In a financial market, some investments may not be fundamentally strong but they perform well. Same is the case with some memecoins.
Memecoins, as the name suggests, are digital currencies that begin as a joke. They do not have an underlying purpose.
One of the most prominent ones, DOGE, also began as a joke on cryptocurrencies.
Little did its founder know that it would go on to become a favourite of many investors and command a loyal fanbase.
Today DOGE is supported by industry stalwarts including Elon Musk and Vitalik Buterin.
Why Memecoins Are Popular Among Investors?
The stunning bull run of 2021 created numerous memecoin millionaires which started a new race for memecoins.
DOGE inspired coins such as Shiba Inu, Floki Inu, Baby Doge, etc. arrived on the scene.
Well, many purposeful projects also created millionaires, but memecoins have carved their own niche in the market.
Their spectacular returns have instilled FOMO (Fear of Missing Out) in new investors. These FOMO driven investors are looking to find the next big project at the early stage.
Most of the newbie retail investors are not able to buy Bitcoin or Ethereum due to their exorbitant prices. As a result, to make gains in similar proportions, they look for new projects which have the potential to compete with the old biggies.
The newbie FOMO driven investors do not give heed to the project fundamentals. They treat every project as a speculative asset.
Memecoins Are Just Speculative Assets
Memecoins do not have any purpose. They are just considered as speculative assets that can provide appreciating returns. That’s why they become the target of newbies. Some investors become millionaires, but many see their principal amount plummet.
When memecoins get a rousing reception from the community, they establish a vision.
Conventionally, it is considered prudent to invest in any financial offering whose fundamentals are strong. Initially, a coin is in a price discovery phase wherein market forces determine its value. That’s why any new investment offering may provide long term returns only if it has a long-term vision.
Other than memecoins, investors also look for altcoins that can provide huge returns like Bitcoin and Ethereum. The same practice of evaluating fundamentals applies here.
The prominent memecoins like DOGE and SHIBA are outliers. There are numerous memecoins in the market, but only a handful of them are performing well. It is just because they have stronger fundamentals.
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