TL;DR Meme coins have pumped tremendously in the past two weeks or so. They dominate the top gainers dashboard on a weekly and monthly timeframe. In recent years, meme coins have proven that they’re more than a joke and in fact are an investible asset class within crypto. You have to know when to enter though: around the time the masses arrive. And you have to be aware of the role of meme coin ecosystems.

Before deciding if you want to jump on the doggie and/or froggie train, let’s look at the current state of meme coins, how they pump relative to the broader cycle, and various meme coin ecosystems.

Below the index are the top 5 and their percentage gains (dashboard by Messari).

Talking about meme coins, it’s really DOGE and the rest, even though Shiba Inu’s market cap is approaching that of DOGE. Dogecoin was created 7 years earlier than the number 2 on the list, Shiba Inu. The other top 5 names are even more recent.

Dogecoin is the coin of its own chain, while the others in the top 5 are tokens on Ethereum or Solana. The exception is Shiba Inu, which started out as a token on Ethereum but became its own coin on its own chain.

Market Cap of Meme Coins

According to Coingecko, the total market cap of all meme coins is 60 billion dollars – but as I’m writing, there is a lot of volatility. So this figure could change fast.

Interestingly, that’s higher than the market cap of all NFTs. It’s also bigger than sectors that are taken very seriously, such as DeFi and DePIN.

Looking at the below bubble chart, it’s clear that there are two top dogs: Doge and Shiba Inu.

At the time of writing, this is the order and market cap of the top 6:

1. Dogecoin: $24B
2. Shiba Inu: $21B
3. Pepe: $3B
4. Bonk: $1B
5. Dogwifhat: $1B
6. Floki: $750M

Dialogue between a Skeptic and a Believer

To profit from meme coins, some people more than others have to take a mental hurdle. Let’s help them get over this hurdle by this dialogue between Skeptic (S) and Believer (B).

S – ‘There’s no intrinsic value in magic internet coins with a dog logo on top!’

B – ‘Or is there, normie? Show me the coins you pay with in your local grocery store, what logo do they have?’

S – ‘It is our King’s’.

B – ‘Right. So you think a coin with the picture of your King on it has somehow intrinsic value, and a coin with your beloved and Shiba Inu dog doesn’t?’

S – ‘Well, it’s our country’s currency. It’s official.’

B – ‘True, currency used to be the monopoly of nation-states. But in our age of online communication, people can cluster in communities and create economies of their own.’

S – ‘Aren’t you taking it a bit too seriously? Dogecoin or Pepecoin or whatever: they are just jokes.’

B – ‘Granted. Let’s assume this Doge joke made 500.000 million people worldwide laugh a few times. There’s value in that. People pay real money to comedians to get entertained.’

S – ‘Are you saying you want to multiply the number of times people laughed with the price per laugh to arrive at a fair market cap?’

B – ‘That’s indeed what I’m saying, and by the way it can also be other emotions than laughter. Any emotion that’s shared in a community can now be monetized’

S – ‘Crazy world we live in.’

B – ‘Indeed, so join the fun.’

Dogecoin as the First ‘Fractionalized NFT’

What’s hopefully become obvious from the fictional dialogue I started this article with is that buying a meme coin is buying a piece of the culture of a community. 

What are you buying if you buy Dogecoin? You’re quite literally buying into the joke, and you can buy it in small amounts. In a sense, buying some quantity of DOGE is buying a fractionalized NFT. You could buy into a form of art before the invention of NFTs. And DOGE is truly the ‘people’s coin’, as you don’t have to be rich to buy a limited edition NFT item.

Dogecoin started as a frivolous rebellion against all the Bitcoin clones and forks that were launched in the 2013 bull market. Doge was a playful coin, a way to satirize the altcoin mania in which any new scammy project pumped.

But Dogecoin was also in fact used, for example to tip content creators. Also, the community became known for charitable and sporting sponsorships, such as raising $50,000 for the Jamaican Bobsled Team to attend the 2014 Winter Olympics. 

Following Dogecoin’s success, the floodgates opened for a variety of meme coins inspired by internet trends and jokes. But the big wave came only from 2020 onwards. Doge is and will always be the OG.

Let’s look at a chart. 

Below is the chart that measures the price of DOGE not in dollars but in BTC. You can see two major descending wedges, and it looks like we might be close to a breakout from the second wedge. We’ll see.

But besides that, what is the main thing you deduct from the below chart?

Well, what I get from it is that even after BTC’s recent rally…

DOGE has outperformed BTC over a 10-year timeframe.

Let that sink in.

It’s really the only coin that’s been around so long that has been able to outperform BTC. Here’s the graph of Litecoin/Bitcoin over the same period of time.

Again, how indeed funny is it that a coin named after a dog has done much better than a coin that was presented as a serious Bitcoin alternative with faster block generation time and lower transaction fees. 

Apparently, the market cared more about the Doggie than the seriousness and usability of Litecoin.

Meme coin Season is Retail Season

Are there specific ‘seasons’ in which you should invest in meme coins?

From the above DOGE/BTC chart you can see it started pumping in early 2021. That was roughly a month after BTC broke through its previous all-time high. It was the period when retail investors started flooding into crypto. 

The masses only flock to crypto after they’ve read the headlines of a new BTC all-time high. At which point they look at the BTC price and think to themselves: 

‘Can I only buy 0.001 BTC for my dollars? I’ll buy 1 million of these frog coins instead, sounds like a better deal!’

In this first wave of retail investors, influencers pop up who ‘adopt’ certain meme coins. In late 2020/ early 2021 it was Elon Musk who started regularly tweeting about Dogecoin. 

If you want to trade a meme coin, realize that you might still be rather early at this point. But you’ll have to hurry.

On December 20, 2020, Elon Musk tweeted: ‘One word, Doge’. In the following two days, the price pumped by 50%. 

In retrospect, that first 50% jump was only the beginning and DOGE would go on to do another 10x from that point. 

On the other hand, you also don’t want to buy the top and be the bagholder. So how to know if you’re still early? Well, if you’re reading this newsletter, you’re a person who stays on top of the news more than the average retail investor. So you’re probably early enough.

Meme Coin Ecosystems

Let’s face it, DOGE or SHIB won’t bring you another 100x anytime soon. So it’s worth considering what meme coins are launched NOW? Consider that Shiba INU was launched almost four years ago, at the onset of the previous bull market. Buying back then would have pocketed you hefty gains.

How to get in early? These days, to stand out, new chains will not only promise airdrops, but often also launch a meme coin.

For example, Bonk was airdropped on Solana in 2022 to lighten the mood and reward developers and community members in the wake of the FTX/SBF fraud, which had dragged down the price and reputation of Solana.

Almost any chain has its own meme coin these days. Did you know, for example, that the Cardano boys have a meme coin (Hosky, named affectionally after founder Charles Hoskinson)? Cardano has been relatively quiet in recent months, but expect their meme coin to pump whenever the Cardano ecosystem shifts into the next gear.

The smaller meme coins can’t always be traded on centralized exchanges, so you would have to head over to the dexes of the protocol. 

• Injective Protocol, for example, has $Ninja and you can trade it on Injective’s dex Helix. 
• Avalanche has Coq Inu and you can trade it on its dex Trader Joe. 
• Arbitrum has Nola and you can trade it on Sushiswap on Arbitrum One.

A trend in the making is that airdrops of new meme coins require you to participate in the fledgling ecosystem. An example is $Puff. Puff the Dragon will be a novel meme coin on Mantle Network, an Ethereum Layer 2. Users can earn $Puff by minting an NFT called Mystic Potion using mETH, the version of staked Ether on Mantle.

Conclusion

Be aware that retail investors without a lot of time to dive into crypto will rather buy the meme coin than the newest Ethereum Layer 2 based on zero-knowledge proofs. So if you want to benefit from investing in and/or trading meme coins, you should keep your finger on the pulse of the sentiment among the masses. Buy the memes right before or right around when the masses arrive. A way to leverage your meme coin gains is by being involved in upcoming ecosystem meme coins.