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Memecoin investment fever

source-logo  en.cryptonomist.ch 28 May 2023 11:00, UTC

As we have seen, at present, the investment fever surrounding Memecoins is very impactful, influenced by both deliberate promotion and the general market environment in the cryptocurrency sector.

However, a few questions come to mind in this regard. Which Memecoins are most worth paying attention to? What are their characteristics? Are they good or bad investments for the ecosystem? Below are all the details.


The main Memecoins within the market: PEPE, AIDOGE, AICODE AND OGGY

As for the main Memecoins to watch within the market, we see that PEPE has become an important metric, with investors closely watching its rise and fall.

After a recent decline in memecoin prices, many are wondering if PEPE could experience a second wave of growth.

A similar example is SHIB, which rose to an all-time high in May 2021 only to fall rapidly to reach a new ATH in October 2021, double the value of its previous peak.

Large investors are already entering the market should PEPE be able to replicate SHIB‘s trend.

Despite the deflation of trading volume and high chain fees, AIDOGE has managed to create a positive spiral in coin prices. The product “Burn AIDOGE to earn AICODE + Stake AICODE to earn ARB” helped push prices to new highs.

However, after the recent drop in meme coin prices, both AIDOGE and AICODE have taken a hit. Hence, it is important to continue monitoring whether the upcoming launch of “AIFI” by AIDOGE can provide the project with the necessary boost.

Oggy Inu, on the other hand, first attracted attention through his partnership and AMA with BabyDoge. In addition, his partnership with the Messi Fan Club further boosted his profile.

Strong project resources and public relations skills enabled him to withstand the first wave of meme coin drops.

Oggy Inu also has the potential to become the next BabyDoge or even surpass it. It is worth noting that OGGY has a transaction fee of up to 10% on the chain and, currently, Bitget offers the best OGGY liquidity on the network and is tax-free.

Focus on the crypto inspired by Pepe The Frog

As for PEPE, it currently appears to be undergoing a correction, with high levels of volatility in recent days. Under such circumstances, users should pay close attention to several factors.

Among them, we see some positive long-term developments, such as the fact that some meme coins can sustain their wealth effect through celebrity endorsement, ongoing product development, and community engagement.

Examples include memecoins such as DOGE, which has been endorsed by Elon Musk, and SHIB, which is developing layer 2 networks. Hence, if PEPE has these positive characteristics, we can consider adopting a medium- to long-term trading strategy.

As for the short-term trading opportunity, however, we see that Bitget has currently opened futures trading of PEPE tokens, which allows users to engage in two-way trading via contracts.

By following PEPE token trends and analyzing technical indicators and fundamentals, futures traders may be able to achieve good returns in either direction.

Finally, we see that during the uptrend, the PEPE community expanded rapidly and trading fervor pushed gas rates on the ETH chain to around 80. The community’s FOMO sentiment continued to drive up the price of the currency.

However, the hype has now cooled and users wishing to engage in PEPE trading need to consider the level of community activity when making investment decisions.

What is the effect of Memecoins within the crypto ecosystem?

Currently, the investment fever surrounding Memecoins is influenced by both deliberate promotion and the general market environment in the cryptocurrency sector.

At the same time, market formation is hampered by excessive speculation and a lack of reliable assets to attract long-term investors.

In the previous bullish market, Dogecoin and Shiba Inu achieved great success and made it to the top ten projects by market capitalization.

Meme coins are built around fun and community, with low barriers to entry in terms of technology and investment.

In fact, they can generate profits quickly and reach high market valuations in a short period of time.

We know that people often participate in meme currencies because of their entertainment value, social media influence, and speculative mindset, as they are interested in achieving huge short-term returns.

On the other hand, we see that the cryptocurrency market is currently experiencing liquidity constraints. There are problems with attracting more external capital to enter the market and also internal institutional funding.

Hence, the market is in a phase of competition for existing funds. This year, the overall market is driven mainly by the alternating trends of Bitcoin and Ethereum, which lack a compelling narrative.

This has resulted in short-term capital inflows into memecoins. Memecoins have a clear “passing game” nature, relying on social media outreach to generate strong buying power, but they also lack sustainability.

In a classic stock market, such investment instruments are called “fad stocks.”

These stocks experience a sudden surge in popularity driven by hype, speculation or a specific trend, but their appeal tends to fade as quickly as it emerged.

As whales continually convert their created memecoins into traditional currencies, referring to the waves of SHIB and DOGE memes in 2020, there is the possibility of a rapid market downturn trapping retail investors before the trend ends.

How similar are meme coins to the spirit of the crypto industry?

As we know, the essence of cryptocurrencies is decentralization. Anyone can create their own cryptocurrency, and meme coins are generally built on Internet cultural trends and memes.

Simply put, meme coins are a form of social tokens created by people for people.

They are often created and promoted by online communities or individuals with a shared interest or sense of humor.

The social element of meme coins plays a significant role in their success and adoption, as they promote a sense of community, encourage participation, and create a shared experience among their holders.

In addition, Memecoins are issued with a large total supply and extremely low token prices. The original intention was to address the rising price of BTC, which makes it difficult for ordinary people to buy even a single unit.

Meme tokens allow regular users to purchase a large quantity. This concept of affordable purchase and equal access within the community represents the spirit of decentralization, equality and transparency in the cryptocurrency space.

Therefore, despite price spikes and speculative users, meme coins such as DOGE with 4.91 million ownership addresses, SHIB with 1.303 million ownership addresses, and PEPE with 114,000 ownership addresses have a much larger user base than other blue-chip tokens.

Finally, these core meme coins are spreading from Web3 to Web2 user communities, creating a unique Web3 narrative and capturing the attention of more mainstream users.

This further promotes the “mainstreaming” of cryptocurrencies. Hence, it cannot be said that meme coins violate the general spirit of cryptocurrencies.

Awareness regarding the risks of Memecoins: Ponzi schemes, pump and dump, and rug pulls

New anonymous meme coins often have many contractual vulnerabilities, including closed-source contracts, proxy contract mechanisms, tradable logic with pause functionality (Rug Pull risk), and setting high sales fees that hinder token sales, among others.

These vulnerabilities can potentially lead to losses for traders. Therefore, it is recommended to use portfolios that incorporate advanced detection capabilities to trade and identify contract risks associated with new meme coins early on.

In addition to contract vulnerabilities, some meme coin issuers focus on a large number of chips in a single EOA (Externally Owned Account) address or distribute them across multiple addresses under their control, which poses significant short-term dumping risks.

Hence, when trading Memecoins, especially newly distributed ones, it is essential to be extremely careful and do your research.

How can one solve the clogging caused by memecoins on networks such as Bitcoin and Ethereum?

Before even talking about how one can solve the problem of transaction clogging caused by Memecoins in networks such as Bitcoin and Ethereum, one must ask whether it needs to be solved.

In terms of how to deal with network congestion, Layer 2 provides a ready-made solution. The purpose of Layer 2 is to downsize the underlying blockchain network, improving its throughput and performance.

The underlying blockchain only needs to compute evidence for transactions sent to smart contracts, validate activities on the Layer 2 network, and store the original unexecuted transaction data as call data.

In short, the blockchain no longer has to perform so many computational tasks or store so much transaction data on layer 2, thus reducing the cost per transaction.

With regard to the question of whether network congestion should be solved, it is worth noting the fact that congestion on Ethereum itself may have advantages.

Indeed, with the implementation of EIP-1559, higher gas rates generally result in a higher base rate and the burning of more Ethereum.

As a result, higher gas tariffs lead to a faster deflation rate for Ethereum, which has a positive impact on its price.