Breaking Down the Psychology Behind Memecoins

With a market cap of over $50 billion USD, memecoins now rank as the 10th biggest sector in crypto — outranking popular fields like GameFi and Ethereum Layer 2s.

But what is it exactly that makes memecoins so popular? How are tokens created as a joke outranking projects with innovative technology and sound fundamentals?

To answer these questions, we first need to see memecoins for what they truly are — memecoins are the anti-cryptocurrency. 

They exist to spite the righteous crypto investors who believe they are investing in something world-changing or groundbreaking. 

Dogecoin, the original memecoin, was created specifically for this reason. It was a simple fork of Bitcoin made as a joke to throw shade on the almost comical amount of alt-coins being created in the 2013-14 bull run — all of which claimed to have some unique purpose or use case.

All memecoins since have been created for the same reason (whether they realize it or not). 

SHIBA, PEPE, BONK, and even DEGEN all exist as anti-cryptocurrencies. They do not claim to have any underlying value or tech that sustains them. They were created to generate fun, inclusion, and a community-driven culture while not taking themselves too seriously. 

When a new Web3/crypto/blockchain-based project launches, it generally does two things:

1. Hypes up the tech and innovative nature of its product.

2. Launches a token (usually ERC-20 format).

This structure leads people to believe the token is somehow related to the new tech and innovation their product will bring. However, this is almost never the case.

These tokens usually have little to no real value. Their main utility is as a ‘governance’ token. This means, in theory, holders of these tokens get voting power in the future direction of the project. 

In reality, most holders rarely bother to make use of this ‘voting power,’ and the vote itself is usually a foregone conclusion as the founding company almost always dictates the outcome.

It is a false utility hidden behind the product's innovative features. Essentially, the product/tech has fundamental value, but the token does not. 

The tokens of these projects are no different from memecoins. In fact, they are worse in many ways as they pull the wool over investor's eyes.

Memecoins don’t pretend to be something they’re not. 

*Note: The above point is specifically concerning tokens. Native cryptocurrencies (or “coins”) such as BTC and ETH have (some) value that directly derives from their respective blockchain’s usage and technology. 

Bitcoin was created with the intention of becoming the decentralized currency of the internet. It has achieved this in some areas, but its prohibitive fees and slow transaction finality have, and likely always will, prevent it from fully achieving this goal. 

Other candidates, such as ETH,  LTC, XRP, SOL, etc, either suffer from the same issues as Bitcoin or fail to fulfill the decentralization requirement. 

Memecoins, as crazy as it seems, are probably the closest thing we currently have to Satoshi’s original vision. 

They are community-driven, decentralized, and their tokenomics generally make them more usable as peer-to-peer electronic cash system than anything else.

And it is only fitting that the currency of the internet is denoted in the staple of internet culture — memes.

The main mission of most memecoin projects is to generate value for token holders (legit, non-rug ones, of course).

This is in stark contrast to almost all ‘innovative projects with sound fundamentals.’

Take the recent RWA token or AI token hype as an example. Many of the projects behind these tokens are undeniably building groundbreaking products and solutions that will be game-changing for the industry. But what value does that give to their token holders? In general, not much.

Memecoins, on the other hand, are not focused on innovation or building game-changing tech. Their focus is to find ways to reward and bring value to their token holders.

Partnerships, airdrops, white listings, token burning mechanisms, as well as building out exclusive DeFi and GameFi products, are just a few of the ways memecoins bring direct value to their community.

The focus is building up the token and the community — the tech can come later (if at all). 

There are many reasons people continue to invest in memecoins. The culture, the community, the absolute ridiculousness of their very existence — it all comes into play, and each person has their own reason for investing. 

However, the main reason memecoins have been so successful, and will likely continue to succeed long-term is that they give crypto investors what they are really here for — a way to make profits without feeling ashamed about it. 

Ultimately, if you own crypto, you do so because you want to make money, no matter how you try and justify it — you wouldn’t invest if it wasn’t for the potential profit.

Memecoins embrace this fact and give people the license to put their guard down.

With memecoins, you don’t need to justify your investment. You can proudly say, “I’m not here for the tech; I’m here for the memes!” 

Join the /milo community on Warpcast and follow @nickysap and @diviflyy for more insights into the world of memecoins.