Currently, half of the cryptocurrency trading volume rankings are Meme coins, mainly for the following reasons:
1. Social Media and Community Promotion
1. Network communication effect
• The concept of Meme coins is very suitable for social media dissemination. For example, Dogecoin was originally symbolized by the Shiba Inu emoji. This novel and interesting image can easily attract attention on social networks. There are a large number of cryptocurrency communities on social platforms such as Twitter and Reddit. Users share information about Meme coins on these platforms, forming a viral spread. Once a Meme coin is hotly discussed in these communities, it will attract more attention, thereby increasing trading demand and leading to an increase in trading volume.
2. Community consensus and sentiment
• Meme coin communities tend to have a strong community consensus. Community members believe that a certain Meme coin has value and promote and support it in various ways. This community sentiment will affect the decisions of market participants, and they are willing to participate in Meme coin transactions even in the absence of traditional financial fundamental analysis. For example, community members of Shiba Inu actively participate in its promotion, creating a positive market atmosphere and prompting more people to buy and sell the coin.
2. Low threshold and high speculation
1. Low investment threshold
• Compared with some mainstream cryptocurrencies, the price of Meme coins is often lower. For example, the price of many Meme coins may be only a few cents or even lower. This allows investors to buy a considerable amount of Meme coins without investing a large amount of money, attracting a large number of small investors to enter the market. These small investors may participate in Meme coin transactions with a try-it-out mentality, thereby increasing trading volume.
2. High speculative attraction
• Meme coins are considered a highly speculative investment option. Due to their large price fluctuations, investors have the opportunity to obtain high returns in a short period of time. For example, some meme coins may increase in price by several times or even dozens of times in a short period of time. This high speculation attracts many investors who seek high risks and high returns. They frequently buy and sell meme coins in an attempt to make a profit, which also leads to a significant increase in trading volume.
3. Market environment and trends
1. Impact of volatility of mainstream cryptocurrencies
• When the mainstream cryptocurrency market fluctuates or enters a consolidation period, some investors will turn their attention to Meme coins. Because the price fluctuations of Meme coins are relatively independent and may not be completely affected by the trends of the traditional cryptocurrency market. For example, when the price of Bitcoin is stable or slightly falling, some investors will think that Meme coins are a new investment opportunity and invest their funds in the Meme coin market, driving up its trading volume.
2. Preferences of emerging market participants
• As the cryptocurrency market continues to develop, more and more emerging market participants are entering. These new investors may not be familiar with traditional financial investments, but are attracted by the novelty of Meme coins. They are more inclined to participate in Meme coin transactions because such transactions do not require much financial knowledge and are more based on the judgment of market trends and community sentiment, which also prompts Meme coins to occupy a high position in the trading volume ranking.
IV. Filling the gap in market with project marketing and innovation
1. Unique marketing model
• Meme coin projects usually adopt unique marketing methods. Unlike traditional cryptocurrency projects, they do not rely on complex technical white papers and professional technical teams for publicity. Instead, they attract investors through creative marketing activities. For example, some meme coins will hold creative competitions related to the coin name, such as creating emoticons and stories in the image of the coin, which attracts the participation of many netizens. This marketing method can quickly increase the popularity of the coin and thus increase trading volume.
2. Filling the gap of insufficient innovation
• In the cryptocurrency market, when some traditional projects are slow to make progress in technological innovation and expansion of application scenarios, Meme coins fill the gap in the market with their unique concepts. When investors are looking for new investment opportunities, the novelty and uniqueness of Meme coins become factors that attract them. Although Meme coins lack intrinsic value in the traditional sense, the trading volume is still considerable due to the market's desire for innovation and new opportunities.
5. Celebrity Effect and External Influence
1. Celebrity endorsements
• Some meme coins have received support or endorsements from celebrities. For example, Musk mentioned Dogecoin many times on Twitter, which had a huge impact on the price and trading volume of Dogecoin. When a celebrity expresses his concern or support for a meme coin, it will trigger followers and investors to follow suit, leading to a large number of buy and sell operations, thereby increasing the trading volume of the meme coin.
2. External capital inflow
• Some external funds may flow into this market due to the high popularity of Meme coins. These funds may come from venture capital funds, small investment groups, or even idle funds of individual investors who are interested in emerging investment opportunities. Once these funds enter the Meme coin market, they will increase trading activity and increase trading volume.
6. Exchange promotion
1. Listing incentives
• For cryptocurrency exchanges, listing new Meme coins can attract more user traffic. The exchange may reach a cooperation agreement with the Meme coin project to list the Meme coin under certain conditions. In order to stand out in the highly competitive market, some small exchanges are more inclined to actively list Meme coins. Once listed, more investors will trade Meme coins on the exchange, thereby increasing the trading volume of Meme coins.
2. Transaction fee income
• Exchanges can earn commission income from Meme coin transactions. Since Meme coins have a large trading volume, even if the commission ratio for each transaction is low, it can still bring considerable profits to the exchange. Therefore, exchanges are also motivated to promote Meme coins, such as recommending popular Meme coins on the exchange homepage, or holding trading activities related to Meme coins, such as trading competitions, etc. These measures will stimulate investors to trade Meme coins, thereby increasing their trading volume.
7. Herd Effect
1. Investors follow suit
• In the cryptocurrency market, investors are susceptible to the herd effect. When seeing Meme coins at the top of the trading volume ranking and the price trending upward, many investors will follow suit and buy. They worry about missing out on possible money-making opportunities and don't consider the actual value of Meme coins. As more investors follow suit, the trading volume increases further. When some investors start selling, it will cause panic selling by other investors, which will also increase the trading volume.
2. Information dissemination bias
• In the process of market information dissemination, information about Meme coins is often biased. Since Meme coins lack a rigorous information disclosure mechanism like traditional financial assets, many investors obtain information from social media or other unofficial channels. This information may exaggerate the potential of Meme coins and mislead investors to trade, resulting in an inflated trading volume of Meme coins.
8. Characteristics of the Token Economy Model
1. Impact of supply mechanism
• Many Meme coins have unique supply mechanisms. For example, some Meme coins have a huge initial issuance, which makes them widely circulated in the market. At the same time, some Meme coins may have a continuous issuance mechanism or mining reward mechanism, which prompts more coins to enter the market for trading. More tradable quantities plus the buying and selling behavior of market participants will naturally increase their trading volume.
2. Value distribution and incentives
• The token economic model of Meme Coin tends to focus on short-term transaction incentives in value distribution. Unlike some cryptocurrencies with long-term value storage or complex application scenarios, Meme Coin focuses more on obtaining value through transactions. For example, through dividends from transaction fees or transaction rewards, holders are encouraged to trade frequently, thereby increasing the market's trading volume.
9. Cultural and Psychological Factors
1. Pop culture fusion
• Meme coins are deeply integrated with popular culture. They are often based on popular cultural elements, such as Internet memes, cartoon characters, etc. This close connection with popular culture allows Meme coins to attract investors who are interested in popular culture. These investors are not only making financial investments, but also expressing their love and recognition of a certain kind of popular culture, which prompts them to actively participate in Meme coin transactions and increase trading volume.
2. Gambling Psychology Driven
• Some investors participate in Meme coin transactions with a gambling mentality. Since Meme coins lack a solid value foundation, the uncertainty of their price fluctuations is very large, which is like a bet in gambling. Some investors hope to get huge returns with small investments. They are willing to take risks in the Meme coin market and frequently buy and sell, which leads to an increase in trading volume.
Investors can deal with the high risk of Meme Coin in several ways:
1. In-depth research and understanding:
• Project background and team: Carefully research the origin of Meme Coin, the development team behind it, and community support. Understand the team’s expertise, reputation, and past experience. A reliable team can increase the likelihood of project success. For example, if the team members have extensive blockchain development experience and a good reputation, then the Meme Coin project may be more worthy of attention.
• Technical foundation: Analyze the blockchain technology platform and smart contracts that Meme coins are based on. Ensure that its technical foundation is stable, secure, and has been professionally audited and verified. For Meme coins that have technical vulnerabilities or are not fully verified, the investment risk will be higher.
• Market trends and popularity: Pay attention to the discussion and market trends of Meme coins on social media, cryptocurrency forums, etc. But be rational and avoid being misled by excessive hype and false propaganda, because the popularity may be short-lived and the price may fall sharply once the market sentiment changes.
2. Develop a reasonable investment strategy:
• Diversify your investments: Don’t put all your money into Meme coins, but use them as part of your investment portfolio and combine them with other assets such as stocks, bonds, mainstream cryptocurrencies, etc. This can spread the risk and reduce the impact of the volatility of a single asset on the overall investment portfolio.
• Short-term trading: Due to the sharp fluctuations in the price of Meme coins, long-term holding is risky, so short-term trading may be more suitable. Investors can take advantage of short-term market fluctuations to make quick ins and outs and earn the difference. However, this requires investors to have strong market analysis and quick decision-making capabilities.
• Set stop loss and take profit: Before investing in Meme coins, set reasonable stop loss and take profit points according to your risk tolerance and investment goals. When the price reaches the preset stop loss or take profit price, strictly implement the trading plan and close the position in time to avoid further losses due to greed or fear.
3. Pay attention to market manipulation and fraud risks:
• Beware of market manipulation: The Meme coin market is vulnerable to manipulation by large investors or dealers, who may influence prices by buying or selling in large quantities, publishing false information, etc. Investors should remain vigilant, pay attention to trading data and market dynamics, and carefully analyze abnormal price fluctuations and changes in trading volume.
• Beware of fraudulent projects: Carefully identify the authenticity and legitimacy of Meme Coin projects to avoid investing in fraudulent or runaway projects. Do not easily believe in unverified information and promises, especially those that require advance payment of funds or personal sensitive information.
4. Stay rational and calm:
• Overcome FOMO: The Meme coin market is often full of hype and hot spots, and investors are easily influenced by the "fear of missing out" (FOMO) emotion and blindly follow the trend. Stay calm, analyze investment opportunities rationally, and don't easily change your decision because of other people's investment behavior.
• Insist on independent thinking: Do not rely too much on the advice and analysis of others, and form your own independent judgment. You can refer to professional research reports and analysis, but you should also combine your own investment experience and understanding of the market to make investment decisions that suit you.
5. Continue to learn and pay attention to industry trends:
• Learn about cryptocurrency: Understand the basic principles, technical characteristics, market rules, etc. of cryptocurrency to improve your investment literacy. Only with sufficient knowledge reserves can you better cope with the risks and challenges of the Meme coin market.
• Pay attention to regulatory policies: Regulatory policies in the cryptocurrency market are constantly changing, and these policies may have a significant impact on the market performance and investment environment of Meme Coin. Investors should pay attention to the dynamics of relevant policies, adjust their investment strategies in a timely manner, and ensure the legality and compliance of investment behavior.
