In a recently published report titled Understanding the Rise of Memecoins, Binance’s research team examines the factors driving the popularity of memecoins and the inherent risks of investing in this particular class of cryptocurrency.
Why Are Memecoins Attracting Investment?
As the global money supply expands and economic conditions encourage riskier investment behavior, funds are typically flowing into traditional assets like the S&P 500 and real estate. But some of that capital is flowing into major cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) and, further down the spectrum, into memecoins. Known for their volatility, memecoins are appealing to investors looking to make significant returns on excess capital.
The report notes that memecoins are an entry point for retail investors who are increasingly looking for alternative ways to build wealth. Blockchains provide a financial infrastructure that offers enhanced transparency and accessibility that contrasts with traditional financial systems. Memecoins reflect these principles by attempting to democratize investment and provide equal global access, according to Binance Research.
According to the report, memes have long been a viral, community-driven form of cultural expression, and that appeal has spread to the financial sector with the rise of memecoins. The financialization of memes, thanks to blockchain technology, symbolizes the integration of value and cultural significance in the modern economy. According to Binance Research, this trend points to a broader shift in how value is perceived, combining financial potential with the power of online communities.
The study also highlights defining characteristics of memecoins that demonstrate longevity, such as fair launches and low tokenomics. These characteristics, demonstrated by the success of established tokens such as Dogecoin (DOGE) and Shiba Inu (SHIB), can serve as strategic insights for projects planning token launches. The rise of memecoins is seen as a testament to blockchain’s ability to unite global communities around common ideas and movements.
Despite their popularity, Binance Research warns that most memecoins are short-lived. A staggering 97% of memecoins that took off in 2023 and 2024 are now “dead” with negligible trading volume.
While a few, such as GE and SHIB, have remained relevant for ten and four years respectively, the survival rate of new entrants remains low.
According to the report, the rapid growth and speculative nature of memecoins make them a double-edged sword. While they offer the potential for outsized returns, their dependence on market sentiment and lack of significant underlying value make them a very risky investment.
*This is not investment advice.
