Memecoins
3 Trends That Could Drive Meme Coins Higher and Higher
Economic trends combine in surprising ways to boost meme coins.
Meme coins are having a moment again, and there’s reason to believe they’re not going to stop anytime soon. But the factors driving the market are entirely different from the coin mania of 2021, and any cryptocurrency bull market that develops will have a different character as a result.
If you want to invest in this space, it is your responsibility to understand the macro environment. So let’s look at three trends that define it.
1. Investors are hungry for risk right now
It is often rightly said that investments in cryptocurrencies are risky, even speculative. Meme Coins are even riskier and closer to speculation or outright gambling than slightly less volatile cryptocurrencies like Bitcoin (BTC -1.75%) or Solana (GROUND -4.71%). And right now, there is a preponderance of evidence to suggest that investors are hungry for opportunities to take financial risks at the extreme end of the risk spectrum, for example by purchasing a coin like Dogecoin, Floki, dog hatOr Shiba Inu.
Sports betting via smartphone apps is exploding, with TV and internet ads attracting more and more people. The American Gaming Association predicted that on this year’s March Madness event alone, Americans would bet more than $3 billion. Other sources suggest that commercial sports betting revenues increased more than 12-fold between 2019 and 2024, reaching a sum of over $10 billion per year as of 2023. The main financial properties of these bets are that they are extremely risky and that they are extremely risky. they can theoretically generate outsized returns.
Betting on short-term results in sports games is by definition a game of chance and not an investment. However, investors have also recently invested in risky technology stocks with already inflated securities. evaluationsas You’re here. And investors are also now turning to short-term options contracts, which are incredibly risky, yet offer the possibility of a significant reward compared to the initial investment.
Cryptocurrency investments offer another avenue for those seeking exposure to big risks in exchange for the possibility of big returns. As long as investors continue to crave risk, some of their capital will be directed toward meme coins, which offer similar risk and return characteristics.
But what drives this behavior, and will these factors persist? Now let’s look at two other trends that support this larger trend and make sure it doesn’t die out anytime soon.
2. Consumers have heavy and uncomfortable debts to repay
It is not a good financial decision to take on large amounts of debt. It is also not a good decision to take significant financial risks in an attempt to generate enough capital to repay such debts.
Unfortunately, on average, consumers have already fallen into the first trap, and now many people are falling into the second by throwing their money away. According to the New York Federal Reserve, household debt in the fourth quarter of 2023 totaled $17.5 trillion, up from just under $12 trillion a decade earlier. One of the main contributors to this sum is student loanswhich accounted for $1.6 trillion in the fourth quarter of last year, and which debtors are now forced to repay once again now that the federally mandated pause is over.
Many households are now actually feeling the burden of their student loans for the first time in several years. The painful pinch of that monthly payment coincides with the painful pinch of inflation in consumer goods, healthcare, services, transportation and housing.
What hope is there of repaying large debts held at relatively high levels? interest rate when a person’s other expenses increase sharply at the same time? Desperation breeds despair, which is why the masses turn to risky investments.
Of course, it is probably counterproductive to jump into the same corners without a proper plan and framework for successful, long-term investing.
But at the moment, positive change that would make it easier for people to manage their finances and pay off debt is not at all guaranteed. So expect to invest more in meme coins.
3. Real estate is unaffordable for many
Beyond being debt free, many people want to own their home rather than rent it. Due to a combination of low housing supply, high interest rates, inflated prices, and a handful of other factors, people earning the median income in the United States cannot afford to buy a house at the median price in the vast majority of regions. There is therefore a growing consensus that housing is more unaffordable than ever.
In other words, a very large segment of investors do not have enough capital or sufficient income to purchase a home, even using mortgage debt. They also do not have enough capital to purchase housing in cash. And that means the least risky, least volatile asset that would otherwise make up the majority of most investors’ net worth is out of reach.
There is very little reason to expect the real estate market situation to improve over the next five years. The wage increases that most workers experience on average will do little to improve their chances of securing housing, as house prices will almost certainly continue to rise at a slightly faster rate, as is the case. standard for over a year. decade. Look at this graph:
Tracking salary growth data by Y Charts
Other good places to park large sums of money, like stocks, may seem like an obvious alternative. But stocks don’t typically offer the potential to return life-changing money overnight — nor should they. Still, this is enough to drive investors further down the risk spectrum, toward meme coins and outright gambling.
Don’t make this mistake yourself. With good financial planning and continued efforts to allocate your capital effectively, it may eventually be possible to achieve some of your home buying goals. Instead, think about how to position your investments based on the fact that many other people will be looking for opportunities to take risks. Buying a coin on a channel that is a hotbed for coin trading, like Solana, is probably a good place to start.