With a meme coin bull market shaping up to start once again, and projects like Dogwifhat (WIF -2.76%) being anointed by cryptocurrency influencers as the next coming of Dogecoin (DOGE -1.67%) or another Shiba Inu, (SHIB -0.98%), the risk of investors succumbing to exuberance is high and rising. Between new memes stoking fresh engagement and climbing prices, it's easy to get caught up in the hype and make decisions that your portfolio will later regret.

Euphoria is a dangerous emotion for investors, especially when dealing in the most volatile and speculative cryptocurrencies like meme coins. But it's often hard to step back and tell with certainty when one is being overly bullish. Therefore, be on the lookout for these three signs that you're at risk of not abiding by your logical faculties while investing in memes.

1. Over-identifying with meme coin investments

A lot of the time, the catalyst that makes an investor buy a meme coin is that they find the meme to be funny. While it's not the optimal investment strategy, at a minimum such an approach validates that the meme can be entertaining to someone, which is key for its chances at grabbing more attention share and growing further. And as we all know, one core feature of the most effective memes, silly or not, is that once they're established in your brain, they can be hard to get out.

Alas, sometimes investors become overly emotionally invested in their meme coin holdings and are not able to scrutinize them with the detachedness that's a prerequisite for success.

The behaviors typically associated with this over-commitment are:

  • Repeatedly buying a coin without regard for the actual strength of its community or the effectiveness of its memes
  • Doubling down on underwater meme coin investments, even when it's clear that the coin has no credible path to regaining its value
  • Taking out loans or doing other unadvisable financial maneuvers in the name of doubling down on already-profitable meme coin investments
  • Refusing to believe that another coin is stealing attention share from the favorite
  • Recommending the meme coin to everyone you know without cautioning about the risks involved
  • Posting the relevant memes incessantly on social media

Having coins held at a large gain or at a large loss puts people at a higher risk of falling in too deep. If you notice these behaviors, it's time to step back and take a cold look at your positions, because to continue is to court disaster.

Remember, you're investing in meme coins to make money. You aren't a Coin X evangelist, content creator, marketer, social media manager, or community member. You're holding a coin for a few years until its price reaches the target specified in your plan, or until your investing thesis is proven invalid.

2. Refusing to take profits

Refusing to take profits when it's appropriate to do so is another behavior associated with being over-invested in a meme coin, as well as with bull market mania, and it's such an important issue that it deserves its own section.

In short, regardless of your strategy or investing thesis, the only way you will ever make money from investing in meme coins is by taking profits. This simple fact has been the downfall of many cryptocurrency investors, and it's easy to see why.

Cryptocurrency investing earworms like "let your winners ride" and "bet more" make their way into most investors' lingo relatively quickly. Likewise, glorifying having "diamond hands" and holding meme coins through thick and thin is a common point of conversation in the space. And it's true that some of the best cryptocurrency investors are able to remain passive in the face of enormous volatility so as to continue holding on until the price of their asset hits their target point. You won't be able to succeed until you can master your own emotional responses to the fluctuations of the market.

But none of that invalidates the all-important dictum that the only way you will ever make money from investing in meme coins is by taking profits. If you resist selling when the time is ripe, believing that the price will continue to go up forever, you may be in the thrall of bull market euphoria, and you'll need to step back to regain your proper dispassionate perspective.

Set a price target before investing. When the coin's price hits the target, sell the portion of your holdings outlined in the plan. If that results in missing out on some upside, make your next plan better.

3. "It's different this time."

As alluded to in the prior section, perhaps the biggest sign that an investor has lost their perspective is if they say or believe that "it's different this time" when considering the possibility of their meme coin's price continuing to rise and rise and rise.

Thinking that it's different this time -- as opposed to other times when prices have risen and then later fallen -- is a red flag that an investor has abandoned their well-considered plans in favor of getting caught up in fervor of the rising tide.

It is possible that a meme coin like Shiba Inu or Dogecoin could continue to gain in value for an unusually long period. It does not happen often. The more likely scenario is for a skyrocketing coin to crash back down to earth soon enough.

When a coin has been climbing for long enough that someone might be tempted to think that the normal rules don't apply, the end of the bull run is usually near. If you find yourself saying or thinking the phrase in question, it's probably time to take a vacation from crypto investing for a week or two, preferably after closing out your riskiest positions and rotating into more stable and long-term-oriented investments.