Why Memecoins Are Bad Investment Choice (2024)

Investing in meme coins carries risks due to their volatile nature and speculative basis

Meme coins have come to the center stage in an economically turbulent world of cryptocurrency which is all about branding and going viral, and more importantly, attracting investors who seem to find them very funny. Moreover, though meme coins are seen to be attractive the possibility of profit comes with a risk as the process of investment is risky. It is this article that pinpoints the possible drawbacks of meme coins by using all of your investment portfolio.

1. Lack of Intrinsic

Unlike the mature and widely adopted digital assets, like Bitcoin or Ethereum, which have been used for a long time and are based on tested and approved underlying technology, meme coins do not have any tangible practical applications. The reason why a significant portion of such digital currencies is so popular among the public is due to hype created by social media and the opinions of the community. Such a factor is known to lead to unstable investment decisions.

2. High Volatility:

Just to point out, meme coins are very famous for the fact that they always change their prices, and these changes can be up to hundreds and thousands of times. It can go up or come down astronomically swiftly, based on social media trends, and influencers’ approval. Such uncertainty makes it a challenging task to make appropriate decisions and this situation results in a great risk of loss.

3. Susceptibility to Scams:

As we know it, the meme coin market is deeply embedded with scams and deceptive projects. No law is standing in the way of this process and fraudsters can use it as conditions are ideal for them to create a fake coin related to a particular theme-of-the-moment and the coin can instantly become a ‘hit’. Then, when the hype is at its peak, the scammers leave with investors’ money.

4. Short Lifespan:

In theory, numerous tokens dedicated to meme coins are in short-term circulation on the market. This could be manifested as a short burst of mania that will inevitably translate into inertia as popularity drops and new buzz circulates online.

5. Regulatory Uncertainty:

The regulatory area for cryptocurrencies is yet to have a consistent structure and meme coins are one of the inquiries confronted. From the threat of shutdowns and regulatory issues to the question of how and where they can legally stand, the setbacks bring down the attractiveness of these assets to investors.

6. Market Manipulation:

Memecoins fall victim to market manipulation as their low market capitalization and concentration of the holdings in the hands of individual investors or a group average from an investor. This manipulation, an example of a “whale” can contribute to the price movements by pulling off “pump-and-dump” schemes, where the smaller investors are the losers.

7. Lack of Professional Support:

Institutions and financial advisors as a rule decline to carry on trade in meme currencies since they have a unique tendency for dabbling in price speculation. This being so, investors who wish to make investment decisions in meme coins are often independent as there is expeditiously less to no guidance on how to choose.

8. Contribution to Market Bubbles:

While some professionals suggest that the “bubble” feature, which is characteristic of this digital currency market, may be attributed to the intense excitement around meme coins, others explore the fact that the profit-driven character of the cryptocurrency market is the key mechanism of the “bubble” phenomenon. If the bubble bursts when high prices are the norm, investors can experience huge financial losses as they are unable to recoup the money invested.

9. Limited Use Cases:

Indeed, it frequently transpires that even if the development of such meme coins envisages use cases or ecosystems they usually are limited to providing long-term sustainability and growth. The strongly speculative element is still kept, and the more practical component is left out.

10. Community-Driven Hype:

The value of meme coins is so called upon the community spirit and the advocacy of their sub-attention to boost the value of the coin. In case the community is faced with distractions or a change of focus, then the value of the coin could begin to go down quickly.