As the crypto market continues to experience a surge in meme coins, Bitcoin investors are left wondering if they should approach the situation with added caution.
What are Meme Coins?
Meme coins are cryptocurrencies that were created based on internet memes and have little to no real-world value. While these coins have gained popularity recently, history suggests that this speculative mania could lead to major market tops or bearish reversals in Bitcoin.
Surge in Meme Coin Trading
A recent surge in trading volume of meme coins has caught the attention of many investors. According to blockchain observer James Tolan’s Dune analytics-based tracker, the crypto market saw a six-fold increase in meme coin trading volume last week, reaching $2.3 billion. This surge in trading volume was led by Pepecoin (PEPE), a three-week-old meme cryptocurrency that crossed $1 billion in market capitalization and peaked at $1.82 billion.
Other low-cap tokens like DINO, WSB, CHAD, and 4TOKEN have also seen a significant rise in value, increasing by several hundred percent in the past two weeks. While this may seem like a good opportunity for investors to make quick profits, caution should be exercised.
Effects on Bitcoin
Historically, speculative mania in non-serious cryptocurrencies has presaged major market tops or bearish reversals in Bitcoin. Bitcoin’s value has been known to be closely linked to the market trends of other cryptocurrencies, making it susceptible to fluctuations in the crypto market.
As of Monday, Bitcoin’s trading value is hovering around the $27,970 mark, reflecting a 2% decrease for the day. Interestingly, this decline occurred even though the dollar index (DXY) is showing signs of weakness, which is typically linked to an opposing movement in Bitcoin’s value. The DXY had a temporary boost, reaching 101.75 last Friday after the release of the US jobs data, which surpassed expectations. However, it has now dipped under 101.20.
Why Investors Should Be Cautious
While meme coins may appear to be a good investment opportunity, investors should approach the situation with extra care. Meme coins have no inherent value, and their values are based solely on market demand. This makes them incredibly volatile and susceptible to market manipulation.
Additionally, investing in meme coins can be risky, especially for inexperienced investors. The surge in value seen by these coins is often short-lived, and investors can quickly lose their investments if they do not sell at the right time.
Avoid FOMO at This Point
FOMO, or the fear of missing out, can be a powerful motivator for investors, particularly when they see others making substantial profits in a short period. However, it is essential to exercise caution and avoid making impulsive investment decisions based on FOMO.
Jumping into a volatile market like meme coins without proper research and analysis can result in significant losses. Many investors are prone to investing blindly based on hype, which can lead to regret and missed opportunities.
Investors should remember that investing in cryptocurrencies, particularly meme coins, carries significant risks. The value of these coins is often driven by speculation and market demand, making them incredibly volatile. Furthermore, many of these coins lack real-world use cases or any underlying value, making their long-term prospects uncertain.
Final Thoughts on the Meme Coin Mania
The recent meme coin surge may seem like a good opportunity for investors to make quick profits. However, history suggests that investors should approach the situation with caution.
Bitcoin investors, in particular, should be wary of the impact that this speculative mania could have on the market. While there is potential for profit, investing in meme coins carries significant risks and should only be done after thorough research and consideration.
Giancarlo is an economist by profession with a career spanning nearly two decades. His professional journey has seen him assume vital roles in various government and private organizations such as the Department of the Interior and Local Government (DILG), the National Economic and Development Authority (NEDA), Megaworld Corporation, and the China Banking Corporation in the Republic of the Philippines.
In addition to his civic and corporate pursuits, his forward-thinking approach has led him to manage several prominent websites in the banking and finance sector, notably the Australia-based RateChoice, where he immersed himself in the world of emerging financial technologies and where he found particular interest in Bitcoin all the way back to 2013.
Prior to his addition to Blockzeit’s dynamic team, he held an essential role as Project Manager for initiatives encompassing blockchain, stablecoin, mining, special economic zone development, and iGaming. This noteworthy chapter in his career unfolded under the auspices of InPlan Consultancy Services, Inc., the think-tank of IMPERO Consortium Management Corporation headquartered in Manila, Philippines, and Tokyo, Japan. InPlan, led by a distinguished retired Cabinet member of the Philippines, collaborates directly with IMPERO’s core management team, contributing to strategic planning and business development endeavors.