The Memecoin Frenzy Explained (And How I Missed The Signs)

Crypto is cattywampus and I'm here for it! Memecoins are back and minting millionaires again with average returns of 1,312% so far this cycle. At first, this blew my mind given the current economic dumpster fire. Why are people YOLOing their dollar-dollar bills on cartoon dogs and frogs amid a cost-of-living crisis? Not to mention, we’re staring down the barrel of a recession. The math ain’t mathin’. Or is it? Hindsight is 20/20, so let’s unpack the signs that predicted the current memecoin mania and how I missed them.

Top Memecoin Gainers at a Glance:

*based on data as of April 23, 2024

Understanding Memecoins

When a funny internet trend and a crypto-degen fall in love, they have a baby and feed it high-quality social media hype. Poof! We have a memecoin with mass appeal. But unlike their solemn relatives like Bitcoin, memecoins solemnly swear they're up to no good use-case. They don’t solve any problems or offer any kind of disruptive innovation - literally zero utility. 

Exhibit A: Dogecoin (DOGE). Created as a joke, it’s now laughing all the way to the bank. But most of them are just up to no good, period. I’ve lost a few hundred buckaroos to your classic rug-pull. Then the notorious volatility took me out. I bought Floki (FLOKI) during the 2021 market top and it tanked about 15 seconds after hitting that buy button. 

Memecoins are nothing more than crypto slot machines. But cuter, because some have pictures of dogs in hats.

Why Are Memecoins Pumping in 2024? It Started With Bitcoin 

Fast-forward to now, and memecoins are swinging from the chandelier once more. I personally know several people who have printed a ton of money for themselves by sniping the next up-and-coming coin. And by sniping, I mean gambling with better odds because this isn’t their first rodeo. 

Historical data and crypto market optimism are pushing investors further out on the risk curve. Simply put, it means people are boldly jumping into higher-risk projects looking for higher returns. That’s because when Bitcoin performs well, the rest of the crypto market bounces with it.

Capital begins to flow downstream through the altcoins and eventually to memecoins. But in the wildest plot twist ever, that capital skipped past the established blue-chip tokens and blew up the meme scene. These are the classic crypto market green flags I ignored:

A Year-Long Rally 

Crypto pundits have had their crystal balls to the wall looking for signs and wonders. I started seeing them a year into the bear market and eventually called the bottom in December 2022. I was right, but talked myself out of it. It didn’t help that a personal friend in the industry responded with an Anchorman gif saying ‘I don’t believe you’. 

A few weeks later, Bitcoin kicked off the new year with a 42% rally in January 2023, and more than doubled its price by the end of the year. That’s a gorgeous recovery. People were finally feeling the sun on their face after a brutal crypto winter. 

With renewed optimism about Bitcoin’s future, crypto die-hards have turned their sights on a specific niche of altcoins. According to the 2023 crypto market report by CoinGecko, memecoins were the third hottest point of interest for investors. 

Bitcoin Spot ETFs

When Bitcoin sneezes, the crypto market spikes a fever. In the middle of literal flu season, the USA approved a Bitcoin Spot ETF on January 10th, 2024. Massive asset management firms like Blackrock, Greyscale, and Fidelity (to name a few) were quick to launch Bitcoin ETFs on US stock exchanges. The institutional floodgates were thrown wide open.

In just two months, over $113 billion USD poured into the market. The move vindicated crypto as a legitimate asset class. helping Bitcoin hit a new all-time high of roughly $73,000 USD by the end of March. This told crypto believers what they already knew: traditional and institutional investors were ready, it was the regulators who weren’t. The influx of new capital triggerd a quick price appreciation, with meme lord Dogecoin in hot pursuit.

BTC market cap from Jan 2024:

DOGE market cap from Jan 2024: 

The Bitcoin Halving

As if the market wasn't hot enough, the much-anticipated Bitcoin Halving event in 2024 added more fuel to the speculative fire. A Bitcoin halving is a scheduled reduction in the rewards given to miners and happens approximately every four years. More importantly, it’s a cornerstone of Bitcoin’s economic model to preserve its value over time. Bitcoin holders have come to anticipate post-halvings with easy profits. 

And they’re not wrong. So far, each halving has marked the beginning of a new crypto bull market. Historically, Bitcoin spends the next 12-18 months rallying to a new all-time high. Many holders cash in some of their Bitcoin profits to invest in riskier altcoins with higher yield potential. 

This typically kicks off “altcoin season”, a time when newer and lesser-known tokens generate significant, widespread gains. Last bull run, memecoins were among the last group of tokens to pump. But this cycle, they were the first. 

Really, Memecoins? In THIS Economy?

When macroeconomic trends turn sour, it historically has a profoundly negative effect on markets. Investors cash out of high-risk assets en masse and park that wealth somewhere safer. Equity markets dip, capital dries up, consumers cut back, and businesses respond with layoffs. This creates a vicious cycle that leads to recessions and depressions. 

The whole vibe feels like that moment in every JJ Abrams show when he loses the plot and nothing makes sense. So you bail. Remember Lost? I rest my case.

Right now, we’re dealing with crazy inflation, a cost of living crisis, a brewing recession, wars, and rumours of wars. Not to mention, the stock market is looking extra frothy and primed for a pullback. I don’t know about you, but I’m not about to gamble invest in high-risk speculative assets with nary a utility in sight. Not when grocery prices rival Gucci swag and AI is stealing our jobs. Thank you, next.

And that’s exactly why the current memecoin frenzy blindsided me, despite the Bitcoin breadcrumbs. I assumed everyone felt as skittish as I do and would refrain from financial risk-taking, like I have. It’s also what John Maynard Keynes said they would do but shouldn’t because it's bad for the economy. Well, they understood the assignment while I was busy making assumptions.

I forgot that crypto investors are a different breed and, apparently, also unwitting Kenysians. I also completely disregarded how the current state of affairs might push normies into unchartered territory. Here’s why I think our economic doom and gloom is actually driving the memecoin frenzy: 

Regret is a Hell of a Drug

First, the crypto community never forgets. During the last major bull run, stories of overnight millionaires splashed across headlines. Regular people turning a few Loonies into life-changing wealth painted a narrative of easy money. The ones who remember these stories have internalized an acute case of FOMO (fear of missing out). 

Dogecoin’s market capitalization ballooned to almost $90 billion USD in 2021, which is one-third of the entire crypto market cap today. And Bitcoin is just clearing her throat, she hasn’t even started to sing yet.

Now that institutional money has legitimized crypto, liquidity is rolling in. The little guys are trying to catch lightning in a bottle again. They don’t want to miss their shot at the next memecoin jackpot.

Pessimism, Pessimism Everywhere

If FOMO is the root cause, then pessimism is compounding it. Most Canadians believe the economic forecast is cloudy with a chance of job loss. As traditional investments look increasingly unstable, the allure of quick gains intensifies. Thanks to their low entry costs and potentially massive returns, memecoins are financially accessible to most people whereas traditional stocks are not.

For perspective, a friend of mine threw roughly $100 into Mooncoin during the last bull run. It went parabolic in just a few weeks. He cashed out when his position ballooned to $30,000. Had he held on a few weeks longer, he would have made $300,000. I turned $75 into $3,000 (but I was too dumb to take profit and the coin went to $0). 

In contrast, NVIDIA  has been dominating the headlines. Its price surged almost 250% over 2023 and is now hovering around $12,323.91 AUD at the time of writing. That’s a fantastic gain - for traditional assets. But the 5-digit sticker is cost-prohibitive, the gains are comparatively underwhelming, and that's if the market doesn't crash. 

Memecoins present a risk-reward ratio that’s hard to resist. Losing $100 is far more palatable if there’s a chance you could 100x your investment in just a few short weeks. Those are odds you’ll never get in the traditional market unless you ape into penny stocks then wait 30 years hoping one turns out to be the next Amazon (AMZ). Spoiler, that's also gambling.

Desperate Times, Desperate Measures

Nearly half of all Australians are one surprise bill away from becoming the next Walter White. Inflation is pushing the cost of everything into the stratosphere, which means we’re getting poorer by the day. Coupled with a severe housing affordability crisis, millions of people are strapped for cash and desperate for relief. 

The middle class has officially lost its standard of living and is starving for opportunities. If you relate, then memecoins probably seem like a viable solution, especially when savings accounts and bonds offer microscopic returns. For some folks, these coins might feel like their only ticket off the financial struggle bus. 

Geopolitical Tensions Eat Your Lunch

Conflict, social unrest, and tribal politics are fueling global instability. This further undermines our confidence in traditional financial systems and our own elected officials. Not to mention the historical impact war has on currency valuation and access to essential resources. 

We’ve already seen how current global conflicts have affected the price of wheat and oil, while policy failures at home have stripped away our purchasing power. Not only do memecoins offer potentially outsized rewards, but they also feel like an act of rebellion against a broken system. After all, Bitcoin was quite literally created as a giant middle finger to central banks.

Bridging the Great Divide

The current social scene is giving The Purge vibes. I’ve never experienced this level of polarization and collective emotional instability. Since memecoins thrive almost entirely on community hype and solidarity, they offer a sense of belonging amid dizzying division. These tokens unify people with their shared passion for comedy, pop culture, and crazy profits. 

Dig a little deeper and these communities are also far more accessible than traditional crypto communities, which tend to be more technical and exclusive. Memecoins are built on fun and creativity - a powerful draw for anyone feeling alienated. I’ve engaged with these communities firsthand and they offer a refreshing escape from the world’s toxic nonsense.

The Meme Dream Team

Then there are the opportunists who saw the writing on the wall and said “hold my beer.” People figured out that creating your own memecoin and recruiting a hype army isn’t that hard. Last bull run, the Binance Smart Chain exploded with new memecoin projects. All you needed were some basic coding chops and social media skills.

Now, you don’t even need to code. Enter Pump.fun, Solana's sexy new memecoin-generating app. It has turbocharged the memecoin frenzy to unprecedented levels. Pump allows anyone to mint their own cryptocurrency for the price of a Double-Double. According to CoinDesk, it earned over $5 million in fees within a month of launching and is on track to hit $66 million in yearly revenue. 

Then there’s the plethora of AI crypto bots designed to hunt and automatically buy risk-worthy coins. A fan favourite in my crypto group chat is Artemis AI (ATAI). This bot uses aggregate data to detect potentially high-yielding coins on the Ethereum blockchain. I’m not exactly sure what the hit rate is, but several friends have enjoyed over 100x gains on Artemis calls. Absolutely mind-blowing. 

Memecoin’s Calling Your Name? Buyer Beware

Memecoins are not for the faint of heart. First and foremost, it’s gambling. None of them have any underlying value and many are scams. Their prices can plummet just as quickly as they soar.

Never invest more than you can afford to lose. The line between stunning gains and steep losses is razor-thin, so your risk management needs to be tight. Memecoins are super fun but not something to stake your financial future on. 

Next, use reputable sources and tools to track market trends and make informed decisions. Localcoin ATMs provide a secure, user-friendly interface for engaging with crypto. And they offer the well-established memecoins like Dogecoin (DOGE) and Shiba Inu (SHIB). 

Find a Localcoin ATM near you for a secure, simple, and smart way to throw your hat in the ring. Just your hat, though. Don’t bet the farm.