Meme Coins: Risky Ride on the Hype Train

The cryptocurrency world is divided over the merits of meme coins – digital tokens inspired by internet jokes and pop culture references.

The cryptocurrency world is abuzz with the latest trend – meme coins. Inspired by internet jokes and pop culture references, these digital tokens have taken the market by storm. But while some see them as a chance for explosive returns, others, like Bitcoin evangelist Adam Back, remain skeptical.

Meme coins have seen a surge in popularity in recent months, with tokens like Pepe and Dogwifhat experiencing astronomical increases in value, largely driven by online communities and celebrity endorsements.

One recent example is influencer Iggy Azalea’s promotion of her own meme coin, which has sparked both interest and amusement among her followers.

While some may be tempted to join the hype and chase quick profits, others, like analyst Murad Mahmudov, advise against investing in highly speculative microcap meme coins, which are essentially tiny startups in the crypto world.

However, the speculative frenzy surrounding meme coins has not gone unnoticed by critics. Ethereum co-founder Vitalik Buterin seems to share Back’s concerns, expressing his skepticism towards meme coins that lack real-world applications or innovative technology.

According to Buterin, many of these coins might struggle to find long-term viability.

reminder, zoom out. prior bull runs had half a dozen -30% draw downs too. we’re at about -26% (-27% earlier).

in fact if anything, recent draw-downs seem to be less deep, but people forget the normal bull market pattern. don’t panic, buy the dip. or buy a bit of $CMSTR with… pic.twitter.com/vBOjFN1TOn

— Adam Back (@adam3us) July 5, 2024

Back, whose name was famously mentioned in the original Bitcoin whitepaper, has a history of blunt dismissals when it comes to meme coins. In 2021, he took aim at both the meme creators and their creations.

According to Back, the so-called “shitcoiners” are terrible at making memes, and the reason for that is unclear.

The Blockstream co-founder went on to douse the hype surrounding expensive meme-based NFTs, such as EtherRock, which sold for millions despite being, in his words, “a low-resolution gif that has no merit.”

Back’s stance on the matter is clear – Bitcoin is the only cryptocurrency that holds true investment potential. He views meme coins and most alternative cryptocurrencies (altcoins) with a suspicious eye.

This unwavering support for Bitcoin is not new. Back has repeatedly called Bitcoin “super cheap,” even when its price hovered around $66,720 in April this year.

In his view, the market undervalues Bitcoin's potential as a digital store of value, much like gold. Back further argues that a few bear markets, like the recent price drops that saw Bitcoin plummet to a five-month low, are necessary for investors to truly understand the long-term value proposition of Bitcoin.

The clash between meme coins and established cryptocurrencies like Bitcoin reflects a deeper debate about the future of digital assets. While meme coins present a gamble on cultural relevance and community power, their success hinges on maintaining hype and attracting new investors.

Bitcoin, on the other hand, rests on its established technology and growing adoption as a legitimate financial instrument.

Featured image from WSJ, chart from TradingView

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