Meme coins can be a tempting investment.
They’re a colorful form of cryptocurrency that can swing higher and lower at a moment’s notice — offering the potential for outsize gains. However, with those large swings also come risks, which can turn some investors off.
“Memecoins, in general, get a lot of hate, but I do think it is a good way of onboarding the general public to the usage of crypto,” Charles St. Louis, CEO of DELV, which builds crypto infrastructure for investors, told The Post.
“Whether they learn a lesson of it, a loss or something, they still get some interest in the technology and I think having skin in the game is what allows you to fall down the rabbit hole of understanding why it’s so good,” St. Louis added.
So how do you know if meme coins are the right investment for you – and how can you find the best ones?
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A meme coin is a type of cryptocurrency, or digital cash, that is usually pegged to a humorous image or text, like an inside joke for the internet.
Many meme coins are based on animal-related memes, like funny images of cats and dogs.
While these cryptocurrencies often start out as jokes, they can gain substantial attention and market value overnight.
It goes without saying, then, that these same coins are often very volatile – so they can result in big losses for inexperienced investors.
Like other cryptocurrencies, meme coins sit on a foundational layer known as a blockchain, which is a digital, tamper-proof ledger that can record, verify and transfer data.
There’s no shortage of meme coins available for those interested in investing.
Some of the most popular meme coins include Dogecoin, Pepe, dogwifhat – a comical abbreviation of “dog with hat” – and POPCAT, which are all based on animal memes.
“These projects have built strong followings and remain active across social channels – a critical factor in meme coin success,” Daniel Polotsky, co-founder and chairman of global crypto kiosk CoinFlip, told The Post.
There are smaller meme coins that have been gaining attention, too, like American Coin and Giga Chad, but these are “highly speculative plays and should be approached with caution,” Polotsky added.
Dogecoin, arguably the most popular meme coin, is based on an image of a Shiba Inu dog.
It opened in 2013 and hit an all-time high of $0.7376 in May 2021 – meaning a hypothetical $100 investment in the coin when it launched would have been worth nearly $250,000 at its peak.
The coin’s success was due, in part, to outspoken support from Elon Musk on his social media platform X, formerly known as Twitter. Dogecoin tumbled recently during Musk’s public feud with President Trump.
President Trump launched his own meme coin on the Solana blockchain in January, just a few days before he took office for his second term. Known as $TRUMP, the coin was made in his likeness. A similar Melania Trump meme coin called $MELANIA launched at the same time.
The $TRUMP coin made an estimated $100 million in trading fees by Jan. 30, less than two weeks after its launch, as it skyrocketed amid his inauguration.
The digital currency enjoyed another boost in April when it announced that its top holders would be invited to a private dinner with the president. The announcement helped raise the value of the meme coin by more than 40%, partially reversing an 88% slump from the weeks prior.
The top holders of the meme coin spent as little as $53,500 to as much as $16.4 million to grab an invite to the dinner, according to data analytics firm Inca Digital.
Around 2 million wallets have purchased the meme coins. Nearly 60 of these wallets have made more than $10 million each – while around 764,000 wallets have lost money on the investments, according to data from blockchain analytics firm Chainalysis shared with CNBC.
Due to their volatile nature, the best meme coins to invest in are constantly changing.
Investors looking to find the next Dogecoin before it soars should spend time staying up to date on trends in the industry.
And not all meme coins are created equal. Some are much riskier investments than others.
“The more trustworthy meme coins tend to be the ones with transparent teams, consistent communication and strong, engaged communities,” Polotsky told The Post.
Since meme coins trade purely off public sentiment, social media sites like X and Reddit can be useful tools to stay informed on up-and-coming coins.
“These are the spaces where meme coins live or die – sometimes overnight,” Polotsky said.
Sites like CoinGecko and CoinMarketCap can also help investors assess potential investments, showing market cap, trading volume and other key indicators for meme coins.
Market cap is an especially important factor. Coins with lower market caps can offer potentially larger returns, but also carry much higher risk, Polotsky said. Meme coins with larger market caps are more stable but come with less growth opportunity.
Whether or not meme coins are the right investment for you depends largely on your experience as an investor and your openness to risk.
Meme coins can be a great addition to a broader crypto portfolio, but should never make up the bulk of an investor’s assets, Polotsky warned.
“Their value is often more social than financial,” Polotsky told The Post. “As a general rule, allocating more than 5% to 10% of your portfolio to meme coins is probably already pushing into risky territory.”
More experienced cryptocurrency investors might be able to withstand more risk, so these high-risk, high-reward bets could be a good option for them.
“These investors typically understand market cycles, know how to read community signals, and can stay emotionally detached from the wild swings that meme coins are known for,” Polotsky said.
But newbie crypto investors may want to steer clear of the volatile investments.
A common mistake with new investors is that “they feel like they missed the boat with Bitcoin,” Ben Weiss, co-founder and chief executive of CoinFlip, told The Post.
“So then they buy some of these smaller coins, like these meme coins that are like four cents a coin, thinking it’ll be the next Bitcoin, and those coins are usually four cents for a reason,” Weiss continued.
Polotsky said new investors should view meme coins like venture-style investing: 90% to 99% of them may fail, but the right one could deliver outsized returns.
