Memecoins are a unique category of cryptocurrencies that function technologically just like other cryptos such as bitcoin (BTC) or ethereum (ETH), but like their namesake, are based on humorous or interesting ideas captured in various forms of media like images or videos.

They were created by software developers as a form of satire or humorous tribute to internet culture, often inspired by viral internet memes and jokes.

The first viral memecoin was Dogecoin (DOGE) which launched in 2013. Using the now-iconic Shiba Inu breed of dog as its mascot, it was originally created as a joke, aiming to make fun of bitcoin and the many other cryptocurrencies. The memecoin’s creators confess that they intentionally misspelt the word “dog” to make it seem “as silly as possible”.

Gaining rapid popularity because of its dedicated community, Dogecoin became the hallmark of memecoins succeeding it, making history in 2014 by donating nearly US$30 000 to the Jamaican bobsled team for the 2014 Sochi Winter Olympics, garnering significant media attention and further funding.

Dogecoin attracted supporters like Elon Musk, who frequently endorsed it through social media, referring to himself as the “Dogefather”. His backing helped propel Dogecoin to the eighth-largest cryptocurrency at the time of writing, with a value of $21-billion — turning it into a social phenomenon and inspiring over 200 other memecoins.

In August 2020, Shiba Inu (SHIB) was released. Created by an anonymous entity known as “Ryoshi” and dubbed the “Dogecoin killer”, Shiba Inu also adopts the same Shiba Inu dog from Dogecoin as its logo. One of its notable features is its large token supply, with a quadrillion tokens initially minted. This high token supply means that individual tokens are valued at a fraction of a cent, attracting investors looking for high-risk, high-reward opportunities.

Shiba Inu operates on the ethereum blockchain as an ERC-20 token, which means it can be stored in any ethereum-compatible wallet, with a market valuation skyrocketing from $1-billion in October 2020 to $13.4-billion today.

In May 2023, a memecoin built upon the legacy of Pepe the Frog (a popular internet character which gained popularity in the early 2000s on forums such as 4chan), was launched. The project’s market valuation has grown to a remarkable $2-billion, outperforming both Dogecoin and Shiba Inu over the last 12 months.

Seeking a high reward for little risk

While often lacking in any real underlying value, these coins have made crypto traders both love and hate them due to their highly volatile nature. It’s not uncommon for a memecoin to trade 10-20% up or down on any given day, driven primarily by speculation and community engagement. This makes memecoins highly risky investments. But with memecoins existing and growing in popularity since 2013, they’re unlikely to disappear overnight.

Some started out as jokes and have subsequently gained huge followings, to the point of actual payments use cases being developed, with speculation giving them market values larger than most JSE-listed companies.

A likely underlying driver behind the popularity of memecoins is the financial exclusion experienced by many young people, who increasingly view traditional paths like a 9-to-5 job as inadequate for achieving home ownership and financial prosperity. Compounded by rising living costs, high youth unemployment and excessive government money printing, younger generations are desperately seeking alternatives, which has paved the way for the rise of the memecoin.

The concept of seeking a high-reward, low-risk financial jackpot is common:

South Africa’s National Powerball lottery draws have attracted record contributions, with Unisa’s Bureau for Market Research finding that 74.3% of lottery activity participants cited the “need for money” as a major reason for participating in the lottery. Around 42.2% of national lottery players earn a monthly income of less than R5 000.
The rise of WallStreetBets on Reddit – where ordinary investors boosted stocks such as GameStop and Blockbuster to record highs, securing substantial profits.
Revenues from forex trading have reached peak levels.
Sports betting revenues are at all-time highs.
Zero-day options trading is rising at an unprecedented rate.

The idea of spending R5 on a ticket to stand a chance of winning millions – often over R100-million – is extremely enticing, as it offers the dream of a very high reward for a very low risk.

Memecoins have carved out a niche in the market as part of a cultural movement, offering a lottery-style return mechanism. Investors can potentially achieve significant returns over a short period, with better odds than traditional lotteries, albeit with somewhat smaller payouts, even with relatively modest investments.

The high-risk, high-reward nature of memecoins has drawn speculators who invest modest sums — from R150 upwards — on short-term price movements, aiming for triple-digit returns. With the mentality that even if their memecoin drops by 20%, 50% or even 90%, it’s still worth the gamble, as there’s always a chance it could rebound.

Memecoin performance

Interestingly, memecoins have outperformed the likes of bitcoin and ethereum since the start of the 2023-2024 crypto market rally.

As seen in the performance graph, memecoins such as Dogecoin (DOGE), Shiba Inu (SHIB) and Pepe (PEPE) have outperformed bitcoin (BTC) and ethereum (ETH) over the last three and six-month timeframes, while PEPE has been the standout performer outperforming BTC and ETH by over 1 650% on a 12-month basis.

In previous crypto bull markets, memecoins would usually only start to rally near the top or end of the market cycle as euphoria crept in, never at the beginning. This leads to the possibility that memecoins could be set to continue to outperform the bigger cryptocurrencies.

If there is one thing history has shown us, it’s that nothing is more powerful than a movement – could the memecoin be the movement of this crypto market cycle? We will need to wait and see.

Where can I buy memeoins?

Memecoins are high risk and highly speculative investments, but with the growing demand for these quirky investments, Cape Town-based Altify has become the first licensed South African crypto investment app to offer Dogecoin, Shiba Inu and Pepe to its users.

Not only does Altify provide access to the widest variety of memecoins, it has garnered a reputation for providing an easy-to-use platform, with no sign-up fees and attracting users to get started with as little as R150.

Disclaimer
This article is intended for informational purposes only. The views expressed are not and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. Altify provides a reception and transmission brokerage service for crypto asset orders without giving any investment advice or personalised recommendations.

While we believe in crypto accessibility for all, we also know that it might not be appropriate for everyone. Before investing, please take into consideration your level of experience and your investment objectives, and seek independent financial advice if necessary. You are encouraged to conduct thorough research into cryptocurrencies before making any investment.

As an investor, you are responsible for making decisions regarding your investments. Please consider your personal circumstances when buying or selling crypto as the price can be very volatile. Remember, investing in cryptocurrencies is considered a high-risk investment as the value of cryptocurrencies are subject to extreme price fluctuations and may both appreciate and depreciate over time. Investing in crypto assets may result in the loss of capital.

Remember, past performance does not guarantee future results, and we can’t guarantee returns since asset prices move based on supply and demand, so never trade with funds you can’t afford to lose. You should seek professional advice if you’re uncertain about the suitability or appropriateness of any investment for your specific circumstances or needs.

Further information can be found in the General Risk Disclosures and Crypto Risk Disclosures on our website. Investments should only be made by investors who understand these risks.

For more information, please visit www.altify.app.

About Altify
Altify is headquartered in London, with satellite offices in Cape Town and Vienna. The fintech business is backed by notable investors, including Sabvest, High-Tech Gründerfonds, CVVC, Emurgo and Calm Storm Ventures. Altify’s desktop and mobile platforms provide a user-friendly, low-cost way for over 80 000 users to invest beyond the stock market — offering access to 15-plus individual crypto assets, including bitcoin and ethereum, as well as the world’s largest range of ETF-style Crypto Bundles and gold.