Meme Coins: Get Rich Quick or Get Rugged Even Quicker

On January 17, a new meme coin called $Trump was launched by the President-Elect. Within two days, its total market value peaked at over $14.5 billion - only to crash by two-thirds shortly after. Reuters reported that the entities behind the coin raked in close to $100 million in trading fees in under two weeks (according to estimates from three blockchain analysis firms). But while it was a windfall for some; hundreds of thousands of everyday traders lost money. Meanwhile, in late 2024 when Trump announced a Department of Government Efficiency - DOGE - Dogecoin surged to achieve a 150% increase post-election -  far outpacing Bitcoin’s 30% gain.

Thanks to moments like these, meme coins are now firmly on the investment radar, but their erratic highs and often painful crashes make them hard to navigate at best, and downright frightening and risky at worst. Are they an exciting new asset class, or are they just a well-packaged scam?

First things first, what are meme coins?

Meme coins are cryptocurrencies that originate from internet culture, social media trends, or even okes. Unlike Bitcoin or Ethereum, which have clear technical foundations, meme coins thrive on hype, community sentiment, and celebrity endorsements. Their value is often volatile, dictated by online trends rather than fundamental utility. While they often start as parodies, meme coins can gain serious traction due to viral marketing and highly speculative trading. Sometimes, this traction is short-lived.

Meme coins have gained mainstream visibility due to their cultural relevance and the potential they offer traders for outsized short-term gains. High-profile figures like Elon Musk have fueled meme coin rallies with a single tweet, driving huge speculative interest. While many traders are drawn to this possibility of overnight riches, the reality is that meme coins are high-risk assets with unpredictable price swings.

Somewhat ironically, the SEC’s negative stance toward crypto has actually fuelled the rise of meme coins. While crypto assets that provide utility or financial returns face significant regulatory hurdles, or (worse) run the risk of ‘regulation by enforcement’, meme coins are openly and blatantly speculative and make no promises to holders, leaving them outside of the regulatory net.

A high-risk game: meme coin volatility

While meme coins can generate enormous gains, they are among the most volatile assets in crypto. Their prices are driven by community hype rather than fundamental value, meaning they can skyrocket or collapse within mere hours. For every story about a trader making 600% gains; there's another about someone losing everything.

Fartcoin is one of the classic meme coins that went all in on absurdity. Launched as a joke (as many meme coins are), it promised absolutely nothing except ‘gassy gains’. Its community thrives on toilet humor and the idea that financial markets should be fun. Despite this ridiculous premise, Fartcoin saw some real traction (hitting 2.2B market cap) proving once again that in crypto, a good meme can be just as valuable as a good use case. Fartcoin followed the typical meme coin trajectory: early hype, a parabolic rise in value and then the inevitable crash when its whales cashed out.

In line with this, Pump.fun is a meme coin platform that allows users to create and trade meme coins quickly and easily, often with little to no technical knowledge. The platform has gained popularity due to its streamlined process for launching tokens, which has led to a surge in speculative, short-lived coins.

Beware the rug pull…

Meme coins are notorious breeding grounds for what the industry calls pump-and-dump schemes. Influencers, celebrities and even viral internet personalities have launched their own coins - but this is often done at the expense of their fans.

Take Haliey Welch, known online as the "Hawk Tuah" girl. After gaining internet infamy (you can read some of the details in Vanity Fair - they’re not for the fainthearted), Welch launched $HAWK which reached a market cap of nearly half a billion dollars within a single day. Hours later, however, the coin collapsed, wiping out investor funds and leading to nasty accusations of fraud. Some called it a textbook pump-and-dump scheme, where insiders hype up a coin, inflate its value and then sell off their holdings, leaving everyday traders with worthless tokens and sometimes devastating losses.

This story isn’t just a one-off - meme coins routinely experience these catastrophic crashes and in February alone, several high-profile meme tokens plummeted, taking millions in investor funds with them.

The most concerning amongst these was the $Libra cryptocurrency debacle - an ongoing political scandal that began on February 14 when the president of Argentina, Javier Milei, promoted a crypto project by the same name. The price of the meme coin spiked following Milei's promotion but then saw a severe price drop, leading to allegations of a rug pull scam (dubbed Cryptogate) and The Economist calling it the "first big scandal" of Milei's presidency.

(These examples underscore why memecoins are also referred to by pejorative term ‘shi*coins’, or “a crypto with little to no value or no immediate, discernible purpose”. )

What does it all mean?

Meme coin mania is often seen as a barometer of retail investor sentiment (the appetite of everyday investors to buy crypto) in the crypto market. When meme coin activity spikes, it often signals a growing appetite for risk. However, 2024 and early 2025 have introduced a new dynamic: institutional investors, via ETFs, have largely steered clear of meme coins. Analysts at Bitwise have pointed to a divergence of views which has seen institutions remain bullish on Bitcoin; but retail traders are pulling back, burned by previous meme coin implosions.

Meme coin market dynamics

For those still willing to take the plunge, understanding key market concepts before you risk it all is essential:

• Liquidity: Meme coins with low trading volumes can experience extreme price swings. Always check liquidity before investing.
• Community sentiment: Meme coin prices are often dictated by social media hype. Platforms like Twitter and Telegram can provide insight into whether enthusiasm is genuine or artificially generated.
• Tokenomics: Some meme coins have built-in mechanisms to drive scarcity, while others dilute their supply constantly. Understanding supply and demand is crucial.
• Pump-and-dump risk: If a meme coin is being aggressively marketed with unrealistic promises, it’s likely a short-term hype play rather than a sustainable investment.
• Early entry vs. longevity: Getting in early can be lucrative, but it’s also incredibly risky to try and ‘pick the top’. Some traders prefer holding well-established meme coins with strong communities rather than chasing the latest trend.

If you’re considering diving into meme coins, it is wise to never invest more than you can afford to lose because much like gambling, fortunes can be made and lost in the blink of an eye.