Have you ever come across a cryptocurrency that was inspired by a meme? If you have, then you’ve stumbled upon what is known as a meme coin. These digital currencies take their cues from the internet’s funniest and most shareable images, videos, and other forms of media. But unlike traditional cryptocurrencies, meme coins often serve no real purpose other than to be enjoyed and shared among the online community. This lack of clear utility, combined with the fact that meme coins are typically uncapped in supply, can make them incredibly volatile and risky for investors. Despite these risks, many traders are drawn to the excitement and potential for quick profits that come with meme coins since some of these have proven to be 100x. And like any other cryptocurrency, they can be bought and sold on various cryptocurrency exchanges.
The trends surrounding meme coin popularity started back in 2013 with the creation of DOGE, the first-ever meme token, and since then the scene has exploded with hundreds of these humorous digital currencies popping up left and right. But What makes them so special? Well, for one thing, they often feature hilarious memes and pop culture references on their websites and marketing materials. But more importantly, they’re a unique way for investors to try and make a quick buck in the crypto world, with many people hoping to strike it rich by buying in early and riding the meme wave to profits.
The world of meme coins is constantly evolving, and as more of these quirky digital currencies gain popularity, creators are coming up with increasingly creative uses for them. For example, there are now meme tokens designed specifically for use in video games, for donations to charities, and even for buying and selling goods in online marketplaces. And it’s not just individual users who are jumping on the meme coin bandwagon – major businesses like Tesla, GameStop, AMC Entertainment, and Nordstrom are now accepting meme coins as payment. As this trend continues to gain momentum, it can be tough to keep up with the best user practices. That’s why we’ve put together this guide to help you better understand the world of meme coins and how to buy them (before they 100x).
Also Read: Top Memecoins to Watch out for in May 2023
The basics of meme coin investing
Cryptocurrencies have become increasingly popular in recent years, and meme coins, in particular, have gained a lot of attention. The concept of buying a meme coin like Dogecoin or Shiba Inu is similar to buying any other investment. Well, the basic premise is that you’re hoping that the value will increase over time so that you can sell it for a profit. However, meme coins are different from other investments in that they rely more heavily on psychological drivers rather than the underlying value of the asset. This is why they are sometimes referred to as “joke coins” or “internet coins”.
The “Castle-in-the-Air Theory” is a term publicized by economist John Maynard Keynes to describe this phenomenon. Essentially, it suggests that investors tend to build castles in the air, meaning they focus more on the potential price increase in the future rather than the intrinsic value of the investment. This theory is especially relevant when it comes to meme coins, as their value can fluctuate wildly based on factors like social media hype, celebrity endorsements, and even memes. The idea behind investing in meme coins is to get in early and beat the rush of other investors. However, this approach comes with a high level of risk, as meme coins tend to have fewer underlying drivers compared to more traditional investments. As a result, investing in meme coins can be seen as more of a gamble than a surefire investment strategy.
Have you ever thought of meme coins like the games you play in a casino? In this case, the L1s such as Ethereum and exchanges can be compared to the house. As we all know, the house always wins; It’s a similar story with L1s, which often take a cut from transactions and have their own tokens to sell. This is exemplified by the recent increase in $ETH burn, which is directly linked to the increased on-chain activity. The more people use the network, the more $ETH gets burnt, and the more money ends up in the pockets of the L1s. It’s important to remember that you’re betting on the hype and sentiment surrounding a particular coin, without any real guarantee of success. While it can be tempting to jump on the latest meme coin craze, it’s important to remember that the odds are often stacked against you. The L1s and exchanges always have the upper hand and will come out on top in the end.
However, Unlike Roulette, where the odds are set in stone, meme coin investing is a much more dynamic and fluid process. By staying up to date on the latest news and trends in the market, you can identify opportunities that others might miss. Additionally, doing your due diligence and carefully researching a particular coin before investing can help you make more informed decisions and potentially tip the odds in your favour. This means looking beyond the hype and sentiment and examining factors like the coin’s use case, development team, and community.
How to find and research strong meme coins?
It’s true that investing in meme coins can be compared to a game of chance, but as we touched upon earlier, there’s a major difference between it and something like Roulette. With Roulette, the house always has a built-in advantage of around 5.26%, no matter what. However, with meme coin investing, there are certain strategies you can use to improve your chances of success.
However, with so many different coins out there, it can be overwhelming to try and identify which ones have the most potential. Luckily, there are some techniques you can use to increase your chances of finding the next big thing in meme coins.
Here’s a roadmap that consists of five steps to help you spot the next big meme coin and boost your chances of success.
Step 1: Keep track of which coins are making gains
In order to effectively invest in meme coins, it’s crucial to keep tabs on the market and closely monitor which coins are performing well. One of the most effective ways to do this is to use resources like DEX Tools, which provide real-time data on top gainers and losers in the meme coin market. By regularly checking this section, you can measure which ones are performing well and gaining momentum. By keeping an eye on the top gainer’s section and focusing on tokens showing promising signs of growth, you can give yourself an edge when it comes to investing in meme coins.
Step 2: Determine that the token shows some community vitality
One crucial aspect to consider before investing in a meme coin is to verify that the token has a strong culture. It is important to note that in the world of meme coins, having a strong community is the key to success. The meme must be something that people can relate to and find amusing, with a strong underlying aspect that resonates with investors.
To figure out whether a token has strong backing on social fronts, there are various methods you can use. One is to track social metrics on platforms such as Lunar Crush, which can provide valuable insights into a token’s performance. Additionally, you can check whether the token is being discussed on social media platforms such as Twitter, Telegram, Discord, and other online communities. You can also check whether the asset is trending on Twitter, Google, DexTools, or CoinGecko. By doing this, you can gain a better understanding of the community’s sentiment towards the token and its potential for growth.
Step 3: Conduct a thorough analysis of the fundamentals
This step involves asking important questions about the team behind the token and the tokenomics. It’s crucial to know who is behind the project and whether they have a proven track record of success. Are the team members public and transparent about their identities (i.e. “doxxed”), or are they anonymous? Have they demonstrated competence in building hype around the project? These are all factors to consider when evaluating the team behind a meme coin. You can also read our guide on how to use Dex Screener to find memecoins like Pepe before they 100x.
Another important aspect to research is the tokenomics, or the underlying economic structure of the token. Is there a dilution of tokens planned in the future, or are there mechanisms in place to burn tokens and maintain a stable supply? Understanding these details can help you assess the potential long-term viability of the project.
While these questions may not be as critical in the case of meme coins, it’s still worth doing your homework to gain an edge. One of the biggest challenges in this sector is the prevalence of scams and hacks. Although it’s impossible to completely eliminate this risk, I recommend two methods to minimize it: perform a quick audit on Token Sniffer and examine the wallet distribution on bubble maps.
Step 4: Determine your strategy – follow the leader or play the rotation game
In the world of meme coins, there are often coins that take the lead within a certain category. These leading coins have higher market capitalizations and are considered to be less risky than their counterparts. For instance, $DOGE is widely recognized as the leader of the “Inu” coins and $PEPE is the current leader of the “Frog” coins. Some experts advise that the best approach to invest in the leader can be a good strategy to adopt because it provides some stability and predictability in the volatile meme coin market. In a recent post, Fabian D. recommended that the best approach is usually to go long on the leader. You can find the full explanation for this recommendation in his tweet.
When a new meme coin emerges, the initial liquidity enters the space and it usually flows towards the dominant player or the leader of the pack before making its way to other smaller coins. The smaller coins often benefit when there is a rotation of liquidity within the sector, but ultimately profits tend to flow back into the leader. This is why investing in the leader often presents a better risk-to-reward opportunity for investors seeking to capitalize on the growth potential of meme coins.
An alternative strategy is to engage in the rotation game, which entails investing in smaller market cap coins that emerge under the dominant leader in a particular niche. While this approach can lead to considerable gains if timed correctly, it is generally considered to be a less favourable risk-to-reward (R/R) play for the reasons explained previously.
Step 5: Identify Promising Meme Coin Opportunities by Tracking Whales
In the volatile and speculative world of meme coins, following the smart money can be a valuable strategy to identify new opportunities. Successful meme coin traders and whales often make early purchases in emerging coins, which can give insight into potentially profitable projects. So, how can you track these moves?
One way is to go to Etherscan and investigate the early buyers of thriving meme tokens like $PEPE. This can give you an idea of who has already had success in the market and what projects they are interested in. Another tool to use is Look On Chain, which allows you to discover more “smart money” wallets and track their activity. You can also use DeBank to monitor these wallets and notice what they are currently purchasing. By following the moves of successful traders, you can find patterns and make more informed decisions about which projects to invest in.
Successful approaches to purchasing meme coins
Alright, let’s paint a picture here. You’ve spent hours, days, maybe even weeks doing all the groundwork, researching and analyzing everything you can. You’ve wrapped up your groundwork, analyzed the fundamentals, and have finally after careful consideration, singled out a specific token and you’re feeling pretty darn confident about making a purchase. But, without a purchasing strategy, how do you go about actually executing the trade and reaping those sweet, sweet profits? Well, as a solution, let me introduce you to a three-step plan that will make it as easy as pie.
Step 1: Approach it like a game of chance
It’s no secret that investing in meme coins can be an enjoyable and thrilling experience, with the possibility of hitting it big. However, it’s crucial to remember that the crypto market is just like a casino – unpredictable and volatile. In light of this, it’s wise to approach your investments with caution and treat them like gambling. This means investing only what you can afford to lose and not overallocating your funds. To put it simply, if you wouldn’t be comfortable betting a particular amount on a spin of the roulette table at a casino, then you shouldn’t be investing that much in meme coins either. It’s all about taking calculated risks, and investing wisely and within your means will ensure that you’re in control of your investments, and not the other way around.
Step 2: Keep your meme coin trades isolated with a separate on-chain wallet.
Let’s delve into the second step of our investment plan – using a separate on-chain wallet to trade meme coins. Mixing your investing capital with your meme coin capital is a big no-no. To avoid this, it’s best to keep your meme coin funds separated from your other investments.
By doing this, you’ll be able to clearly divide your trading systems and avoid the emotional toll that comes with mixing your funds. It’s important to remember that investing in meme coins comes with its fair share of risks, so it’s essential to be prepared for the worst-case scenario. This means being willing to lose all the capital present in your new wallet. Keeping your meme coin funds in a separate on-chain wallet is a smart move that will help you stay organized, focused, and in control of your investments.
Step 3: Incorporate technical analysis for better meme coin entries.
Now that we’ve covered the first two steps of our investment plan, it’s time to move onto the third step – using technical analysis (TA) to help you make informed entries. We all know that executing accurate technical analysis can be tough due to market constraints and a lack of reliable historical data. However, there are ways to navigate these challenges and get some clarity on your trades.
One approach that’s worked well for me is using charting to develop a game plan. By waiting for significant corrections, you can position yourself to long the next high time frame (HTF) breakout. I’ve personally seen this strategy pay off with $PEPE. This method can help you avoid the risky move of going all-in blindly, without a plan. Instead, it allows you to make informed decisions based on the market’s movements.
Another strategy that can help you keep your emotions in check is dollar-cost averaging (DCA) over a predetermined period. You don’t have to rush into a trade all at once; take your time and be patient. If you’re feeling the fear of missing out (FOMO), consider getting an initial entry at market for around 20-30% of your final position size.
Mastering the Art of Profit-Taking in the Meme Coin Market
Alright, let’s imagine that things have gone well for you and you’ve seen some significant gains in your meme coin investments. Now, it’s time to think about taking profits and securing your newfound wealth. When it comes to deciding on a strategy for taking profits, there are a few different approaches you could take. While you can potentially earn life-changing money quickly, it’s important to utilize those profits in a meaningful way.
One common rule to follow is to avoid roundtripping profits – that is, taking profits on a trade and then reinvesting those profits back into the same coin. A simple strategy to avoid roundtripping profits is to take out your initial investment after you’ve doubled your money. This way, you’re essentially trading with “house money”, and any further gains are pure profit. It’s important to note that the remaining capital still carries some level of risk, but at least you’ll have locked in profits on the initial trade. As the price continues to rise, you can then start to take profits on a graduated scale. For example, for every additional 2x increase in price, you could sell off a predetermined percentage of your holdings.
For those who are more risk-averse, it may be prudent to take out your initial investment amount each time you double your money. This can help to mitigate your risks and ensure that you’re not risking more than you’re comfortable with. However, if you’re feeling more adventurous, you may opt to take out a lower percentage of your holdings for every additional 100% gain. For example, you could take out 20% or 30% of your holdings each time the price increases by 100%. It’s important to note that these strategies are effective until a top is reached. Once the market begins to experience a downturn, you may start to encounter extreme drawdowns.
It’s worth noting that there are several signs you can look out for to spot the formation of a market top. Here are some indicators that you should keep an eye on:
• Market cap being overtaken by 24-hour trading volume
• High time frame (HTF) charts showing lower highs
• Decrease in the number of holders, or significantly slower growth in holders
• Big investors starting to sell off their positions
• Funding rates moving from negative to positive
I hope you now know how to invest in memecoin in a proper manner. Applying these techniques, you will be able to eliminate 90% of the scam coins. However, even after a through research, you may still go wrong with investing in the right coins. Hence, take all precautions, and invest only a very small amount that you can afford to lose. If I were you, I would not put more than 0.01% of the networth in any memecoin. If you have any question, feel free to comment below.
