There are thousands of crypto projects, each with their own objectives. While one project is really committed to the further development of blockchain technology, the other is more of a joke that got out of hand . Meme coins are popping up more and more and surprisingly they can still do well. For example, Dogecoin (DOGE) is in the top 15 of all projects with a market cap of no less than 18 billion dollars at the time of writing. The question is then mainly: how come these meme coins get so much attention and people take their chance en masse?

But not all of them have a long life. In practice, we see a revival of a few days, weeks or at most months, after which the price collapses disastrously. But still we keep burning our hands on these meme coins. Why? Discover the psychology behind meme coins in this blog.

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• View quickly
• What is a meme coin?
  • Lack of fundamental analysis
  • Lack of experience
• Psychology meme coins
  • Community
  • Misleading expectations
  • Fear Of Missing Out (FOMO)
  • Pride
• Risks of meme coins
• Influence of meme coins on the crypto market
• The future of meme coins
• Conclusion

Watch the video below and get an overview of which meme coins there are and why they sometimes do so well:

What is a meme coin?

A meme coin is a cryptocurrency inspired by an internet joke or a meme. They are not meant to be taken seriously, but despite this, these meme coins can gain huge popularity due to the potential big wins. As soon as the value of this meme coin increases, it gets more attention and investors flock to it. The more online visibility and the more exposure for this meme coin, the greater the chance that such meme coin can increase exponentially in value . Elon Musk is pre-eminently the person who likes to influence the market with his meaningless tweets, where he may or may not promote meme coins. He did this several times with Dogecoin and Floki Inu, among others.

The video below from AllesOverCrypto tells you everything you should know about Dogecoin!

Lack of fundamental analysis

Blockchain technology is a major technological revolution that can affect the entire society. Think of Decentralized Finance (DeFi), the use of smart contracts and the decentralization of almost all aspects. Despite this, there are also many crypto coins that have virtually no fundamental analysis.

A fundamental analysis tells you more about the objectives of a particular project. What problem does it want to solve? How can it positively change the future? What added value does it have? At meme coins we can answer this fairly briefly: the only thing that makes meme coins great is the presence of a strong community, the word-to-mouth and the hype that every investor experiences. One for all and all for one.

Always research the white paper of a new project extensively. In the past there were meme coins where you paid a fine when you wanted to sell your coins, this is often a small percentage. This is anything but a good way to attract investors and is therefore an immediate indication that such an investment may not be worth it.

Lack of experience

A meme coin often attracts the attention of new investors due to the exorbitant profits. Without any knowledge, they take their chance hoping for a good outcome. Characteristic of these meme coins is that they often have a high circulating supply, but a correspondingly low price. A good example of this is Dogecoin (DOGE) which, at the time of writing, ranks 12th on CoinGecko and CoinMarketCap, with a price per token of $1.14.

‘ That currency is still super cheap, just look at Bitcoin or Ethereum, they can still grow very fast .’ Due to the lack of knowledge, investors expose themselves to dangers and huge losses. It is not about the price of a token or a coin but about the market capitalization. This gives an indication of the growth opportunities.

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Psychology meme coins

The crypto market is highly volatile, but it is driven by investor emotions . The price is determined by buying and selling pressure of each individual in the market. While fundamental projects like Bitcoin (BTC) and Ethereum (ETH) involve long-term investments, investors may be looking for quick wins with meme coins. Nevertheless, there are clear emotions present with these meme coins:

Community

Core in these meme coins is the community. And this is certainly not to be underestimated. The meme coin does everything for its community . For example, holders of this coin may be rewarded with a certain percentage of all transaction costs or they may receive additional benefits. Previous meme coins reserved 5 percent of all transaction costs for the community. In other words: with every sale, each holder received a share. In short, the team does pretty much everything they can to make sure investors hold on to their tokens for as long as possible.

Fortunately, there are also meme coins that take a different approach. For example , they put maximum effort into marketing and brand awareness to gain the trust of the general public . Just last year Floki Inu advertised on trams in Amsterdam, with the slogan ‘ MISSED $DODGE? GET $FLOKI ‘. This is very deliberately arousing the emotion and FOMO the potential investor. Of course, there are absolutely no guarantees that this new currency will experience the same growth margins as Doge. In that respect you can see it as false advertising.

Misleading expectations

Because the community believes so strongly in the project, they act on the basis of a self-fulfilling prophecy. This is a psychological term used when you get what you think and also expect, literally translated the self-fulfilling prophecy. It is therefore often mentioned together with the power of persuasion . An entire community is so convinced that the price will rise and they make everyone in their area enthusiastic about this project that they attract more investors and the price will therefore also rise. This without technical analysis or fundamental analysis. It’s kind of like a blind spot of vain hopes for financial freedom.

Please note: this does not mean that one individual can set the price with his or her desperate optimism. Experienced investors know that the market is largely driven by emotions and will also take profits in time. As more and more smart investors are cashing in their profits, the trend is about to reverse and a real sell-off can take place. Only investors who are too emotionally involved in a project and are so caught up in this tunnel vision will be left with major losses. That is why the price of meme coins can be extremely volatile.

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Fear Of Missing Out (FOMO)

In principle, the majority of investors know that there is a relatively high chance that they will burn their fingers on this meme coin. Yet the human brain sometimes works a little differently. When the price rises, and rises, and continues to rise, we can face Fear of Missing Out. Perhaps the most dangerous emotion you can have as an investor. You may still want to take your chance because you are afraid of missing out on potential winnings.

It is also at this time when everyone on social media shows off their winnings. In 2021, TikTok and other social media were full of videos of teenagers who had become rich overnight with SafeMoon. Do you sit in the office all day working for a salary, while such a person immediately becomes rich. Just take a chance, I hear you think. And then things go wrong, the price has now risen so fast that once again smart investors have an exit strategy.

Pride

Those who are left behind do not give up. The price is falling and continues to fall, but the community is so strong and tight-knit that they convince each other that this was just a small dip. ‘The best is yet to come, to he moon’. They continue to persevere and believe in the future of this meme coin. Emotions take over and there is often little room for rationality.

Risks of meme coins

In addition to meme coins, there are also scam coins. In the beginning, these have the same properties as a meme coin with a lot of potential. The makers respond to certain hypes. For example, in 2021 there was a meme coin called Squid Game, named after the popular series on Netflix. At the time of its creation, many people believe that they can earn money from this. The price rose in no time by no less than 2400% in value to a total market value of 150 million euros. But the makers had other plans. During a hefty All Time High (ATH), the team disappeared with all funds.

This does not mean that all meme coins are also scam coins by nature. But it is a warning that you should always do your research , and that this is slightly more difficult with meme coins where a fundamental basis is limited or completely absent.

Influence of meme coins on the crypto market

Meme coins are not the best thing to happen to the crypto market. Since the emergence of Bitcoin in 2009, developers have been working hard on new protocols, new solutions to existing problems to ensure global applications of crypto. This is a very time-consuming and intensive process that takes place step by step. The team must constantly prove why they hold the solution to an existing problem. Only with sufficient financing and funds can they achieve their objectives.

On the other hand, the meme coins that raise huge amounts without any solid solution and overtake large projects in the rankings based on the market cap, much to the chagrin. In practice, we also see that many investors take this opportunity to earn money and then invest it in solid projects. But timing the market is next to impossible, so losing money is just as likely as making money from these meme coins.

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The future of meme coins

Meme coins are in a not so positive light. All too often, these meme coins cause people to dislike both the crypto market and the technology behind it. They also no longer believe in fundamental projects. Although these meme coins are not new, we see new projects being added all the time. Think of:

• CateCoin
• DogeBonk
• Kuma Inu
• Kishi Inu
• Meme Inu
• …

We would prefer that meme coins disappear completely so that only solid and fundamental projects remain . In practice, these non-solid projects also disappear over time, but they say that there is still too much money in these meme coins. This capital would be better invested in solid projects to help build the future of crypto together. Without the meme coins, crypto will also have a less negative image. But will they ever cease to exist?

Investing is pure psychology and in this we are often led and misled by emotions . It is not for nothing that it is often said that you should be able to invest with your ratio and completely switch off your emotions. By nature we are always looking for social contacts and we attach great value to a community. The sense of belonging in such a community is very strong and is also the strongest feature of meme coins. Yet these meme coins can wreak havoc in the long run.

Conclusion

We all want to earn thousands of euros with a tenner, but unfortunately the reality is not so rosy. Meme coins can make you rich, but it is only feasible for a few. There are many meme coins today, the choice is huge! Unfortunately, the vast majority of them are not a wise investment. How do you know that? By doing your own research.

Before investing in a meme coin, always take enough time to do your own research, do your own research (DYOR) . You will learn more about tokenomics, but also about the intentions and priorities of the team. Do they have a long-term plan for the community and the growth of the protocol? Or are they primarily interested in simply driving down the price, at the expense of investors? The latter is a huge red flag. Therefore, always start by reading the white paper. Be critical!

Do you have any questions about meme coins? Ask us in our AllesOverCrypto Facebook group where we now have more than 100,000 members! You can also easily find the answer to a question about crypto in our FAQs. Furthermore, you can also find a lot of information by googling your question + AllesOverCrypto.

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