Headline:
Body: I remember joking around with a group of friends, and saying how one of the guys in the group had saved some orphans in a fire. I thought this was pretty funny, so I went to the Paint program and dummied up a “newspaper article” remembering Joe as the swashbuckling hero who single-handedly saved 4 orphans from certain death. I thought it was really funny and I thought I was super clever for having “substantiated” the claim.
Well, it turns out that when you are a multi-millionaire or billionaire, your jokes become so much more complex. In point of fact, some get so involved that their “jokes” have their own cryptocurrency attached: That’s how we get Dogecoin and others. These coins that started as a joke among wealthy friends are often referred to as meme coins.
OK, so what ARE meme coins?
Let’s begin by defining what they are NOT. Bitcoin and Ethereum are occasionally useful for investment purposes. The meme coins are (with exceptions) worthless because they are so thinly traded. There is simply not much of a market for them. In fact, many within the media describe these meme coins as pump-and-dump schemes. On the other hand, they can act as a fun and enjoyable way to begin or continue a conversation about investing. On the off-chance that it earns a profit, you could have a homerun. But, it most likely will not happen that way. You can buy a variety of meme coins from either centralized or decentralized exchanges. In fact… you know what….I’m going to start my own cryptocurrency. Let’s see… dog themes seem to be good. Some kind of alliteration or rhyme scheme seems to help. Aah, I’ve got it. I will sell canincoin. (It really can be THAT easy.) Before you make too much fun of my cryptocurrency, please consider that there is a cryptocurrency called “Australian Safe Shepherd” hereinafter referred to as, well, ASS.
A good joke amongst millionaires, where’s the problem?
The problem is that normal people, people like you and me, don’t have the millions to fall back on. So, when there is a rug pull, the millionaires simply laugh and clink champagne flutes. C’est la vie! But, the normal folk who get caught, lose all of their money, and this is the problem. Also something to be considered is how incredibly thinly traded these memecoins are. Basically, there must be a market made for each individual sale. And, between the buying and the selling, the value of this cryptocurrency can vary dramatically. Added to all of this, the rate of inflation is unreal because many of these memecoins don’t have the built-in inflation defense of burning.
It gets worse, I’m afraid. For all of the above-referenced reasons, the pricing of these meme coins is highly volatile. But, the other important ingredient (read “ingreedient” perhaps) is that these meme coins are marketed on social media, reaching people who completely lack the wherewithal to understand cryptocurrency as an investment. Add the small possibility of immense gain (and the flipside of large probability of large loss) with the popularity of social media and you have the recipe for potential financial disaster for many.
The Verdict
Please, please be very careful if you invest in memecoins.
TREFERENCES
Meme Coin Explained (investopedia.com)
What Is a Meme Coin and How Do They Work? | PCMag
What Are Meme Coins? Definition and Examples – NerdWallet
Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice. Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.