Your Dad Will Love Memecoins

Every bull run has a bait that pulls people in — something that hints at big, asymmetric returns. In the early days, it was Bitcoin. Then came ICOs, DeFi, and NFTs — each cycle’s breakout success, tempting people with outsized returns that would leave any traditional investment in the dust.

This time, it’s memecoins.

Memecoins offer the same kind of asymmetry as past cycles: small stakes that could explode into something big. They don’t often fit the purist’s vision of what crypto “should” be, but their raw appeal is undeniable. Memecoins have that same magnetic pull that brings people onchain, hoping to ‘make it’ in the new cycle.

Now, let’s be clear: this isn’t a call to invest in memecoins. These tokens are risky, lacking in fundamentals, and more about the attention economy than any intrinsic value — the value can disappear just as fast as it appears.

And yet, in this cycle, memecoins may just be the entry point that brings new people to crypto, the way NFTs did last time. So, while they may be volatile and a game of musical chairs, memecoins are undeniably a part of this cycle’s story.

Is this the Memecoin Supercycle?

Crypto purists often dismiss memecoins as either scams or pure hype, but here’s the thing: they generate excitement, and that excitement pulls people into the market. 

Every time someone hears a story of turning a couple of hundred bucks into thousands, they think, "Why not me?" And that’s how new players enter the game. Let’s be honest — that’s how many of us got here in the first place. Watching others make outsized returns on crypto felt like an invitation, a call to take a chance and bet on this thing.

Consider NFTs from the last cycle. NFTs went mainstream not because they unlocked some complex technical innovation but because they tapped into something simple. People loved the idea of owning a unique piece of digital art that was culturally relevant, and there was money to be made. We remember the Bored Apes popping up on Instagram and CryptoPunks catching headlines as they sold for millions. The two ingredients — cultural relevance and the chance to get rich quick — served as bait for new participants to enter the market.

Memecoins scratch that same itch. They’re funny, easy to understand, and sometimes even come with celebrity endorsements — think of celeb coins like Iggy Azalea’s $MOTHER token. If it’s easy to understand, easy to buy, and socially interesting, that’s enough to get someone started.

This pitch of memecoins even hooked Elon Musk last cycle — he became DOGE’s ultimate hype man. And if we go back even further, even Vitalik experimented with memecoins. He bought $25,000 worth of DOGE as a test, made multiples, and eventually donated a significant portion to charity.

The point is – memecoins resonate with people. They’re a fun, community-driven experiment in crypto. The speculation aspect of memecoins is similar to the GameStop frenzy in the stock market. Memecoins give new users a shot at the dream of quick wealth without requiring them to dive deep into the technicalities of crypto or DeFi.

For instance, just last week, I mentioned a few AI memecoins to my dad, sharing some of their backstories and lore. He was intrigued enough to ask me to sell his existing crypto on a centralized exchange (which I’d originally encouraged him to buy) and shift the funds into memecoins. His logic? The amount was small enough to experiment with, he was tired of holding a large-cap crypto, and he wanted to take a chance on a “zero or hero” bet.

It was a risky move, but he ended up making some money. And the best part? He now has a Phantom wallet with funds onchain, holding his first self-custodied crypto investment. I wouldn’t be surprised if many new users enter crypto with a similar mentality.

One of crypto’s biggest barriers has always been its complexity. Concepts like staking, decentralized governance, or zero-knowledge proofs are hard for the average person to digest, especially at first. But buying a memecoin? That’s simple. You just buy it, maybe share it with friends, and hope it goes up. Compared to DeFi protocols or other crypto products, memecoins come with a low learning curve.

This ease of entry is key. For many, their first step into crypto could be as simple as seeing a tweet about a memecoin, feeling a bit of FOMO, and deciding to try it out. Even if they lose, the hit doesn’t sting as much since the buy-in is usually small. It’s this low-stakes entry that encourages experimentation. And by experimenting with memecoins, people naturally start learning the basics of wallets, transactions, and exchanges, often becoming crypto-native by accident.

And yes, while the stories of people hitting it big on memecoins might bring them in, we want these crypto tinkerers to stick around, so it's still crucial to remind our friends and family to only play with money they’d be comfortable losing at a casino. There are certainly plenty of sharks out there looking to separate hopeful retail investors from striking profits. And the odds are, yes, this will happen to most entrants, as it has to most of us who have already dabbled in memecoins.

So, yes there's plenty of inherent risk in this onboarding strategy, but there's always been risk in crypto – whether that's NFTs, DeFi summer, or ICOs. While we hope that newbies to crypto eventually stay for the ideology and technology, the reality is that memecoins create a stepping stone for new users to join the fray.

Memecoins likely won't be what keeps those people in crypto forever, but they’re a powerful way to get them through the door. Just as NFTs taught people to use wallets and navigate marketplaces, memecoins can introduce people to exchanges and the broader DeFi ecosystem.

An Investor Guide to Memecoin Mania on Bankless

A four-part plan to maybe have a chance at memecoin riches.

BanklessJun Mar 21, 2024 • 6 min read