Meme Stocks Or Tokens? Why Dog Coins Won’t Be The Next GME
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Meme Stocks Or Tokens? Why Dog Coins Won’t Be The Next GME

Meme stocks have galvanised community spirit, while meme tokens rely on maintaining perpetual hype.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

With the recent rise in SHIB and DOGE, some retail investors may be hoping there are some similarities with these dog tokens and meme stocks such as GME and AMC. This is understandable that traders are looking for these opportunities in the market, but there are big differences in meme stocks and meme tokens that we will explore in this article.

Becoming a Billionaire Overnight

Making the rounds on Twitter last week was the story that the owner of this wallet address may be the most successful investor of all time:

  • $8,000 worth of Shiba Inu (INU) tokens bought in August 2020
  • A year later, the dog coin appreciated over 7 million percent, turning $8k into $5.7 billion

That this lottery-like investment is even possible to achieve is an important phenomenon to examine. The trading volume for SHIB over the last 24 hours has exceeded $8.4 billion — making it possible for this trader to actually cash out their holdings and make a return.

However, as the selling begins, this could crash the price due to the large volumes that would enter the market as sell-side pressure. It should also be noted that this $8.4 billion figure is the combined total of all exchanges, so this whale may need to divide up their holdings between different platforms and not sell too quickly if they wish to realize its gains.

This example does raise an interesting question: why do dog-themed meme coins gain this kind of traction? And is this is a similar act of “degen defiance” fuelled by memes as we’ve seen in GME and AMC long plays from retail traders? After months of promotion for Dogecoin (DOGE) by billionaire Elon Musk earlier this year, The Tokenist took a deep dive on the merits of DOGE, which incidentally is where the meme token craze started back in December 2013.

It All Started With Dogecoin

Dogecoin’s creators, Billy Markus and Jackson Palmer portrayed the coin as a joke meant to popularize the concept of cryptocurrency. However, they were later perturbed by its success.

“I don’t mind if someone spends ten bucks and gets some Dogecoin,” … “It’s like buying a movie ticket or something, that’s fun. But when someone puts $20,000 in? That makes me really, really uncomfortable.”

Although DOGE was released in late 2013, it took years for it to be popularized beyond the fringes of small Reddit forums. More recently, Elon Musk took the meme coin to new heights, using his significant influence on Twitter to seemingly pump its price on a regular basis. After Musk arguably helped to trigger a crypto market crash in May, Jackson Palmer, one of the Dogecoin creators, had this to say about Musk in a now-deleted tweet:

“Reminder: Elon Musk is and always will be a self-absorbed grifter.”

As the origin story goes, it is not very flattering for meme coins, but what does it tell us? There are a couple of noticeable phenomena that meme coins have highlighted:

  • Get rich quick schemes are in high demand, so much so that they override concerns of utility or long-run viability. For instance, dozens of other cryptocurrencies are arguably superior to DOGE as a means of cheap and fast payments.
  • This racing for wealth creates a specific mindset, known as “Crypto Degens“. At its purest definition, this is a class of investors who only look to join the next pump, not relying on technical or fundamental analysis to guide their investment decisions.

“…degen trader buys into an asset not because they see value, rather they do so with the belief that others will join in after them and speculate on the price swings.”

This is the essence of meme coins — perceiving crypto assets as shortcuts to wealth, which in the case of Dogecoin has been quite noticeable. Beneath Elon Musk’s every tweet, one could almost always see people asking him to do some kind of DOGE meme tweet. Why? To pump its price so they could sell at a higher position than when they entered the market.

This is the perennial danger of meme coins. Because they don’t rely on inherent value and have high volatility, a hype must be conjured up to excite interest. In turn, those who have bought low could sell high, while those who have joined the pump later on due to FOMO (fear of missing out) tend to lose money.

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Shiba Inu – Meme Coin Evolved?

Although Shiba Inu wouldn’t exist without Dogecoin, the former has evolved beyond the likes of Elon Musk. After Shiba Hodler asked Musk how many SHIB tokens he holds, he answered the following.

Surprisingly, SHIB only dropped briefly after Musk distanced himself it, perhaps showing that meme coins have grown beyond the tweets of the Tesla CEO.

Going against previous trend, meme investors disregard Musk’s one-word dismissal of the new dog coin. (Image credit: TradingView)

This was extremely revealing considering that it was Musk who triggered SHIB’s rise after sharing the picture of his real-life Shiba Inu dog Floki.

For the price of an asset to fall, a selling pressure has to be created. It seems that Elon Musk may have played the role of the originator, but his input no longer matters as much. Degen investors have created their own self-perpetuating hype fuel, including the new Floki Inu (FLOKI) dog coin, launched a few weeks later.

Dogecoin lost his memetic freshness, taken over by younger dogs – Shiba Inu (SHIB) and Floki Inu (FLOKI). (Image credit: TradingView)

Only a small number of SHIB holders decided to sell, while the majority spurred the price even higher, buying the temporary dip. The question is, what other factors generate this interest? After all, wasn’t Shiba Inu created anonymously as a DOGE parody? Moreover, it seems even more beleaguered than DOGE:

  • Massive amount of token supply – 1 quadrillion – priced at a fraction of a cent.
  • Vitalik Buterin burned 40% of its supply to a dead wallet, after having sent 50 trillion SHIB tokens sent to India’s Covid Crypto Relief Fund.

Elon Musk and charitable donations may have lifted SHIB’s wings, but it now has to continually generate hype to continue seeing gains in price. Although Shiba Inu does have its ShibaSwap decentralized exchange (DEX), Floki Inu’s ambitions have moved up further into a trio of projects, which include:

  • Valhalla, an NFT gaming metaverse
  • FlokiPlaces, an NFT and merchandise marketplace
  • Floki Inuversity, an educational platform

Will this be enough to sustain further growth? This may depend on the outcome of a petition to Robinhood, requesting for the popular broker to list Shiba Inu on its platform. As of press time, the change.org petition has nearly 460,000 signatures out of a targeted 500,000.

Squid Game Token Pulls The Rug

As an example of how meme tokens can hurt investors, Squid Game (SQUID) coin has demonstrated how the hype balloon can pop in a classic example of pump-and-dump price action.

After having gained over 230,000% percent during the week, SQUID took a nosedive. (Image credit: TradingView)

It seems that Netflix’s Squid Game, although enjoying planetary popularity, doesn’t have the same staying power as dog coin projects.

Meme Coins vs. Meme Stocks

As you can see, meme coins rely on the snowballing effect of the hype machine. The bigger the community, the bigger the hype, and the more staying power a project can have. Furthermore, meme coins don’t possess any underlying value.

However, the stockholders of GameStop and AMC in particular, commonly known as apes, have communal engagement on top of investing in companies with billions of dollars worth of assets. GameStop has stores, while AMC has theaters. Retail investors did not only take advantage of Wall Street hedge funds over exposing their short orders against them, but they gave the companies a second wind.

GameStop have used the opportunity to expand their buisness by creating an NFT marketplace, while AMC Plus’ offering continues to expand since its launch last June. This is a stark difference to meme coins, which will more than likely see the majority of buyers lose out who have bought the coins at maximum FOMO before a likely dump, as seen for Squid Game token.

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Do you think meme coins will have a negative effect in the long run because too many people will lose money, making them hesitant to look into solid crypto projects? Let us know in the comments below.

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