What Causes Meme Coins To Have Their Parabolic Runs?

The world has witnessed coins with apparently little to no potential gain enormous traction in the crypto market.

What Causes Meme Coins To Have Their Parabolic Runs?
Photo by olieman.eth on Unsplash

Experts at a Huobi Research Institute-organized webinar discussed the factors that contribute to a meme coin’s success. Investors, approach with caution.

A meme coin is largely known as a cryptocurrency that has its origins in an Internet meme or humorous characteristic, and many often have a reputation for being pump-and-dump schemes, lending illegitimacy and an overall unsavoury reputation for crypto trading.

While many such coins fade from the public eye eventually, the meteoric price runs of some beg the question: just what factors contribute toward a meme coin’s success?

The answer, according to panellists, lies in a combination of pro-common man and anti-elite sentiment, paired with high accessibility.

Meme coins share some common features such as a large issue size and low entrance price. The underlying idealism behind their creation and distribution often focuses on fairness and equality.

“People love meme coins because they’re easy to identify with,” said Flora Li, Director of the Huobi Research Institute and author of the institute’s annual report titled Global Crypto Industry Overview and Trends: 2021–2022.

Li added that meme coins buyers are often lured by the promise of striking it rich overnight. “They tend to low value coins, where one can buy a large volume for a small amount of money, so crypto newcomers get both a sense of satisfaction plus the illusion that worst-case losses are also minimal.”

According to Li, meme coins also represent the rise of a counter-elite culture. “The world has traditionally been controlled by elites, so the notion that history can be made by the power of everyday citizens is highly appealing for many.”

Two conditions

Certain important conditions must take place before a meme coin enjoys a parabolic rise, said Co-Chairman of the Singapore Blockchain Association Chia Hock Lai.

A meme coin’s success first requires a bull market, shares Chia. Secondly, it requires positive reviews and backing from influencers, such as Elon Musks’ public support of Dogecoin.

As always, caveat emptor, panellists caution.

“These two elements will give rise to a parabolic price rise for meme coins,” says Chia, “But different countries will have different subcultures and it’s very unlikely meme coins will be the rage this year.”

Astronomical price rises of this nature have also been observed on Wall Street, points out Li. “But meme coins fall under speculative assets and most are useless with no specific goals in place.”