Many investors take a dismissive attitude toward meme cryptocurrencies like Dogecoin, Shiba Inu, Dogwifhat, and others. None of them have any real utility or value, nor will they ever, and the fact that they're based around silly pictures of pets makes them inherently unserious investments that aren't befitting of serious, long-term oriented investors -- so the argument goes.
The coins' extreme riskiness, wild volatility, and penchant for brutal crashes seem to indicate that the detractors are correct, and the dictionary of technical terms and slang that permeate the industry make it even harder to approach.
But there's another perspective on the issue of meme coins as investments that most investors haven't considered.
What do people get from a meme coin investment?
Most meme coins go to zero, and investors lose all their money in the process, and at this point, everyone knows it, so why do people keep coming back to invest in the category again?
One valid answer to that question point to the alluring possibility of securing outsize returns from a relatively small but highly risky investment. A second possible answer is along the lines of "because these investments are frequently a form of gambling, and people are addicted to the thrill of taking extreme financial risks." But there's a third answer that's not on the radar of most investors, so let's unpack it, as it's also key to understanding the new perspective mentioned earlier.
For many cryptocurrency investors, buying a meme coin means becoming a member of a community. Crypto communities tend to live on social media apps like Telegram, Discord, or X (formerly Twitter). Like all communities, meme coin communities have a shared core purpose that all of the members find meaningful: increasing the value of their coin. The financial stakes of joining the community become a bond between members.
Meme coin communities also have their own set of norms and values, as well as their own in-jokes, humor, and shared histories of thrilling victories or depressing defeats based on the coin's price movements. Furthermore, there's always a cast of characters, complete with influential figures, alleged shadowy cabals, oddballs, content creators, deep-pocketed players, and quiet (or raucous) spectators.
And while such coins might not ever have an end use, it's undeniable that their communities believe that the tokens have value. After all, they're actively involved in both creating and consuming the memes, and the coin is the platform. The communities that are more engaged, and that produce and propagate memes with wider and more enduring appeal, are those that tend to outperform.
Meme coins are more similar to stock investments than it might appear at first
Now that you're up to speed on the community perspective of meme coin investments, let's use this framework to compare them to a traditional investment, like a stock.
When you buy a stock, you're buying a share of ownership in a business. Most shareholders don't have enough shares to actually tell management what to do, so they rely on the company's leaders to act on their behalf in a way that increases the value of the stock over time.
Typically the way management chooses to pursue that goal is by expanding the company's operations to garner more revenue and earnings. Shareholders may choose to evangelize for their investments to attract more attention and thus more buyers, thereby (hopefully) increasing the value of their shares via the equivalent of an informal and self-organized marketing effort.
As you can probably already appreciate, meme coin investments aren't all that different when considered from the community perspective. Coin holders can't necessarily influence a project's developers, but their interests are aligned with management (if it exists at all) as well as with their fellow holders: Make the price of the coin rise. The levers to accomplish that goal, making memes and broadcasting them, can largely be described as marketing, and every holder is incentivized to contribute to the best of their ability.
When paired with the excitement of seeing the coin price rise, and the often-euphoric discourse shared with other community members, it's no surprise that meme coins have staying power as a type of cryptocurrency investment.
Don't feel as though you need to buy in
Now you're equipped to think about meme coins as investments in a way that is sensitive to the nature of the value that holders put into them and derive from them in return.
It might be appropriate to devote a small (1%) portion of your well-diversified portfolio to investing in high-quality meme coin plays, especially if you can tolerate significant risks in exchange for the possibility of large returns. Don't buy in if you will need the money at any point in the future.
Most of all, don't turn off your skepticism of projects in this market. Established communities can decline and their members are often fickle. The existence of an active meme community does not abrogate a coin's volatility, nor does it fully mitigate the risk of a permanent collapse in a coin's price.
But it does mean that there's a group of people working, often around the clock, to advance a project -- and when you buy the coin, you're banking on their success, which is something that most investors tend to miss.
