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Beginner’s guide to the meme coins explained including potential risks and how to buy them

Influencers have always played an important role in crypto culture, but never more so than now. When Elon Musk backed the original meme cryptocurrency, Dogecoin, it sparked a wave of imitators, who were promoted by influencers on social media platforms like TikTok.

Some consider investing in meme coins to be insane, while others see it as a low-risk bet with the potential for 1000% profits. Whoever is correct, there has been a surge in interest in meme coins or tokens in recent months. This article serves as a beginner’s guide to meme coins.

What Are Meme Coins?

Meme coins are cryptocurrencies that are inspired by social media memes, the internet, or jokes. Dogecoin was the first meme coin created (DOGE). DOGE was created in 2013 as a parody of the popular Doge meme of a Japanese Shiba Inu dog.

Meme coins are notoriously volatile. They are primarily community-driven and can quickly gain popularity as a result of online community endorsements and FOMO. However, their value can fall unexpectedly when traders shift their focus to the next meme coin.

Another feature of meme coins is that they frequently have a large or unlimited supply. Shiba Inu (SHIB), for example, has a total supply of one quadrillion tokens, whereas DOGE has no maximum supply and already has over 100 billion tokens in circulation. Because meme tokens do not have a coin-burning mechanism, their low prices are explained by their massive supply. Millions of meme tokens can be purchased for US$1.

Why Are Meme Coins So Popular?

While it's difficult to pinpoint specific reasons, some argue that the crypto market grew during the COVID-19 pandemic as retail investors sought to hedge against inflation. During the hype, meme coins also grew in market capitalization and variety.

It all started in late 2020 with the "meme stock" saga of GameStop (GME) and AMC Entertainment (AMC), in which the Reddit community inflated the prices of these shares by up to 100 times in a few months. A Reddit group joked in January 2021 about raising the price of DOGE to create a crypto equivalent of GME. The trend caught on, and the DOGE price rose as a result of Tesla CEO Elon Musk's tweets. Dogecoin has reached a new all-time high of US$0.73 representing a gain of more than 2,000% in five days.

Potential Risks of Investing in Meme Coins

Meme coins may have seen exponential growth in 2021, but trading and investing in meme coins, like all cryptocurrencies, carries significant financial risk.

To begin with, the tokenomics of meme coins can be troubling. As an example, consider Bitcoin. It has a blockchain, an established ecosystem, and a deflationary nature. In recent years, we have also seen increased institutional adoption of bitcoin. Most meme coins, in comparison to BTC, are inflationary, with no maximum supply. Their ecosystem, use cases, and fundamentals are frequently defined by the community's collective jokes. Only a few meme coins were built using major cryptocurrency technology. DOGE's technology was derived from Litecoin, and SHIB was built on the Ethereum blockchain.

Another potential risk is that meme coins are heavily community-driven and more speculative than higher-market-cap cryptocurrencies. This volatility frequently results in unexpected pump and dump. Meme coins typically have a short lifecycle. Their prices can skyrocket due to celebrity shilling or FOMO, or they can plummet unexpectedly when the community decides to move on to the next meme coin.

Be aware that there may be projects that take advantage of the hype to defraud traders as the meme coin market expands. Squid Game (SQUID), a meme coin inspired by the popular Netflix show of the same name, for example, increased by more than 86,000% in a week. However, the development team abruptly rug-pulled, causing the price to plummet by 99%. Worse, holders were not permitted to sell their SQUID tokens. As a result, before trading or investing in meme coins, you should always exercise caution and DYOR.

How To Buy Meme Coins on Binance?

The more popular meme coins, such as DOGE and SHIB, can be purchased on cryptocurrency exchanges such as Binance. Other, less well-known meme coins can be found on decentralized exchanges.

As an example, consider DOGE.

Access your Binance account. Then, in the top bar, navigate to [Trade] to select the classic or advanced trading page.

In the search bar on the right side of the screen, type "DOGE" to see a list of available trading pairs. As an example, consider the DOGE/BUSD pair. To open the trading page for "DOGE/BUSD," click here.

Scroll down to the [Spot] box and type in the amount of DOGE you want to buy. To purchase DOGE, you can choose from several order types. In this example, we'll use a Market order. To confirm the order, click [Buy DOGE], and the DOGE you purchased will appear in the Spot Wallet.