Investing in memcoins: a risk or a chance to get rich?

According to CoinMarketCap, in 2023, the total number of memcoins exceeded 200, and their combined capitalization reached $50 billion. Memcoins were initially created as jokes or memes and became popular over time due to community support, media interest, and sometimes unexpected market value.

For example, memcoins such as Dogecoin (DOGE) and Shiba Inu (SHIB) have seen tremendous growth since their listing:

Dogecoin (DOGE) was launched in December 2013 with an initial price of less than $0.0006. As of December 18, 2024, DOGE costs around $0.3867. Thus, the growth has been more than 64,000% since listing.
Shiba Inu (SHIB) appeared in August 2020 with a price close to $0.0000000001. Currently, SHIB's price is around $0.00002589. This represents an increase of more than 25,890,000 times.

Despite its hype origins, memcoins can appeal to novice investors and experienced traders alike. However, it is worth sorting out whether memcoins are a real chance to get rich or represent a risky hobby.

Pros of investing in memcoins

Memcoins are attractive for several reasons. First, they are cheap in the initial stages, which makes them accessible to a wide range of people. This is an excellent way for beginners to try crypto investing without significant financial investments. In addition, the success of memcoins largely depends on an active community. The Internet, social networks, and memes all fuel interest in such assets and can cause the growth of their price.

Another critical point is the opportunity to make money quickly. The story of Dogecoin, which grew thousands of times, is a great example. Such growth is possible due to the viral effect and hype around memcoins. Often, their popularity is fueled by the attention of celebrities. Take Elon Musk: his tweets have repeatedly provoked a rise in the price of Dogecoin.

Finally, for experienced investors, such assets can be a way to add variety to their portfolios. Even if the main focus is on more stable assets, memcoins can offer a chance for significant gains.

The cons of investing in memcoins

Memcoins are subject to sharp fluctuations in value. Their price can rise rapidly but fall just as quickly, which makes them a hazardous investment. For example, Dogecoin (DOGE), after reaching a high of $0.76 in May 2021, fell more than 90% by June 2022, dropping to $0.05. This drop is due to decreased interest and a lack of meaningful news. Shiba Inu (SHIB) has fallen over 90% from its peak of $0.00008251, reaching $0.000006 in months.

The problem is also that most memcoins have no real value. They only exist because of hype and popularity; if interest wanes, their value can drop to zero. In addition, the market attracts many scammers who create fake projects promising huge profits but eventually disappear with investors' money.

Another nuance is the lack of regulation. If something goes wrong, the investor cannot get his money back. It is tough to analyze such assets because their success depends on memes and trends that cannot be predicted.

What you need to know when investing in memcoins

Before investing in memcoins, it is essential to understand the basic principles of risk management. Here are some practical tips to help minimize potential losses:

Portfolio diversification. You should not invest all of your funds in memcoins. It is recommended that investments be distributed among different assets, including more stable cryptocurrencies, stocks, and bonds.
Limit investment amounts. Invest only the amount you are willing to lose. Memcoins are a high-risk asset, and the possibility of losing your investment entirely is high.
Thorough research. Before buying a memcoin, research the project, its team, community and market prospects. Avoid investing in projects with opaque information.
Use reliable platforms. Choose trusted exchanges and wallets to buy and store memcoins. This will reduce the risk of theft or loss of funds.
Keep an eye on news and trends. The success of memcoins largely depends on the relevance of memes and trends. Stay up-to-date with the latest developments so that you can react to changes promptly.
Profit Capture. If the value of memcoin has grown significantly, it is worthwhile to lock in profits by selling some assets. This will help minimize possible losses in case the price falls.
Using stop-loss orders. Set loss limits using stop-loss orders to protect your investments from sharp drops.

Conclusion

Investing in memcoins is both a chance for quick profits and a serious risk. These assets attract attention due to their popularity, but their volatility and lack of fundamental value make them highly unpredictable.

This information does not constitute personalized investment advice, and the financial instruments or transactions mentioned in the publication may not correspond to your investment profile, objectives, and expectations. The above information is only the editor's opinion. Determining whether a financial instrument or transaction is suitable for your interests, investment objectives, investment horizon, and risk tolerance is the personal responsibility of each investor.