple many smaller meme coins lacking compliance cover.

  • Scam Risks – The get-rich-quick appeal makes meme coins prone to fake projects, developer exit scams etc costing investors. Caution is necessary.

A prudent approach is to only allocate 1-5% of your crypto portfolio towards meme coins with thorough research. Now let‘s look at the future outlook for this asset class.

What is the Future of Meme Coins?

Given their extremely speculative nature and boom-bust cycles, critics argue that meme coins cannot sustain long-term relevance. However, trends reveal a more nuanced reality:

  • For all the volatility, top names like Dogecoin and Shiba Inu have shown tremendous market endurance defying naysayers. Their billion-dollar valuations and strong community support make them staples of the crypto space now.

  • Increased real-world utility – To sustain beyond hype cycles, even meme coins are now adding NFTs, metaverses, DeFi tools and blockchain games to create tangible value. For example, Dogelon Mars has a play-to-earn soccer game, Tamadoge has battling NFTs and more. Such Web3 integrations make projects viable for the long term.

  • New legal cover – Regulations are fast emerging in crypto‘s favor by giving legal recognition and investor protection cover to new assets. Registered meme coins with compliance measures could prevent outright bans proposed earlier.

  • Further institutional adoption – Venture capital funds, hedge funds and even retirement accounts have started including meme coin exposure after witnessing their traction among retail traders. This lends further credibility.

In essence, while extreme speculation carries inherent risks, meme coins as an asset class have earned their place at the crypto table – be it through sheer endurance or adopting tangible utilities. They capture both the fun and innovative lure of crypto making it hard for institutional players to ignore them wholesale either.

After the staggering show put up by market leader Dogecoin through bull and bear cycles, no one can write off this niche as just another passing fad!

Summing Up

We hoped this guide offered you a comprehensive and realistic perspective around the emerging niche of meme coins – their origins, growth factors, workings, investment potential and long term viability.

As outlined, while meme coins carry higher risk-reward ratios, the prudent investor can still consider allocating a smaller portion of their crypto portfolio towards this asset class after thorough research.

Top ranking names like Dogecoin and Shiba Inu have already achieved mainstream endurance aided by their strong communities. As more projects incorporate real-world utilities around DeFi, NFTs and gaming, we could see the rise of more sustainable meme coins with tangible value backing the initial hype.

On that note, make sure you do your own research before buying unknown coins. Stay safe and have fun memeing!