Recent weeks have seen record levels in Bitcoin and Ethereum. 

Bitcoin crossed the $66,000 threshold and Ethereum $4,000 as the volatile crypto market experiences a bull-run.

There are many alternative coins for those who are brave enough and able to invest in crypto. All of them have their USPs or potential uses. 

The so-called “meme coins” are a part of the market that receives a lot of attention. Shiba Inu, Dogecoin and Dogecoin were the first to go. But what is the point of them all?

Dogecoin, which started as a joke, now has a market cap of $40bn

Dogecoin was originally created as a joke and now has a market cap in excess of $40bn

These two coins were originally joked about by Elon Musk, the world’s richest man. They have now made it onto the list of most valuable digital assets.

After its launch at the end 2013 Dogecoin now boasts a market capitalization of $36.4billion 

Amazingly, ShibaInu has a market cap now of $40.2billion. It was launched in August 2020.  

Shiba is actually the third most popular choice for crypto trading platform Coinbase, while Doge is the 13th.  

The question is, do Dogecoin holders sell out to Shiba Inu to raise the price and then repeat it again with another newer coin.

Doge is currently worth roughly $0.28 a coin and Shiba is at $0.00007302, suggesting many are pinning their hopes on the price growing. 

Experts are skeptical about these highly-speculative coins that were inspired by internet memes.

We examine what meme coins are, and whether they could devalue more’serious cryptocurrencies. This refers to cryptos that claim to solve problems or have potential real-world uses. 

What are meme coins?

Although Meme coins have been around for a while, they reached new heights during January’s Gamestop saga.

Since then, amateur traders have piled into the joke coin in the hopes of making a profit from speculation and social media hype.

Dogecoin was started as a joke. Elon Musk has made Dogecoin somewhat legitimate and wants to send a Doge-1 ship to the Moon. A tweet from Tesla founder could drive up the cost of a coin dramatically. 

It was inspired from a meme – usually gifs or pictures or videos that go mainstream online. This meme is a picture and text of a Shiba Inu-breed dog, along with the dog’s internal monologue. It was intentionally written in broken English.  

Doge reached its peak in May at $0.64 before plummeting to $0.16. However, it has been trading at $0.28 since then.  

Floki, a new coin, has joined the meme coin pack. It claims it is trying to take over Europe with aggressive marketing strategies and can be seen advertising and posting on the London transport network.

Crypto commentator Glen Goodman

Crypto commentator Glen Goodman

“Meme coins” were invented as a joke. They were just supposed to be memes about the Shiba Inu dog people liked. 

Glen Goodman, author of The Crypto Trader and crypto commentator Glen Goodman said, “It started with Dogecoin then Shiba inu which is now the most famous,” 

Shiba Inu is a rival me coin to Dogecoin. It bills itself as a Dogecoin killer’. 

Its branding uses the same internet meme that dogecoin is built on, and features an image of a Japanese Shiba Inu.

After a 777 percent increase in the past 40 days, it has now been surpassed by Doge as the most valued meme coin. It is also among the top 10 most expensive cryptocurrencies overall.

A $8,000 investment by one investor was used to purchase the coin in August 2020. It is now worth $5.7 billion.

These stories could be influential on crypto speculators behavior – trying to get into a coin early, drive up its value, and then exit. 

Blockchain technology is used to create meme coins, which are similar to Ethereum, Bitcoin, and other well-established cryptocurrency. 

Dogecoin uses the same technology that Litecoin spin-off bitcoin, while Shiba uses Ethereum token.

What uses are meme coins?

Although Meme coins were initially created as a joke, they can be used as a payment system for cross-border transfers.

Goodman said: “If Elon, the richest man in the world and most powerful, decides that he wants the joke coin based on a picture of an animal to be the world currency, is that possible? That is something I do not think we can ignore.

“The merit of both coins is that they are payment mechanisms like bitcoin. 

They could theoretically replace many of the payment systems that we use worldwide, like Venmo, bank to bank transfers, and Paypal.

“Imagine that all these Shiba Inu traders truly believe that one-day we’ll all be swapping Shiba Inu for each other, instead of exchanging pounds through Paypal.

It’s unlikely, in large part, because very few online shops accept meme coins. This makes them redundant. 

Instead, most crypto speculators will look at meme coins as a way of getting rich quickly.

What about Floki!

After a massive advertising campaign on the London transport network that stated “Missed Doge?”, a new meme coin has been gaining huge interest. Get Floki

Adverts have also appeared all over the world, and their prices have risen 45 percent in 24 hours from an extremely low level. 

Floki is reportedly Elon Musk’s dog name. It claims to have three utility projects: A NFT gaming metaverse; NFT and merchandise marketplace; and a content/education platform. This makes it different from other meme currencies. 

The aggressive marketing push it receives is funded by a 4% marketing fee. It cannot be bought on the main buying channels. 

Cherry Lane Investment partner Rick Meckler said that it was driven by fad buyers looking to get in now and then flip to what will need be a new set of buyers at higher prices.

“This makes it closer towards a collective marketplace than a currency markets, and as such, determining value with traditional analytical seems impossible.”

Goodman added: ‘Shiba’s valuation whichever way you look at it is an insane valuation because… you can’t spend it in shops. 

‘I accept the possibility that if it really takes off in a meme-like way… if it really grabs the public imagination and suddenly everybody wants Shiba Inu then they’ll start accepting it in shops… that is a possibility. It is unlikely, but we must accept it.

“It’s not an option to be valued at $40 billion.” It’s like a tech startup that maybe should be worth a few million at best … you don’t value it at $40billion when there’s absolutely no guarantee whatsoever that it is ever going to amount to anything as a currency.’

According to Coinbase, dogecoin, unlike Bitcoin, which is intended to be scarce, is ‘intentionally plentiful’

There is a limit to the supply of coins, with 10,000 coins being mined each minute. 

Shiba is the same, with a total supply exceeding ‘one quadrillion coins. Coinbase states that the coin supports projects like the non-fungible token exchange and the development decentralised exchange. 

Tesla chief executive Elon Musk helped dogecoin reach new highs earlier this year

Elon Musk, Tesla chief executive, helped dogecoin achieve new heights earlier in the year

Do they run the risk of legitimate cryptocurrencies being devalued?

In their first ten years of existence, institutional investors dismissed cryptocurrencies as a useless asset. 

Asset managers have since changed their view and now more institutional capital flows into crypto.

But if the price of meme coins is rising but there is little fundamental value, can it lead to devaluation of more legitimate coins?

Goodman seems inclined to believe so: ‘The main issue with meme coins in terms od that PR effect, is that they completely distract from the really exciting technology progress that is occurring within the cryptocurrency industry.

“Ethereum” was the name of the first computer, and it is more than just a currency. It’s a new operating platform that allows for new apps to be built on top.

“That’s completely obscured not only by bitcoin but also all these meme coins. Everyone sees cryptocurrencies as pure currency that can be exchanged for other money. They are far more than that.

The meme coin rally has not affected long-established cryptocurrencies. 

Bitcoin recently crossed the $60,000 mark, and Ethereum is on the cusp for a new all time high of more than $3,000. 

Cardano, a lesser-known coin, is also experiencing moderate gains.

This is a very risky investment…

Mainstream financial advisors would argue that cryptocurrency are not an investment – they are merely a form gambling. Retail investors should not attempt to profit from movements of world currencies if they are accepted as currencies.

Many people who have digital currencies consider them an investment. Despite being complex and volatile, cryptocurrencies can be very risky. 

Bitcoin crashed to $30,000 three months after it had crossed $60,000 in April. Meme coins should not be treated differently.

“Don’t listen to anyone online who says this is going to continue rising for the next two weeks, before it crashes. They’re just making up stuff. They don’t know. Goodman said, “Nobody knows.”

A stop loss order can be made if a meme coin crashes. It can protect some money but should not be considered insurance.

A stop loss order is a request to a broker to purchase or sell a stock or cryptocurrency at a specified price.

However, if the price drops significantly, the stop-loss won’t work. It will only work if there is an immediate market for the stop loss.

Goodman stated that in extreme situations, there are no buyers and only sellers. Even if you set a stop loss, the price could continue to fall and your platform won’t be able close the trade. This is because there aren’t any buyers.

“And since the investment has no fundamental value, there’s not reason why its price should’t go up to 100billion or zero; it’s possible to do so either way. In this sense, it is a pyramid scheme.

It could all be a flash in a pan, because these memes are supposed to be funny but the joke must eventually wear off. It’s obvious that once the joke is over, it doesn’t matter anymore.

Q&A: THE INS AND OUTS OF BITCOIN

WHAT IS BITCOIN? 

It’s often called a cryptocurrency, but that’s not very helpful. It is virtual currency, which means that it does not have physical money or coins. It was invented by Satoshi Nakamoto, a Japanese man claiming to have invented it. However, his or her true identity is not known. It was used often for illicit activities in its early days, but bitcoin is now attractive to ordinary investors. 

HOW DOES IT WORK 

Bitcoins can be stored in a digital wallet that is accessible via smartphones or computers. Blockchain, the online ledger that records transactions, is where transactions are recorded. Although bitcoin is not widely accepted, you can theoretically use it to pay for goods or services. You can also buy it with the hope of making a profit. 

WHERE CAN I BUY IT 

An exchange allows anyone with a smartphone or computer to buy bitcoin. To purchase bitcoin, you will need to pay trading fees. 

What is it worth? 

Bitcoin is not backed or underlying by any tangible asset, such as gold, and therefore has no intrinsic value. It is ‘worth’ what people are prepared to pay – and that has been extremely volatile. One bitcoin was worth around $5,000 in March 2020. After a spectacular rally around Christmas it reached $41,000 the first week in January. It is currently at $62,000, which is almost an all-time high. 

SHOULD I BUY 

It depends on how much you believe bitcoin will increase in value. It’s a big risk. The same applies to other cryptos. The FCA, a city watchdog, reminded savers recently that they should be ready to lose all the money they have invested in crypto and bitcoin. So only invest what you can afford to lose. Deals in bitcoin are generally out of the reach of regulators’ safety nets if things go wrong.

The old saying, “Don’t invest in things you don’t know” is still true. If you are tempted to invest in crypto, do your research on the use and whitepaper for the coin you are interested in. Don’t invest money that you can’t afford to lose. Only use legitimate platforms, make sure you have a small amount of your portfolio, and be ready to lose all of it and for volatile price swings. 

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