Meme Culture in the Cryptoworld- How Did It Begin and Who Are the Winners?

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The cryptocurrency community has not heard a “Doge-related” comment from Elon Musk in the last few weeks. However, only a few days ago, Musk again released yet another tweet, where he mentioned that there is a possibility of a merch between Tesla and Dogecoin, the canine-inspired meme cryptocurrency. And while the cryptocurrency did not “moon” as one might have hoped, the recent statement of Elon Musk only emphasizes that the meme culture in the cryptocurrency world is far from over.

2021:  the year of memecoins

The year 2021 has brought different trends in the cryptocurrency space. During the first few months, people were mostly talking about the world of decentralized finance (DeFi), while during the summer time it looked like most of the focus had shifted towards the non-fungible tokens (NFTs). And after the release of Mark Zuckerberg, where he talked about metaverse and rebranding of Facebook to Meta, everyone started to talk mostly about metaverse.

However, if there is one sector in the whole space that was able to keep about the same amount of attention, it was memecoins. These altcoins, which are mostly based around memes, jokes, puns or some other type of funny anecdotes, have had a tremendous year. It is safe to say that even if they are at a loss as compared to their all time highs, these coins have still made an incredible amount of money for most of their investors and long term hodlers. Before we look more closely at a few examples of these memecoins, let us first explore a more crucial question. How is it possible that projects such as Dogecoin or Shiba Inu, have skyrocketed during the last year?

Why are memecoins more popular than ever?

While there is no right or wrong answer to the above mentioned question, there are few signs and factors that might have affected the rise of “the meme coins era.” First of those reasons is surprisingly Covid-19 pandemic. At the first glance it might not look like there is an obvious connection between the Covid-19 pandemic and meme coins, a more in-depth approach might surprise. Several studies have already shown that during the series of lockdowns and quarantines all around the world, people spend much more time in the online world. They were forced to socialize in the online world, where they were not only looking for a social life, but also thrill and adrenaline. And that is something that trading memecoins definitely delivers.

Moreover, in combination with the hunger for online trading, another pattern emerged that might have helped to shine more light on the likes of Dogecoin and Shiba Inu. And that is social trading. During the Covid-19 pandemic, people tended to trade in communities more than ever before. This was mostly seen during the Game Stop saga that happened at the beginning of this year. During that time, retail traders that were mostly following the subreddit r/Wallstreetbets gained so much traction and attention by longing the Game Stop (GME) stock that they were able to make few of the biggest hedge funds really nervous. That is exactly what Raoul Pal, the CEO of Real Vision Group, has stated at the end of October:

“These new investors are not interested in your love of oil or commodities or 1950´s V8´s or your Contemporary art of the 1990’s and 2000’s. Your Jeff Koonz is just a stupid balloon sculpture. It is not their cultural reference. JPEGS and memes are. This is ALL about culture.”

The sense of belonging to the group of “fellow traders” during the time when social interaction has been limited to minimum might have helped coins like Dogecoin or Shiba Inu. These altcoins were particularly popular in the eyes of retail investors from Reddit or TikTok.

However, none of these would not have happened, if people did not have money to trade with. Excessive money printing became not only a cryptocurrency meme, but also a huge issue. Since the beginning of the year 2020, more than 40 % of all dollars currently running in the system have been printed. This is already showing through the high inflation numbers that are constantly rising all around the world.

But it was also one of the reasons why retail investors all across globe could have poured money into meme coins. Several stimulus checks to support the households were also one of the reasons why, contrary to the opinion, the average disposable income per household has increased in the last two years in numerous countries such as the United States, Canada or G7 countries. This means that the average person has more money to spend or invest.

Yearly change in household disposable income by country, source: data.oecd.org

The unique combination of money printing, social and community investing with the need for finding a thrill and adrenaline on the internet, as well as ease of investing helped memecoins to gain not only more traction and attention, but also to rise sharply in the price as well as market capitalisation. This was mostly seen with Dogecoin and Shiba Inu.

The rise of Dogecoin and “its killer”

The meme coin trend this year has brought up a competition between two cryptocurrencies, famous Dogecoin (DOGE) and a newcomer to the cryptosphere, Shiba Inu (SHIB). Before we judge whether there is a clear winner or loser in this fight we briefly introduce both of these cryptocurrencies.

Dogecoin was created in 2013 by Jackson Palmer and Billy Markus, who both had great experience from their previous careers. It was created as a fork of Litecoin (LTC) and primarily it was thought of as a joke. Regarding few of the main characteristics, Dogecoin has about 30 TPS (transactions per second) with transaction costs are usually at around a few cents with transaction time of a few minutes.

What started as a joke or a meme however turned out to be not only one of the biggest cryptocurrencies of all time, but also one of the most renowned names in this sphere with the biggest community. There are more than 3.4 million Dogecoin wallets, excluding the exchanges. Dogecoin also has huge social media support, with an official twitter account having more than 2.4 million followers or an official subreddit of more than 2.2 million followers.

However, contrary to beliefs, Dogecoin is also extremely centralized. The biggest wallet has more than 24 % of current circulating supply, with TOP 100 wallets having more than 80 % of all the coins in circulation. Due to relatively easy price manipulation, which can be mostly seen when paired with BTC, Dogecoin has also seen its fair share of pump and dump movements.

Dogecoin vs Shiba Inu, source: kryptomagazin.sk

While Dogecoin has been on the throne of “memecoins” for a long time, it has faced a fierce competition for past couple of months.. Shiba Inu (SHIB), was created in August of 2020 by anonymous creator under the name Ryoshi, who is still unknown. The only thing known about this creator is that apparently, he has had some serious connections in the cryptosphere. Some even suspect that he might be in connection with Vitalik Buterin, the founder of Ethereum. As of now, it however appears that he has left the crypto space and is no longer part of Shiba Inu development.

Regarding the fundamentals, Shiba Inu runs on Ethereum, since it does not have its own blockchain. It is thus a rather typical ERC-20 token, with a TPS of about 15. Compared to Dogecoin, the fees tend to be much higher, since it has to rely mostly on Ethereum. Shiba Inu also has its own governance tokens, Bone and Leash. If you want to learn more about these tokens, follow this link.

Shiba also has its own exchange, Shibaswap, which works as AMM (automated market maker) and has a total value locked of around 0.5 billion dollars. While that number seems to be impressive, the community around Shiba Inu is much smaller than around Dogecoin. The so-called Shib Army has around 1.8 million followers on Twitter, while 400k followers on subreddit. The number of Shiba Inu wallets is around 900k, excluding the accounts on the exchanges.

The native exchange of Shiba Inu – Shibaswap, source: shibaswap.com

How do they compare with price action?

Without any doubt, both of these tokens have done tremendously this year. They have not only created several ATHs, but they have also gone as high as TOP 10 of cryptocurrencies when it comes to market capitalisation. The highest capitalization that Dogecoin has seen was around 88.9 billion dollars with the price of 0.75 dollar for one Dogecoin. Shiba Inu has seen the highest market capitalization of around 41 billion dollars and the price of 0.00008 dollar.

At one point during November, Shiba Inu has even flipped Dogecoin in capitalisation. However, this was due to the tremendous price increase that this token has seen in the Q4. In the past three months, Shiba has risen by 400 %, while Dogecoin price has lost around 20 % of its value. If we look at the whole year, Dogecoin has produced an incredible rise of around 3 000 % with Shiba Inu rising by more than 4 000 %.

Dangerous side of memecoins

While the profits might look really encouraging, the truth is that hand in hand with rewards like these come also huge risks. There are several different potential risks that one has to consider, before jumping on the “meme wagon.”

Hype

First of all, most of these projects are relatively new, with the exception of Dogecoin. Vast majority of them will probably not be around in the next cycle, as was seen with ICOs in 2017. A huge success now does not mean that the projects will also have a huge success in the future. And that depends on the overall development, on the team, partnerships or community. Most of these are extremely difficult to predict, which by itself poses a risk.

Volatility

Second of all, memecoins are highly volatile. This is not only thanks to Elon Musk and his dog-oriented tweets, but also due to the fact that most of them have relatively small market capitalisation. Therefore a group of hundred thousand followers or a whale investor can cause a serious price movement either up or down. The downward movements especially can be harmful for investors. Both of these cryptocurrencies are far from their ATHs, with Dogecoin currently losing as much as 76 % and Shiba Inu losing around 62 %.

Scams

Third of all, most memecoins are scams. While this might sound harsh, only a few of these meme cryptocurrencies can bring any value or substance to the market. Most of them are probably created only with a vision of a “get-rich-quick” scheme. This was for instance seen with the meme coin that should have represented the extremely popular Netflix show, Squid Game

The SQUID token has seen a rise of more than 130 000 % in less than 7 days since its inception. The price of the token rose from 0.07 dollars to more than 2 800 dollars. However, that was exactly the moment when the project was rug pulled. In the cryptocurrency world, a rug pull is a scam mechanism that is used by creators of the given cryptocurrency, during which they “suck out” all the liquidity and money from the project, leaving the investors empty handed. 

Rug pull of Squid Game, source: coinmarketcap.com

There have been numerous red flags that could have warned the investors about the potential problems with this project. If you do not want to repeat the same mistake, go ahead and read this article which explains a few of the red flags that are easy to notice when it comes to meme coins.

Conclusion

No matter whether you like or dislike meme coins, the fact is that this subsector of cryptocurrencies has done a tremendous job in the past year. Whether coins like Dogecoin, Shiba Inu, Floki Inu, Baby Doge or many many others will be so successful mostly depends on the value that these tokens will provide for the community.