Meme coins are designed to skyrocket in price within a very short period. That is the key to their ongoing appeal: If you pick the right meme coin, you theoretically have a chance of adding a few zeros to your bankroll. Add in the fact that most meme coins are based on a funny internet meme, and you can understand why they are so popular with crypto investors.
But does that make them a good investment? Should you really be adding dog-themed meme coins like Dogecoin (CRYPTO: DOGE) and Shiba Inu (CRYPTO: SHIB) to your portfolio? If you’re serious about building long-term wealth, the answer is probably no, and here’s why.
In a recent interview, tech billionaire Mark Cuban laid out several reasons why you should think twice before investing in meme coins. The primary reason, of course, is because there is often nothing backing them. Meme coins are backed by hype, sensationalism, and buzz, but not much else. In fact, some meme coin projects will tell you from the very outset, “Hey, this coin is completely useless. It’s for entertainment purposes only.”
Image source: Getty Images.
However, that doesn’t mean a meme coin can’t eventually transform into a coin with some limited utility. Dogecoin is one example of this. It started off as a giant internet joke, but over time, it has become a coin with a market cap of $20 billion. That’s because some companies — including the Dallas Mavericks, the NBA franchise owned partly by Mark Cuban — now accept Dogecoin as a legitimate form of payment. Dogecoin was created using the same code as Bitcoin and Litecoin, and can process financial transactions faster than Bitcoin.
Shiba Inu, too, has attempted to transform from a pure meme coin into much more of a utility coin. Last year, Shiba Inu launched Shibarium, a blockchain scaling solution designed to expand the Shiba Inu ecosystem. The goal was to create unique blockchain gaming and entertainment experiences based around the Shiba Inu mascot dog, as well as to open up the Shiba Inu blockchain for potential decentralized finance (DeFi) applications.
Cuban compares investing in meme coins to a game of musical chairs — you don’t want to get caught with the wrong meme coin when the music stops. Unfortunately, the expected lifespan of a typical meme coin is very limited. Dogecoin, which has been around since 2013, and Shiba Inu, which has been around since 2020, are the exceptions here. Most meme coins have an expected lifespan of a few days, if not a few hours.
It’s incredibly easy to create a meme coin. You don’t even need to hire a a developer, since you can easily find online tutorials that explain how to create a million-dollar meme coin in less than 5 minutes. As a result, people are launching thousands of new meme coins every day.
And that means investor preferences can change overnight with no advance warning. Blockchain research firm Chain Catcher recently showed that, if you held a meme coin for more than 24 hours, you had a 99.6% likelihood of losing money on your investment.
So the race is always on to find the next hot meme coin. Right now, for example, cat-themed meme coins are more popular than dog-themed meme coins. The hottest cat-themed meme coin is currently Popcat (CRYPTO: POPCAT), which was up an incredible 40,000% as of mid-October.
The problem is that it’s almost impossible to know if you should be buying dog, cat, or some other pet-themed meme coin at any point in time. Last year, frogs were hot, as Pepe (CRYPTO: PEPE) skyrocketed in value.
If you’ve been buying dog-themed meme coins in 2024, then you’ve been leaving money on the table. Dogecoin is only up 51% this year, and Shiba Inu is only up 71%. If you had been buying cat-themed meme coins, you’d be up 40,000%.
That being said, Cuban says he still loves Dogecoin for the “fun” and “the community.” So I’m not going to say that all meme coins are worthless or that there is absolutely no reason to invest in them. And I will admit that the potential for massive short-term gains is certainly enticing, especially since you can get started with just a few bucks.
However, I would not advise adding meme coins to your long-term investment portfolio. You don’t want to be playing musical chairs with your money. Over the past decade, Bitcoin has absolutely trounced the performance of Dogecoin, and I would expect more of the same over the next decade.
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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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