Polish News, Jan Powolny: Considering recent events, such as Trump’s victory in the presidential election and Elon Musk’s engagement, we have witnessed an exponential rise in the popularity of memecoins, including Dogecoin, which gained almost 150% of its value in a short period due to the election results, as recently reported by The Guardian.
We will address the following questions: what exactly are memecoins, why their popularity surged around Q3 and Q4 of 2024, and what advantages they may offer.
Table of Contents
Psychological Aspects of Meme coins
One of the most striking differences between memecoins and more established cryptocurrencies like Bitcoin, Ethereum, or Solana is their extreme volatility. While this increases the risk of significant losses it also presents the potential for outsized gains, which contributes to their appeal.
Similarity to Gambling
Meme coin trading shares characteristics with gambling. Even with low odds of success, the possibility of large rewards attracts substantial participation. Early buyers may be motivated by research or genuine interest, while latecomers often follow herd psychology rather than independent analysis. Unlike traditional cryptocurrencies, memecoins can swing dramatically within minutes, driven more by community hype or viral memes than technical fundamentals.
FOMO – Fear of Missing Out
FOMO occurs when investors fear missing a rare opportunity, prompting purchases during price surges despite high risk. In crypto markets, this is reflected in tools like the Fear and Greed Index. Investors often buy near peaks and sell during crashes. Examining DOGE’s chart, it is evident that its price frequently rose when Elon Musk mentioned the coin, partially explaining the surge around the election.
Opportunity Cost
Investors balance the risk of capital loss against the potential for extraordinary gains. The opportunity cost of not investing, missing a potential 10x or 100x profit, can overshadow rational probability analysis. Many accept a high likelihood of losses because missing a windfall feels worse than losing the initial stake.
Smart vs. Risky Behavior
Experts recommend investing only amounts one can afford to lose. Nevertheless, many risk savings or emergency funds, although the sums they can safely risk are usually insufficient for life-changing profits, a core dilemma in memecoin speculation.
Future situation?
In this context, long-term forecasting for memecoins is less relevant, as they can generate huge gains but also collapse to nearly zero. Nevertheless, these currencies demonstrate that we no longer operate in a conventional, predictable financial world. Meme-coins are likely to become a notable part of the digital finance landscape in the second half of 2024 and may continue to thrive in various forms going forward.
References
Barber, B. M., & Odean, T. (2001). Boys will be boys: Gender, overconfidence, and common stock investment. The Quarterly Journal of Economics, 116(1), 261–292. https://doi.org/10.1162/003355301556400
Cheah, E.-T., & Fry, J. (2015). Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin. Economics Letters, 130, 32–36. https://doi.org/10.1016/j.econlet.2015.02.029
CNN Business. (2021). Fear and Greed Index. https://edition.cnn.com/markets/fear-and-greed
Investopedia. (2023). Herd instinct definition. https://www.investopedia.com/terms/h/herdinstinct.asp
Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–291. https://doi.org/10.2307/1914185
Shiller, R. J. (2017). Narrative economics. American Economic Review, 107(4), 967–1004.
Bitcoin.org. (n.d.). Bitcoin: A peer-to-peer electronic cash system. https://bitcoin.org/bitcoin.pdf
Ethereum.org. (n.d.). What is Ethereum? https://ethereum.org/en/what-is-ethereum/
Binance Academy. (n.d.). What is the difference between a coin and a token? https://academy.binance.com/en/articles/what-is-the-difference-between-a-coin-and-a-token
Dogecoin.com. (n.d.). Dogecoin. https://dogecoin.com/
The Verge. (2021, May 11). Dogecoin, Elon Musk, SNL, and Shiba Inu: Everything you need to know about the meme cryptocurrency. https://www.theverge.com/2021/5/11/22430495/dogecoin-elon-musk-snl-shiba-inu-crypto
CNBC. (2021, May 5). Elon Musk’s tweets send Dogecoin to the moon. https://www.cnbc.com/2021/05/05/elon-musks-tweets-send-dogecoin-to-the-moon.html
Chainalysis. (2023). Crypto Crime 2023. https://www.chainalysis.com/blog/crypto-crime-2023/
CoinGecko. (2024). Memecoin Report Q1 2024. https://www.coingecko.com/research/publications/memecoin-report-q1-2024
Polish News Economy / Jan Powolny / 03.05.2025