The craze for memecoins comes and goes in waves, and has become a unique area of the crypto industry. Tokens like Dogecoin, Shiba Inu (SHIB), and Pepecoin (PEPE) have gained notoriety, but most players flock to them for speculation rather than investment purposes. Most memecoins have little to no real utility, but not every memecoin is like this. This article will analyze some token economics features that can differentiate potentially viable memecoins from other trash coins.
Finding the right memecoin to make a fortune on is a very difficult task because scams or junk projects abound. The value of a memecoin typically comes from the strength of its community and the number of buying activities, rather than the fundamental value of a new product or application. Success relies almost entirely on brand marketing and growth, rather than development or traditional metrics, which is why memecoins have more price volatility than other currencies.
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Finding a memecoin first requires due diligence to ensure that the smart contract is legitimate and that the project has no plans to defraud users or “rugpull.” Typically, signs of project safety include code reviews by well-known auditing companies or code replication directly from another mature token/project. Additionally, it’s important to understand the amount of token supply held by the founding team and if they have the option to sell at any time, as this can cause serious selling pressure on the token price.
The community behind a memecoin is the most important feature for whether it can succeed. Without the power of a community, meaning promotion on social media, hype to keep it going will not increase the value of the token. Many projects will attempt to fake community activity using bots, duplicate accounts, and other methods. When the project has tens of thousands of Discord or Twitter members but little on-chain activity and/or high sell pressure, be careful. To build a strong active community, there must be enough users buying in at low prices and believing in its potential for growth. Therefore, the initial distribution of tokens is one of the most critical moments, as it can determine whether the tokens are concentrated in a few hands or distributed to many. Token airdrops can help, but they can also lead to a large amount of users who do not want to hold the tokens for the long term selling them off in bulk.
Many people regard price and total supply as important indicators that have nothing to do with token value. The supply of many memecoins is huge because they believe that holders will see the low price and buy billions or even trillions of tokens, hoping it will one day rise to $1 or more (which is almost impossible),
A more important indicator is market capitalization, which can be determined by multiplying the price by the number of tokens in circulation, which can better understand the value of the token and its growth potential. The strategy used by Shiba Inu is to create a large supply and then destroy half of the existing tokens, artificially making token holders feel that the coins in their hands are more valuable, even if this may have been planned from the beginning.
As the originator of meme coins, Dogecoin has a simple structure: the supply of the token is constantly increasing, and in other respects it serves as a clone of a simple payment blockchain (such as Bitcoin or Litecoin). Since then, the Ethereum-based Dogecoin has introduced new attributes to make it stand out. Some of these include use cases for removing or reallocating from the supply to holders, NFT or token-gated communities or certain gamification aspects. The project party usually updates the roadmap and promises new features. One danger signal to note is that the token is very vague in its roadmap or does not provide any specific details.
Finding a successful memecoin is like finding a needle in a haystack, but knowing what to look for and what to avoid can save us a lot of time. It is important to remember that no matter how much research is done on memecoins, it is still a gamble and cannot be compared to investing in cryptocurrencies/projects/applications that strive for mainstream adoption and real-world use cases.
Author: BlockingBitpushNews Lincoln Murr, Mary Liu
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