In 2023, meme coins continue to underperform the broader crypto market. While Dogecoin (DOGE 0.36%) is up 21% for the year, and Shiba Inu (SHIB 2.21%) is up 37%, other crypto tokens are performing far better. For example, Ethereum (CRYPTO: ETH) is up 59%, and Bitcoin (CRYPTO: BTC) is up 82%.
In the equity markets, this type of underperformance would be punished quickly and severely. But in the crypto markets, this doesn't seem to be the case. Hope springs eternal that somehow -- somehow! -- Dogecoin will finally hit the $1 mark, or that the next hot meme coin will somehow turn all of us into crypto millionaires. The reality, though, is that meme coins are terrible investments, now more than ever.
Meme coin underperformance
While meme coins have always been highly speculative, at least in the past, they came with the promise of nearly unlimited upside. Remember back in early 2021, when Dogecoin experienced a massive 14,000% rally? Dogecoin eventually soared to its all-time high of $0.74. Billionaire Elon Musk was cheerleading for the meme coin, and the future looked as bright as it ever had for Dogecoin.
Image source: Getty Images.
But contrast that situation with what's happening now. Musk is still cheerleading for the token, but with not nearly the same impact. For example, at the beginning of April, he swapped out the iconic Twitter bird logo for a cartoon image of a Shiba Inu dog, which is the mascot of Dogecoin. Traders took that as a bullish signal for Dogecoin. There was a one-day rally of 30%, but after that, the price of Dogecoin actually fell.
Quite simply, the same types of marketing stunts that might have worked in the past are no longer working today. Musk can no longer wear a Dogecoin t-shirt to the Super Bowl (as he did this year) and expect the price of Dogecoin to skyrocket. He can no longer tweet a photo of his pet Shiba Inu and get this meme coin to rally for more than a few days. If there's anything the crypto meltdown of 2022 taught investors, it's that it's no fun getting burned while holding the next crypto asset that falls to zero. And meme coins are quite capable of doing exactly that.
The new meme coin, same as the old meme coin
Granted, there have been some attempts to repair the image of the meme coin. The "old" meme coin had nothing to support it except hype, speculation, and buzz. The "new" meme coin is built much more around the concept of utility. In layman's terms, this means that a coin actually has some kind of real-world value.
For example, Shiba Inu developers are working on a metaverse game where you can spend your tokens. They are also working on a Layer 2 scaling solution called Shibarium that will make it possible (theoretically) to transform Shiba Inu into a blockchain for gaming and Web3. At least, that's what we're told. The reality is that the new metaverse world appears to be just a desperate attempt to burn a large number of the nearly 589 trillion Shiba Inu tokens currently in circulation. And Shibarium? It actually led to the price of Shiba Inu falling after crypto developers began questioning the code used to build it.
And many of the new meme coins that have appeared over the past year are little better. In 2022, one "hot" meme coin that had a brief run was Tamadoge (CRYPTO: TAMA). It promised increased utility in the form of NFTs and a play-to-earn game. But it never managed to escape the dog kennel, let alone skyrocket to the moon. Anyone remember Bonk (CRYPTO: BONK) -- the hot new Solana meme coin from January? It has now flatlined.
Should you buy meme coins?
From my perspective, pure meme coins like Dogecoin no longer have a future. They are an artifact of the last crypto bull market rally. It doesn't matter if you combine the cute Shiba Inu dog mascot with Musk in order to create a "super" meme coin like Dogelon Mars (CRYPTO: ELON) or Floki Inu (CRYPTO: FLOKI) or if you opt for a completely different dog mascot on a different blockchain for your meme coin. They are all dogs with fleas. Meme coins with extra utility will do better, but will likely continue to underperform.
So, no, meme coins are not a good investment in 2023. It's not just that they are risky, speculative, and based purely on hype. It's that they are also wildly underperforming the market and dragging down your portfolio.
