Before delving into the domain of meme coins as potential investments, it’s crucial to acknowledge that these coins fall primarily in the category of speculative assets. Therefore, prudent investors should only allocate funds that they are prepared to part ways with entirely.
Meme coins exhibit a notable price correlation with Bitcoin, where a positive correlation indicates that as Bitcoin’s price embarks on an upward trajectory, a ripple effect is witnessed across various other cryptocurrencies.
Bitcoin’s Market Influence
Bitcoin stands in stark contrast to meme coins – it has garnered institutional adoption and stirred interest through the creation of numerous Bitcoin spot Exchange-Traded Funds (ETFs). Recent trends showed some outflow in a premier Bitcoin ETF, GBTC; nevertheless, these ETFs swiftly rebounded, attracting a fresh inflow of $418 million just yesterday.
This resurgence of bullish sentiment indicates a return of market participants, paving the way for Bitcoin’s price to potentially surge once again, edging closer to the $100,000 milestone, with immediate support hovering around $58,000, as depicted in the chart below.
Visual representation of Bitcoin’s price chart by XTB
While some may view the $100,000 target as overly optimistic, it’s essential to note that we are currently in a Bitcoin halving phase. Reflecting on previous halving periods, Bitcoin showcased significant price fluctuations, with most gains materializing post the halving event.
For instance, during the first halving phase, Bitcoin’s price surged by 416% a year before halving, followed by a remarkable 7,715% upsurge a year later. The second halving period witnessed a 110% pre-halving increase, escalating to 283% post-halving. Subsequently, the third halving phase recorded a 76% pre-halving growth and a 423% post-halving surge. The most recent halving event showcased a 50% pre-halving rise and a 200% post-halving spurt.
In historical contexts, a rallying Bitcoin price tends to cast a shadow on its dominance within the cryptocurrency sphere, prompting investors to veer towards alternative coins, particularly meme coins. Should Bitcoin gravitate towards the $100,000 mark, it could fuel a prolonged era of meme coin speculation.
Unveiling the Essence of Meme Coins
Meme coins epitomize a genre of cryptocurrencies that ride on the waves of popularity primarily through meme-driven marketing strategies and community engagement as opposed to intrinsic technological or fundamental value. These coins often boast catchy monikers, logos, and slogans that are widely disseminated on social media platforms, spawning a viral frenzy.
Although certain meme coins originate as jests or parodies of more conventional cryptocurrencies, some evolve into legitimate ventures with active communities and real-world applications. However, many meme coins are deemed highly speculative and volatile investments, with prices predominantly steered by hype and speculation rather than underlying fundamentals. Notable examples encompass Dogecoin, Shiba Inu (SHIB), and Safemoon.
Strategies for Identifying Meme Coins
Reiterating the speculative nature of meme coins and their lack of intrinsic value, it’s plausible that significant gains can be reaped if identified during their nascent stages. Various avenues can be explored in this regard.
A risk-averse investor with a modest appetite for risk might explore the top 100 coins listed on Coinmarketcap, particularly focusing on those trading beneath one cent, such as Shiba Inu, ensconced in the top 100 coin league on Coinmarketcap.
Diversification is essential – rather than fixating on a single coin, investors should distribute their allocated capital (an amount they are willing to part with entirely) uniformly across all coins trading under one cent within the top 100 cohort. This nuanced approach facilitates risk mitigation and grants exposure to coins not only popular within their communities but also boasting a substantial market capitalization, minimizing the selling risk in the future.
A more daring investor could bypass the top 100 spectrum and delve into coins ranked from 101 to 300, implementing the same methodology to gain exposure to this echelon of cryptocurrency offerings.
Decoding the Art of Meme Coin Investment
Crafting an Exit Strategy
Considering the inherent lack of fundamentals in meme coins, investors must vigilantly monitor the trajectory of Bitcoin. With Bitcoin’s positive momentum and a retracement not exceeding 30%, the likelihood of a continued rally is high, subsequently propelling meme coins upwards.
Navigating the Point of Entry
Seeking entry points involves two primary strategies. Firstly, investors should observe break-out occurrences, typically at the previous all-time high or a four-week peak, before considering a buy-in once the price exceeds these benchmarks. Alternatively, utilizing a 4-hour timeframe, traders can make purchases post the price surpassing the 21-SMA and setting a stop-loss marginally below the latest low.
Key Considerations
Meme coins attract investors with limited capital; hence, transaction costs carry significant weight. In the current landscape, Solana’s blockchain shines owing to its cost-efficient transactions. Consequently, meme coins are gravitating towards Solana’s ecosystem due to lower fees, enhancing their appeal. Leveraging aggregator tools like Birdseye.so offers insights into trending coins across various chains, aiding investors in implementing momentum strategies effectively.
A critical strategy involves monitoring positive percentage gains across 4-hour, 24-hour, 3-day, and 7-day intervals. A dip in momentum over a 24-hour span signals a cautionary flag, prompting prudent investors to reconsider their positions. Utilizing platforms like Birdseye provides visibility into meme coins on different chains, indicating stronger potential for success on popular chains like Solana amidst the ongoing rally.
A Closing Thought
Despite the allure of meme coins, investors must recognize the speculative nature of these investments, often devoid of real value or fundamentals. While these ventures carry risks, aligning exposure strategies with Bitcoin’s evolving journey in its nascent stages could prove advantageous for those willing to employ capital wisely.