Trendy cryptos like Dogwifhat ride meme coin comeback - don't get too excited

By Anushree Dave

Welcome back to the Distributed Ledger newsletter. I'm Anushree Dave, a reporter at MarketWatch.

It seems like just yesterday that I was writing about the possibility of meme coins making a comeback, but it was actually exactly a year ago, and since then we've seen a wave of interest come and go.

This time around, we're talking about a new coin: dogwifhat, launched in November 2023. It's up 33.38% in the past 7 days, and up 251.39% this month, according to CoinMarketCap. Other coins are also seeing a spike in trading in the past month, including dogecoin, PEPE, and Shiba Inu, according to CoinMarketCap data.

A meme coin is a type of cryptocurrency that's loosely defined as highly speculative and supported by online communities and retail traders. They're usually named after cartoons, animals, or something humorous, which is where the 'meme' aspect comes in. Unlike other cryptos, meme coins are known to be highly volatile.

What's driving the interest this time, and what should you keep in mind about meme coins? I got insight from two industry insiders.

Meme coins are driven by community

In 2021, buying of so-called meme coins was sparked by chatter on social-media site Reddit and this led to both serious gains and serious losses for retail investors.

It serves as a reminder that meme coins are largely driven by the community built around them.

"Meme coins are not an investment tool but rather a mode for building community," said Bartosz Lipinski, founder & CEO of Cube.Exchange, a digital asset marketplace. "If you're there for profit, you're there for the wrong reasons."

Lipinski thinks the renewed interest in meme coins has to do with a low barrier to entry (the price of dogwifhit is around $4.00) and having a space that's still mostly retail investor-driven, versus having institutional involvement as bitcoin (BTCUSD) now does.

In many ways, meme coins take enthusiasts back to the early days of crypto, when there was less institutional involvement. Lipinski says "meme coins are a way for the community to regain its autonomy and align with the original ethos of crypto...to reimagine an alternative financial system that is unrestricted by the rigid power dynamics that bar traditional systems."

But the high volatility of these assets can lead to substantial losses, as we've seen previously.

"It's essential to understand the speculative nature of these investments and consider their risk tolerance," said Jake Ostrovskis, OTC trader at Wintermute. "Diversification and not investing more than one can afford to lose are prudent strategies. Engaging with the meme token market should be approached with a clear understanding of its speculative and highly volatile nature."

Crypto in a snap

Bitcoin is down 4.35% over the past seven days, while Ether (ETHUSD) is down 4.75% over the same period, according to CoinDesk data.

Must-reads

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How Sam Bankman-Fried's 25-year sentence compares to Bernie Madoff and Elizabeth Holmes's jail time (MarketWatch)

-Anushree Dave

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04-03-24 1244ET

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