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Are Meme coins going to produce massive volatility?

The two infamous Meme coins – SHIB and DOGE- have become the two most popular topics in the crypto community, but they and other meme coins can create volatility in the market.

Memecoins add entertainment value to the crypto ecosystem. Though, for some, it is a serious way to make quick returns on investments. Investing in meme coins is similar to gambling – high risks and, sometimes, high returns. They work by the principle of network effect – a loyal fanbase, who has invested early, markets them on all social platforms to get additional buyers to keep up the price momentum.

Following a strong rally, both meme coins, Shiba Inu and Doge, have become the new hot topic in the crypto-space. Shiba’s price increased by 152 percent in the latest rally, and Doge climbed up to 25 percent in its value.

DOGE has been in the crypto market since 2013 as a meme token. After being considerably unknown for seven years, the crypto went viral worldwide in the wake of Tesla founder Elon Musk’s tweeting spree earlier this year. Unlike Bitcoin and most other coins in the market, which have a limited supply, DOGE has an unlimited supply of tokens, with its current circulating supply being more than 131 billion.

On the other hand, Shiba Inu (SHIB) started its journey less than a year ago. According to its website, SHIB is the “Dogecoin Killer”. Like DOGE, SHIB is also a meme-inspired crypto coin that quickly gained value and speed as a community of dedicated traders were drawn in by the coin’s appeal combined with the tweets and headlines from personalities such as Elon Musk. SHIB has a maximum supply of 1 quadrillion and is still in active development.

Flipside of SHIB and DOGE

Memecoins do not have any intrinsic value and only grow because of the network effect of a strong community and fan base. Therefore, these are not viable assets to hold and grow your wealth over time. In addition, they are easily manipulated by influencers and should be avoided if you are looking at a stable portfolio.

With meme-based tokens like Shib or Doge, the community or retail traders fuel the rally; hence, increasing social recognition will indicate upcoming volatility on the market.

If more traders join the race for the token or coin, the market will most likely act under their sentiment. The sentiment of traders and investors can only be determined with additional indicators and metrics.

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