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The cryptocurrency community loves memes and one of the industry favorites is Doge, which pairs the Shiba Inu dog Kabusu, with colorful fonts and baby talk like “wow” and “very concerning.”
With the introduction of Dogecoin, which was created as a joke in December 2013, an entirely new crypto category was spawned: the meme coin, cryptocurrencies that are associated with an internet joke or pop culture reference.
Following the creation of the Doge meme, Dogecoin spawned an explosion of cryptocurrencies in the guise of the cute dog, making it the most widely used meme for this type of cryptocurrency.
As a result, a more specific group has emerged within the meme coin category: dog-themed coins. Most retail investors will be familiar with these, as in 2021 there was a lot of speculation about the new meme coin subset, which includes Dogecoin and its derivatives, Shiba Inu and Dogelon Mars. Tesla founder Elon Musk was one of the key reasons these cryptocurrencies surged and expanded last year after he tweeted about his interest in and support for Dogecoin.
Other meme coins beyond the dog-themed coin niche include Pepe Cash, based on the Pepe the Frog character, and “HODL” (wait for your life), from the crypto rallying cry to hold on to your coins for good measure. coast, even during a market downturn.
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A brief history of Dogecoin
Dogecoin is considered the first meme coin, and while it was initially designed to mock the wild speculation that thrives in the crypto markets, it quickly developed a community of its own around it. Crypto enthusiasts saw Dogecoin as a way for new investors to learn and experiment with the technology without having to worry about the higher stakes that came with Bitcoin, which, at the time, had just surpassed $1,000 per coin.
As a result, Dogecoin was promoted as a “fun and friendly internet currency”. Compared to the Bitcoin community, the Dogecoin community was less concerned with the price of the cryptocurrency and more interested in seeing the currency used in the use cases promoted as a key to cryptocurrency in general.
For example, several Dogecoin tipping bots were launched on social media platforms, allowing people to send small amounts to someone if they liked their post. The community also used Dogecoins to raise funds for several worthy causes, including helping Charity: Water build a well in Kenya and sending the Jamaican bobsled team to the Sochi Olympics when they qualified but couldn’t afford the trip.
The Serious Risks of Investing in Meme Coins
While Dogecoin may seem like a joyous project, investing in this type of cryptocurrency or other meme coins like it does come with some risk.
Some meme coins have achieved high market capitalization, while in other cases, the price per coin skyrockets thousands of percent in a few days, making some investors rich, essentially signaling to others that they might do as well. same.
It is also worth noting that these meme-based cryptocurrencies are generally not serious, substantive projects, as they are usually created by copying and pasting code from another type of cryptocurrency. They also tend to lack significant developer communities, which helps keep them secure and technologically up-to-date. The development of Dogecoin, for example, has almost stopped at different times throughout its history.
Additionally, many meme coins are owned by small groups of people who own large market-moving amounts, along with low liquidity pools. As such, their prices tend to be very volatile, significantly influenced by social media sentiments and “FOMO” (fear of missing out). Because of this, meme coins are particularly susceptible to pump-and-dump schemes, in which an individual or a group of large coin holders promote the coin, getting others to buy and inflate the price before disposing of all their holdings. in the market.
While that particular individual or group will end up making significant profits, that kind of quick sell-off can drive the market into the red, leaving everyone else, as they say in crypto, “holding the bag.” Unknowing investors who thought the price of their coins would rise ended up with tokens worth much less than what they initially paid for.
Buying meme coins
While the memecoin markets can be particularly volatile, some investors choose to invest in them anyway. Whether they are interested in timing the market pumps to make money or just want to participate in a silly crypto insider market, investors can buy meme coins on many of the same platforms they would use to buy more serious cryptocurrencies like Bitcoin and Ethereum.
As the oldest and most well-known meme coin, Dogecoin can be bought, sold, and traded on major crypto exchanges like base of coins, Gemini and Binance. Traditional stock trading and investment platforms, such as Robin Hood, WeBull and sofi they have started allowing their users to invest in cryptocurrencies including Dogecoin as well.
base of coins
On the secure Coinbase site
Minimum deposit and balance
0.5% – 4.5% per trade. Fees vary by transaction type and other fees may apply.
New Coinbase users can earn $5 worth of bitcoins after signing up.
You can trade over 100 cryptocurrencies on Coinbase. You can also earn interest on various crypto currencies.
Coinbase Earn allows you to earn crypto rewards by learning about different cryptocurrencies.
- More than 100 cryptocurrencies available to trade
- Simple user interface
- Low account minimum
- Coinbase Earn feature that allows you to earn rewards by learning about cryptocurrencies
- Confusing fee structure and high fees compared to other crypto exchanges
- Reports of poor customer service
- Advanced trading tools are not available in the regular Coinbase app
On Robinhood’s secure site
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. There is no minimum required to open an account or to start investing
Fees may vary depending on the investment vehicle selected. Trading without commissions; regulatory transaction fees and trading activity fees may apply
Robinhood will add 1 share of free stock to your brokerage account when you link your bank account and meet the conditions of your promotion (you can keep the stock or sell it after 2 trading days)
Stocks, ETFs, options trading, fractional shares, IPOs, plus certain cryptocurrencies via Robinhood Crypto (depending on where you live)
- $0 minimum deposit to open an account and invest
- Commission-free trading
- Free Stock Welcome Bonus
- Many investment options for active traders
- Variety of accessible learning tools
- No access to tax-advantaged IRAs
- Non-commission fees may apply.
- Users rely on their own knowledge when building their portfolio
Fun fact: When Dogecoin was first launched, sheets of paper containing private keys with hundreds, if not thousands, of Dogecoins were handed out at cryptocurrency events and parties as a way to attract more people to the community. If you had received a paper wallet containing 500 Dogecoins in December 2013, worth around 20 cents at the time, when the cryptocurrency hit its all-time high of around 70 cents in May 2021, that wallet would end up being worth around of $353.
Shiba Inu, another dog-themed cryptocurrency, is also available on these centralized exchanges, however the more obscure meme coins cannot be easily purchased this way. Instead, interested investors will have to sign up for newer exchanges or learn how to use decentralized exchanges to purchase these lesser-known coins.
Dogelon Mars, for example, can be traded at crypto.com, KuCoin and OKEx. There is also an ether pair wrapped in the decentralized exchange, Uniswap V2.
Should you invest in meme coins?
Before investing in cryptocurrencies, especially meme coins, make sure you have a solid financial foundation. You want to have established a emergency fund which can cover at least three to six months of living expenses as well as pay off any high-interest debt, such as from a credit card. Also, if you have an employer-contributed 401(k) retirement account, you must focus on contributing enough to get your employer’s match.
Depending on your risk profile, investing in meme coins could be of interest to you. For investors who trade daily and have the time to closely watch the markets, meme coins can offer a low initial investment and substantial returns. Still, it’s a good idea for investors to understand the risks involved and do their own research on each specific meme coin they want to trade. Consider that you could potentially lose almost all of your principal investment.
For those who want to invest in crypto as a hobby or store long-term wealth, meme coins are not appropriate and it might make sense to opt for more stable crypto investments through Bitcoin or Ethereum. However, even these more established cryptocurrencies experience a lot of volatility. Traditional investment methods like stocks and index funds also make more conservative and reliable decisions for those who are not interested in the volatility of the crypto markets.
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Editorial note: Any opinions, analyses, reviews, or recommendations expressed in this article are solely those of Select’s editorial staff and have not been reviewed, approved, or otherwise endorsed by any third party.