My Two Cents

The truth about meme coins: Separating PEPE hype from reality

3 min read

By Lucas Kiely, Chief Investment Officer of Yield App • Friday 19 May 2023

Pepe, the latest meme sensation, has reignited hope in the crypto community, particularly for those who have been swept up in meme coin mania. Since Pepecoin’s inception in April, its market cap has skyrocketed, shooting past the $1 billion mark. But just as quickly as PEPE rose to prominence and was the meme coin on everybody’s lips, we saw a sharp pullback as initial investors took profits and led to a herd mentality, with retail investors following suit. 

So, buyer beware. As exciting as meme coins are, you don’t want your trading activity to end up as a meme either. The internet is brimming with tales of meme coin whales left in dire straits. While these meme coin frenzies do point towards a renewed optimism for crypto, they generally don’t have the same fundamentals as the true hallmarks of crypto, BTC, ETH and stablecoins. Meme coins are driven solely by arbitrary factors such as community sentiment, and are almost impossible to predict. In fact, even the most sophisticated models have failed to identify any discernible patterns.

Instead of seeing a new wave of meme coin millionaires, we find ourselves confronted with reports of network congestion issues on Bitcoin and Ethereum. Adding to the turmoil is the rise of Bitcoin-based meme coins following the recent introduction of the Ordinals protocol, which allows NFTs to be minted directly on Bitcoin. As a result, we face a combination of heavy congestion and exorbitant network fees, which will likely dissipate once the allure from the latest meme coin fades away.

It’s still too early to tell whether Pepecoin will follow the same trajectories that Dogecoin or Shiba Inu have had, even if there’s a billionaire out there eager to endorse it through social media. But one thing is crystal clear - meme coins possess no intrinsic value, so investors really need to do their own research before committing their hard-earned cash towards the next big thing being touted on social media. 

DISCLAIMER: The content of this article does not constitute financial advice and is for informational purposes only. The price of digital assets can go down as well as up, and you may lose all of your capital. Investors should consult a professional advisor before making any investment decisions.


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