Memecoins
Memecoins made massive gains on Monday
The leader in memes is back, and so are coins.
The market was all-in on memes on Monday, which helped drive the value of tokens like Dogecoin (DOGE -3.46%) and Pepe (PEPE -5.38%), which has little value but the meme itself. The biggest catalyst was not Wall Street news, but rather the return of a popular market. Reddit personality named Roaring Kitty, who brought the the stock meme craze in the first place.
Over the past 24 hours, Dogecoin has rallied strongly, up 5.1% as of 3 p.m. ET today. Pepe was up 14.3%, dogwifhat jumped 3%, and Bonk (CRYPTO: BONK) gained 3.1%. All of this happened while most of the crypto market was down.
The meme lives
Memes, or culturally relevant images or concepts that spread widely across the Internet, took over the market today after a single tweet from Roaring Kitty after three years of dormancy. Stock actions like Stoppage of play, AMCAnd Hertz skyrocketed with no news other than the tweet.
What makes this type of market reaction so impactful is how quickly it spreads. By the time the exchange opened today, it was clear that everyone was aware of Roaring Kitty’s presence, as all the media had been talking about it.
In the crypto market, the meme trend of 2021 never died and has arguably gained momentum over the past three years. It is therefore natural that meme coins are among the most important today.
When will the meme end?
The biggest question for investors is how long this move will last. Dogecoin was the big winner in early 2021 but lost more than 90% of its value between the peak of 2021 and the end of 2022.
Dogecoin Price data by Y charts.
The same could be said for meme stocks that rebounded and then lost their gains.
The problem with meme investing is that the meme will only last for a limited time because there are no fundamentals driving the movement. Prices for tokens like this depend on the price the next buyer will pay, and if the meme loses momentum, that price may drop.
The best investment in a meme market
It may not be as exciting, but I think the best buys in this crypto market are assets that contribute to the technological improvement of blockchain. Tokens like Ethereum And Solana which provide the currency for the blockchains on which businesses are built and efficient ways of carrying out financial transactions are also emerging.
Meme coins have not proven to have the ability to create this type of financial ecosystem or development to be used as a medium of exchange for financial transactions, so they are unlikely to turn a meme into a fundamental disruption.
I also think that relatively weak economic indicators, such as rising inflation and interest rates, as well as a weakening job market, could make the market for purely speculative assets difficult in the future.
A few years ago, stimulus checks sparked rampant speculation in cryptocurrencies and memecoins, but when the checks stopped, the chips fell. I think a similar crash will happen again; we just don’t know when.
Travis Hoium has positions in Ethereum and Solana. The Motley Fool posts and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.