Best Strategies for Meme Coins: Tips for Navigating High-Risk Investments

Meme coins are cryptocurrency assets that drive value through humorous branding, community efforts, and viral marketing. As the name suggests, they allude to the meme culture, utilizing funny media and lore to drive engagement. Meme coins have grown in popularity in the past five years due to the success of popular meme-coin projects. The meme coin category has grown to over $10 billion in cumulative valuation.

Dogecoin is the first known cryptocurrency project to exhibit the major features of contemporary meme coins. The DogeCoin blockchain is a fork of the Bitcoin blockchain. It was created in 2013 by Jackson Palmer and Billy Markus and branded with a picture of Doge, a Shiba Inu dog breed. With Dogecoin, the intent was to create a cryptocurrency for mining with ease, focused on humor, and fun. Dogecoin adopted a similar setup as Bitcoin – the community-focused administration system. Following the introduction of smart contract technology, several meme coin projects emerged due to the new ease of creation. Between 2019 and 2022, meme coins grew in popularity, most adopting animal brandings like DogeCoin. Popular examples include Shiba Inu and Floki.  Meme coin popularity grew exponentially from this point. The meme coin boom on the Solana blockchain birthed several meme coins projects like Popcat, DogWifHat, Mother, and Giga.

Alignment with the Meme Culture

Meme coins embrace the meme culture. Memes poke fun at real-life events, personalities, and moods. This is reflected in multimedia assets that trigger humor for people who can relate to them. Meme coins adopt this strategy to deliver their wittiness and drive value for the associated token.

Community-driven Marketing and Development

Community-run, several meme coins were created by individuals or groups using pseudonyms. Even meme coins with a known creator are often handed down to a community. The associated community attempts to grow the value and popularity of the projects through social media and internet campaigns. This is usually through volunteering.

Volatility

Meme coins are prone to irregular swings in value. The value of meme coins could grow or drop significantly within very short time intervals. The volatility in meme coins is partly caused by the low liquidity on the platforms where they are traded. Another cause is the distribution structure and trader’s emotion. The uncertainties that surround meme coins (especially in their early days) are also known contributors to the volatility.

The major differences between traditional cryptocurrencies and meme coins include utility and administration.

Utility: Unlike traditional cryptocurrencies, meme coins do not necessarily offer any utility. They are fun projects and drive their value from community engagement and influence-supported marketing. They adopt a narrative and create witty assets to gain popularity.

Administration: Proper meme coins are managed by the community. Traditional cryptocurrencies tend to have a constituted team that pilots the affairs of the project.

Here are some of the best strategies for investing in meme coins:

 Day Trading 

The value of meme coins moves significantly within a 24-hour time interval. Therefore, it is a good category for day trading. Investors can program their day trading strategies in a bot or conduct the trades manually. Day traders make significant profits by purchasing meme coins and selling them at a point when the price rises, within a 24-hour period.

Momentum Trading 

Meme coins respond to waves, such as a social media trend or a mention by an influencer. To profit from this, investors scout for meme coins that appear to be gaining momentum, purchase them before the rest of the market responds, and sell the asset when the momentum starts dying down. Momentum trading bots can automate this type of trading strategy, and various trading indicators can also be used.

Narrative Trailing

Meme coins are subject to trends. Narratives like meme-able animals (such as dogs and cats), political events (like the US presidential election), and celebrities have made the trend in the past. To use this strategy properly, meme coins investors follow trends and scout for promising meme coins that reference the trend.

Trading without Emotions 

Due to uncertainties surrounding meme coins, a generally applicable approach is to avoid trading with personal feelings. Feelings of conviction, greed, and doubt could fail easily, therefore, it is recommended traders base their decisions on well-researched data and adhere to realistic targets.

Gradual Profit-taking 

A common idea is to ‘take profits while you can’. To avoid losing your capital to meme coins trading, you can preserve your capital by selling a portion of your winning trades to cover your initial investment.

While trading meme coins, our CoinHint team advises that you avoid these common mistakes:

• Avoid over-investing. Only invest what you can lose and scale your investments to within a sustainable range.
• Do not trade with emotions. Regardless of your personal conviction, base your investment on proper research and calculations.
• Take profits while you can. At least, preserve your capital by selling to cover your initial investment.
• Do not invest in meme coins with a shady deployer. Use tools like DexCheck, Dextools, DexScreener, and GeckoTerminal to obtain security information on a meme coin before investing.

Like every other financial asset, meme coins are subject to the legislation of the applicable region. Despite meme coins not being classified as securities, they fall into legal jurisdictions like taxation and asset declaration. Meme coin traders must study the legal provisions for crypto assets in the region and consider how this affects their trading activities before investing.

Meme coins are often implicated in brand abuse and copyright issues. The use of unapproved imagery and derogation is common with meme coins. This has legal consequences, some of which are detrimental to the project and the community.

Regardless of their volatility, meme coins are a major asset class in the crypto space. Projects in the meme coins category command several billion in cumulative market cap. Millions of investors are also growing a preference for meme coins. Investing in this asset class could be tricky, and extracting value through meme coin trading requires a good knowledge of the market. This article has examined some recommended practices for meme coins traders, but it is not exhaustive. While trading meme coins, traders should always invest below their risk tolerance level and take profits according to realistic targets. Also, note that this article is only for educational purposes and does not endorse meme coins trading.