Learn / Beginner · Tokens and Stablecoins

What is a memecoin?

Beginner · Tokens and Stablecoins · about 5 min read

A memecoin is a crypto token inspired by an internet joke, character or trend, whose price depends mostly on attention rather than any use.

How it works

• In February 2025, staff at the US Securities and Exchange Commission described memecoins as tokens bought mainly for entertainment and social reasons, with value driven by demand and speculation and with limited or no use. They compared them to collectibles.
• Dogecoin is the best-known example. Billy Markus and Jackson Palmer launched it on 6 December 2013 as a joke, because they felt crypto was being taken too seriously. Its logo is the “Doge” meme, a Shiba Inu dog.
• Because anyone can make a token with a smart contract, new memecoins can appear at any time.

Keep in mind

• With no earnings or product behind it, a memecoin’s price can swing sharply on hype alone.
• Scams are common. In a rug pull, the creators abruptly abandon a project and disappear with investors’ money. Warning signs include hidden identities, no independent audit, promises of huge quick gains and pressure to buy now.
• The SEC staff statement is only a staff view with no legal force, and it says it does not shield fraud. It also means buyers do not get the protections of US securities law.
• Only money you can afford to lose belongs anywhere near a memecoin. General information, not financial advice.

Attention is the whole product

A company's share has earnings behind it and a bond pays interest. A memecoin has neither. Its price rests on how many people are paying attention and are willing to buy, which can change in hours. Because anyone can create a token with a smart contract, new ones appear all the time and most disappear. The same traits that make them fun, speed and no gatekeepers, make them easy to abuse.

A case study: $LIBRA, February 2025

On 14 February 2025, Argentina's president Javier Milei posted about a token called $LIBRA on X, describing it as a project to help fund small businesses and startups. The token's value jumped to more than $4 billion and then fell by nearly 90 percent within hours. Blockchain trackers said a small number of wallets held most of the supply, a pattern linked to rug pulls. Milei deleted the post and said he had not known the project's details. Argentina's main stock index fell 5.6 percent when markets opened on Monday, and a fraud investigation followed. The people behind the token said it was not a rug pull but an experiment that went wrong. These claims are contested, and the legal questions are still open. What it shows plainly is how fast a token can rise and fall on one famous endorsement.

How to read a new token launch

• Who holds it? If a few wallets hold most of the supply, they can sell and crash the price.
• Who made it? Anonymous teams, copied websites and promises of fast gains are warning signs the FTC also lists.
• Can you sell it? Some scam tokens allow buying but block selling.
• Where is the pressure coming from? A countdown or "last chance" message is built to stop you thinking.
• What does the data say? Chainalysis found that more than half of the Ethereum tokens listed on decentralised exchanges in 2023 showed signs of possible pump-and-dump patterns, though those tokens made up only about 1.3 percent of trading volume.

Common mistakes

• Buying because a famous person posted about it.
• Believing a token with a big market cap on one day is "safe".
• Not checking the contract address and ending up with a copy.
• Putting in money needed for bills.
• Selling too late because the price "must come back".

Try it yourself

1. On a block explorer, open the holders list for any token. No wallet needed. Note the share held by the top ten.
2. Work this out: a token rises tenfold and then falls 90 percent. Where does your money end up compared with where you started?
3. Pick a memecoin you have heard of and write what, apart from attention, gives it any use.

Key terms

Memecoin, hype, speculation, rug pull, audit.

Sources and credits

$LIBRA, February 2025: Fortune and Benzinga. Token launches in 2023: Decrypt, reporting on the Chainalysis crime report. Warning signs: US Federal Trade Commission. General information, not financial advice.

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