Meme coins - what they are and how their exchange rate is formed

There is a popular expression that memes rule the world, and today it does not look so funny. Memes penetrate all spheres of life at the speed of light, and the crypto market is no exception, offering users meme coins or memcoins - cryptocurrencies based on popular memes. For example, Dogecoin, widely known and created as a parody of bitcoin, is nothing but a meme coin, since it was inspired by Elon Musk's favorite meme with a Shiba Inu dog. The coin fired and became the motivation for many other similar projects.

It would seem that the idea is wonderful and relevant, but is it that simple? As always, there are pitfalls. And the biggest of them is the memcoin rate, which is often almost unpredictable. This unpredictability is explained by several factors at once. Firstly, the cost of memcoins in itself is very subjective - as a rule, there are no fundamental factors behind it, but it's only about the value of memcoins in the eyes of market participants. That is, the more popular the founder meme and the hype around it, the higher the value of the coin.

However, the situation can change literally in a matter of minutes after, for example, a single tweet from a well-known media person. This is exactly what happened with the meme cryptocurrency Shiba Inu (one of the Dogecoin clone tokens) It has sharply increased in price and in October 2021 entered the top 20 largest by capitalization. However, this did not prevent its rate from collapsing after Elon Musk's Twitter that he does not consider cryptocurrencies as serious investments, acquires them solely out of curiosity, and did not buy Shiba Inu itself at all.

Another reason for the growth of memcoin rates is a temporary lull or an uncertain situation in the market of serious coins. And it is meme cryptocurrencies that often become the favorites of inexperienced or adventurous traders who hope for a sharp rise in the price "for luck" or simply intuitively choose familiar images from memes. Whether this particular coin will shoot at the same time is a very controversial question, reminiscent of a roulette game.

And it is worth mentioning separately about the scammers, of whom there are a lot of memcoins on the fertile soil. For example, the infamous coin based on the sensational TV series "The Squid Game". Having turned out to be fraudulent, it brought total damage to buyers in the amount of more than $ 2 million. Many who are aware of this story, sadly joke that investors themselves played a game of squid and failed.

So, meme coins definitely have a place today, but they belong to high-risk investments due to the instability and unpredictability of the exchange rate. And if you are a fan of memes, or you just want to experiment, then you can pay attention to memcoins, but it's hardly worth allocating a significant amount for these experiments, which will be hard and insulting to part with.

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