Last year saw a massive influx of tokens into the meme-coin space. Every theme, piece of lore, and random internet reference has seemingly been immortalized by a crypto asset that you can buy and sell for a profit. This is especially remarkable when you consider that the meme coin sector has been the black sheep of the crypto space for a long time.
But while the meme coin industry as a whole is much more prominent, there is still the issue of mass failure among the tokens within them.
Do Most Meme Coins Fail?
To be clear, it is still possible to make money from meme coins. The tokens that do go on to succeed have fetched their investors several times their initial amount and this happens all the time. A good way to find meme coins that are likely to stand the test of time is to look to exchange listings. As crypto analyst Carlos De Lanuza writes, those looking to discover the newest listings on Coinbase will see several well-vetted meme coins that may be considered. Some factors that deserve your attention are token demand and utility, social media sentiment, and other relevant market factors.
That being said, it’s been suggested that up to 97% of meme coins fail. These include the much-hyped ones that made a splash when they were first launched and the ones that came and went with very little fanfare.
Why Do They Fail
So, we’ve established that many meme coins go on to fail in the market, but why is that? There are several factors that contribute to this:
- Lack of Use Cases
One of the fundamental issues with many meme coins is that they have no use cases behind them. If a token can be used to pay for goods and services, play games, or simply have a powerful blockchain behind it that sees a lot of use, demand for it will be high. Just look at Ether, which has a plethora of use cases. But if a meme coin doesn’t do anything, the demand for it will likely diminish over time, causing it to fail.
- Hype Failure
It is no secret that many meme coins are based on hype and nothing else. Maybe the token references a piece of pop culture or has a funny aesthetic and the developers hope that people will buy it for these reasons. But for every successful meme coin based on hype, there are many that simply don’t connect with investors and due to this, it fails to retain a place in the market. This is also why investors are warned against buying tokens that are mainly hype-based.
- Rug Pulls
We also have to consider the fact that not every meme coin was even designed to succeed. While many developers do want to make a profit, there are others who are running rug pulls, scams, and shitcoins. In all these cases, the goal is the same; get investors to put money into the token and once they do, the developer abandons it entirely, leaving them with worthless tokens. In that case, the meme coin dies a natural death and is forgotten about. Just like with hype failure, investors are always advised to do their due diligence to avoid losing their money to these.
- Competition
Because of the success of other tokens like Dogecoin and Pepe, the meme coin space has become very saturated, with hundreds of new options entering the market every year. The problem is that while the number of tokens you can buy is always increasing, investors’ funds don’t grow at the same level. With limited funds to invest, some tokens (even worthwhile ones) will have to be discarded. In the same way that not every song can top the charts and not every movie can gross a billion dollars, not every meme coin can succeed in the industry.
- Poorly-Done Tokens
Quality projects are more likely to rise to the top in both the meme coin space and the crypto industry, in general. But if a meme coin project is poorly done, its chances of success are quite low. Some possible issues include an unappealing aesthetic, an unremarkable name, a bad website, and so on. Some entrepreneurs rush to put together a meme coin project just to profit from the industry but ultimately fail due to their lack of effort.
Conclusion
While the meme coin space has produced some gems that have stood the test of time, it also has countless failed projects. Whether it’s due to heavy competition, a lack of use cases, or their being outright scams, there are many reasons for this. Moving forward, both developers and investors need to be aware of these reasons to avoid losing time and money to the next failed meme coin.