- [Narrator] Meme-inspired cryptocurrency
is shaking up the investing world.
(glass shattering)
In October, the meme coin Shiba Inu dramatically surged
in value, growing over 1,100% in the span of 30 days.
And eventually reaching a market cap of around $41 billion.
- I think we've seen examples
where someone put a little bit of money
into something like Doge or Shiba very early on
and then they became millionaires over night.
- [Narrator] Shiba Inu's metric rise
and subsequence fall is part
of a growing trend of meme coins,
a category of cryptocurrencies inspired
by popular social media jokes, sarcasm or puns.
I got $17 of Dogecoin as a joke in 2017.
Not it's worth 800 bucks.
- [Instructor] Their surge in popularity reflects
the behaviors of a growing class of crypto traders
that are making a surprisingly large impact
on market prices.
- I think they see it as a good way
to make money quickly,
and sort of try their hands at the investing game.
- [Narrator] But what's led to the growth of meme coins?
And what trends are they helping to shape
in the world of cryptocurrency?
- So meme coins are basically like the meme stocks
of the cryptocurrency world.
So they are cryptocurrencies that tend
to rise really quickly and really sharply in value largely
because of buzz online.
- [Narrator] To understand the roots of the meme coin craze,
you have to go back to 2013.
That's when Dogecoin was created as a joke,|
playing off the popular Shiba Inu dog meme.
At its all-time high,
the value of Dogecoin surged more than 15,000%
for the year.
- So that means if you'd put $100 into Dogecoin
at the start of the year,
you would have ended up with that turning
into more than $15,000.
- [Narrator] Even though Dogecoin was initially created
as a joke, many grew to consider it
a legitimate investment prospect.
- Dogecoin sort of became the test case
for meme coins,
and that's really helped lead to the rise
of other meme coins, like Shiba Inu.
- [Narrator] Today, there are hundreds
of different meme-inspired cryptocurrencies,
and in order to stand out,
effective branding is key.
Meme coins are very community driven,
meaning social media hype,
publicity and viral moments largely drive their success.
For instance, Tesla CEO Elon Musk
has posted regular tweets about Dogecoin,
often contributing to sudden surges
in meme coin prices.
- So in addition to seeing this rise
of meme coins this year,
we have also seen this subset within that
of dog coins sort of taking off.
So we first had Dogecoin,
then we had Shiba Inu.
And then recently, we've seen a lot
of speculation and excitement around Floki Inu.
And that is because Elon Musk has a Shiba Inu dog
that he has named Floki.
- [Narrator] Another attractive aspect
of meme coins is their tendency to be very cheap.
While one Bitcoin costs around $57,000,
a Shiba Inu coin is just a tiny fraction
of one cent.
As Bitcoin, Ether and other established cryptocurrencies
become more expensive,
cheaper coins offer an opportunity
to make quick gains.
And while all cryptocurrency investments are risky,
meme coins are particularly volatile,
prone to double-digit percentage swings
in a single day.
- People tend to hold Bitcoin a bit longer
than they do Shiba or Dogecoin.
And so I think that can add to a lot of volatility.
- [Narrator] One reason for this volatility
is a lack of built-in scarcity.
Bitcoin has a finite supply
of 21 million coins,
creating value similar to the way gold is valuable
because it's scarce.
Meanwhile, many meme coins are inflationary,
meaning they have unlimited or extremely high supply caps.
Shiba Inu, for instance,
started with a cap of one quadrillion coins.
That's one million billions.
Over time, a nearly unlimited cap on supply
can negatively impact value.
- There's a cap on the number of Bitcoin in existence,
and people might be incentivized
to hold it a bit longer.
- [Narrator] Many investors will trade meme coins
like Doge or Shiba Inu on a short-term basis,
hoping to make a quick profit.
So while it is possible to make money investing
in meme coins, this type of investment is risky,
and can be more similar to gambling
than true investing.
- Investors need to be cognizant
of making sure they're investing in something
that is legitimate.
We have seen scams happening in the altcoin world
just because I think everyone right now
is very eager to find the next Dogecoin
or find the next Bitcoin.
- [Narrator] Something else to consider
when investing in meme coins is utility.
- So I think the big proponents of Bitcoin find a lot
of value in it because it is something
that can be used
to transact in the real world.
I think the difference with meme coins
is that there isn't as much real-world value.
- [Narrator] While the future of meme coins is uncertain,
their rise in popularity reveals
that even the most unconventional trades
can lead to some of the largest gains.
- It's hard to say
when this phenomenon will die down or if it will die down.
I think retail investors have been a much stickier base
than people were anticipating.
I think it's gonna be really interesting
and exciting to watch.
(pensive music)