As the cryptocurrency market continues to rally in 2023, it might be tempting to jump on the latest trend and hope for a quick profit. Dogecoin (DOGE -7.54%) was the crown jewel of meme coins in the last bull market, but this time around, a new token is gaining popularity. Known as PEPE and playing off of the popular meme Pepe the Frog, this meme coin is up 2,100% since it first started trading in mid-April.
As the latest meme coin to catch the attention of cryptocurrency traders, there is likely some serious FOMO among investors looking to cash in on the next big thing. However, seasoned investors know that chasing such hype can be a dangerous game, and there are reasons why you should think twice before investing in PEPE.
It's no secret that investing in cryptocurrencies can be a volatile game, with prices fluctuating dramatically in short periods. While it can be tempting to try and capitalize on these movements, maintaining a disciplined, long-term approach is the best way to achieve consistent results in the cryptocurrency market.
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This has happened before, and it can get ugly
One of the most notable examples of a token catapulting into headlines and subsequently losing steam is seen in the story of the original meme coin, Dogecoin. Despite starting as a joke, Dogecoin saw a massive surge in popularity in early 2021. After starting the new year trading for just a penny, its price climbed more than 8,100% in the span of a mere five months. However, the hype was short-lived, and the price of Dogecoin subsequently plummeted just as quickly as it rose, leaving many investors with significant losses.
Unfortunately, it's more than likely that PEPE is heading for a similar fate. Though it's seen some significant gains in recent weeks, there is no evidence of any real utility or use case for the cryptocurrency. Perhaps investors are becoming aware of this as the token shed more than 20% over the weekend. This is a common problem with many meme coins, which often rely solely on social media buzz to drive their value. As hype fades, so do prices.
The better approach
The safer bet is to invest in cryptocurrencies with real-world utility and track records. Such cryptos, like Bitcoin and Ethereum, have legitimate applications and are backed by a strong network of developers and users. They have stood the test of time and have proven to be a reliable investment for many. Unlike these blue chip cryptocurrencies which have demonstrated use cases in various applications, PEPE's value is driven purely by speculation. Therefore, its price is likely to be far more volatile and subject to dramatic swings in both directions.
What's more, as with any meme coin, there is a real risk that PEPE's value could evaporate almost overnight. It isn't uncommon for cryptocurrencies over the years to completely lose all of their value. Even if PEPE doesn't suffer this fate, the reality is that the vast majority of cryptocurrencies fail to achieve any long-term success. Although some investors may have made a fortune by getting in early on these coins, the likelihood that you will be able to replicate the same strategy is as likely as winning the lottery.
While it can be tempting to try and capitalize on the hype surrounding PEPE, investors should exercise caution before investing in such coins. Simply put, the risks far outweigh the potential rewards.
Rather than chasing short-term trends, investors should focus on building a diversified portfolio of cryptocurrencies with proven track records and real-world utility. By doing so, they can position themselves for long-term success in the burgeoning world of cryptocurrency.
