Memecoins are dominating the news cycle over their significant volatility and growing influence in the crypto ecosystem.
Memecoin search interest has been rising, while search volume for the term “Bitcoin” on Google has dropped to one-year lows. On a scale of 0 to 100, “Bitcoin” is currently at 33, while search volumes for “memecoin” are at 77.
Google Trends uses an index-like approach to represent search volume and not exact figures. Carlos Guzman, research analyst at cryptocurrency market maker GSR, told Cointelegraph this means volume is shown on a relative basis “where the index value is the highest search volume reached in the period selected.”
Bitcon’s Google search volume by sheer numbers is still more than memecoins, but it’s trending down, while memecoins have been gaining popularity and dominating the news cycle.
The marketing lead for memecoin PONKE told Cointelegraph that interest in memecoins is surging, as they offer “some different culture, fun and community.” PONKE’s spokesperson added:
“Memecoins provide a high-beta trade [volatile trade] to Bitcoin, with more aggressive ups and downs. While Bitcoin is seen as a store of value, memecoins tap into culture, making crypto more relatable.”
The data is clear on what’s popular. Step Finance data shows that over 490,000 new tokens have been created on the Solana network since mid-September, while Solana Floor reported earlier this month the launch of nearly 20,000 in just 24 hours.
The reason behind memecoins’ popularity
There are several theories as to what is driving memecoins’ popularity. Ryan Lee, chief analyst at Bitget Research, told Cointelegraph that investing in Bitcoin (BTC) is no longer considered a “life-changing event.”
He said that at the end of 2022, Bitcoin was trading at $16,000 after the collapse of FTX, and investors who bought the dip have only seen a 4x return on their investment nearly two years later. Memecoins, on the other hand, have “offered the potential for 10x or even 100x returns.”
He added that this type of performance has caused a “widespread sensation around memecoins, leading to the notion that a crypto trader might have better odds of making money for a fortune by trading memecoins rather than by dealing with Bitcoin.”
“The chance of earning millions from memecoins is much lower than winning at a casino, but the allure of quick and unexpected wealth will always captivate the masses more than complex investment strategies that offer more reliability and reasonable returns.”
Jeffrey Hu, head of investment research at HashKey Capital, suggested that the growing popularity of memecoins is partly a result of memecoin generation platforms like Pump.fun, which “drastically” lower the barrier to launching new tokens.
Hu said this suggests market participants are “increasingly gravitating toward tokens that offer entertainment value, viral potential and immediate profit opportunities, rather than relying on long-term fundamentals.”
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In the short term, he sees the memecoin trend bringing in more retail participants to the cryptocurrency market and helping raise trading volumes and liquidity.
In the long term, however, he said they could create “instability and market fragmentation” over their extreme volatility.
Can memecoins permanently change crypto?
The data is clear on the impact of this growing memecoin trend, with memecoins outperforming Bitcoin in 2024.
Using MarketVector’s Meme Coin Index (MEMECOIN), a modified market cap-weighed index tracking the performance of the six largest memecoins, one can see these nearly doubled the year-to-date performance of Bitcoin. While Bitcoin shows a year-to-date increase of 61.5% at the time of publication, the MEMECOIN index has risen 127.3%.
MEMECOIN index performance compared to Bitcoin year-to-date. Source: Market Vector
The drastic difference points to a shift in investor sentiment in the cryptocurrency space. According to the PONKE spokesperson, memecoins offer investors the “chance to be a part of something bigger” and are “injecting cultural relevance into crypto.”
Memecoins are making “crypto fun and accessible” in the short term, while in the long term, “they will help mainstream crypto by connecting with new audiences, growing the overall user base.”
Lee echoed this sentiment, saying that these tokens are “appealing, especially to new crypto users,” which has a “positive impact on the market as a whole.” Even if the market declines, it’s “likely to recover when any memecoin experiences another tenfold growth.”
Still, memecoins’ volatility could significantly impact the space at a time when institutional investors are increasingly focusing on the industry. This focus saw spot Bitcoin exchange-traded funds (ETFs) launch earlier this year, growing to over $20 billion in cumulative flows.
Guzman said that the rise in memecoin interest should be expected, “given that’s become a popular narrative lately and some memecoins do exhibit positive price action.”
Nevertheless, he added that the relative size of memecoin search volumes to those of Bitcoin shows that the rising interest is “occurring among a smaller crowd” and not directly changing the market.
“We do think the rising popularity of memecoins represents a shift among investors, but only among a relatively small segment — those prone towards speculation. “
Guzman said these speculators appear to have become “tired of the price action of altcoins” and, as such, moved to the “purely speculative assets, which don’t even pretend to have any future utility or cash flows.”
While interest in memecoins can keep on growing, Guzman said that “the appetite to gamble” on them is limited; interest in these tokens isn’t sustainable.
Interest will fade “similar to the NFT [non-fungible token] craze of 2021” as investors will “eventually tire of zero-sum games where someone is inevitably left holding the bag.”
Financial nihilism or community control?
This “gambling” mentality has often been suggested to be a part of a larger economic trend of financial nihilism — i.e., a general disregard of traditional financial principles and knowledge, including risk management.
Financial nihilism, according to Travis Kling, founder and chief investment officer of Ikigai Asset Management, is about taking bigger risks to “try and leapfrog from your current financial position to something more tenable.”
Kling credits modern monetary and fiscal policies, like central banks’ interest rates as a response to growing inflation, as a source of this financial nihilism. HashKey Capital’s Hu said that financial nihilism may “indeed be playing a role in the current trends,” as memecoins’ appeal suggests that “many investors are less concerned with fundamentals and more focused on speculative opportunities.”
PONKE’s marketing lead disagreed, saying it’s “more about control,” as memecoins “allow people to commoditize culture as currency, bypassing traditional corporate and media narratives.”
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Kadan Stadelmann, chief technology officer of blockchain platform Komodo, said that financial nihilism is “definitely” influencing investors who feel “disillusioned with traditional markets and are seeking thrills or quick profits through risky, speculative assets.”
This mindset reflects a “disregard for long-term value and patience” in a shift that’s a result of frustration and uncertainty associated with slower-growing assets as inflation erodes people’s purchasing power.
Long-term value and patience may be what’s needed to find the “long-term winners in crypto,” which, according to Guzman, will represent the bulk of market value and be those “that have concrete use cases and utility.”
