Crypto for Advisors: Memecoins

Memecoins have been in the news lately, primarily driven by the launch of the President’s $Trump coin. Recently, the U.S. SEC clarified that, for the most part, memecoins are not securities as they don’t meet the Howey test. That doesn’t mean clients won’t be asking questions about these assets, though.

So in today’s crypto for advisors, Janine Grainger from New Zealand-based Easy Crypto provides a breakdown of what memecoins are, how they work and the risks associated with them.

Then, Kieran Mitha, a next-gen investor, answers questions about learning about memecoins in Ask an Expert.

– Sarah Morton

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On January 17, a new meme coin called $Trump was launched by the President-Elect. Its market value peaked at $14.5 billion within two days but soon crashed by two-thirds. Entities behind the coin reportedly made close to a cool $100 million in trading fees in under two weeks (and even more from liquidations). Yet, hundreds of thousands of everyday investors lost significant amounts of money. Meanwhile, in late 2024, when Trump announced a Department of Government Efficiency (DOGE), the cryptocurrency Dogecoin surged 150%, far outpacing bitcoin’s gains.

Moments like these have put meme coins firmly on the investment radar. However, fueled by hype rather than utility, they create both opportunities and risks for investors, and financial advisors need to understand their unique market dynamics, as high-net-worth clients may inquire about them despite their speculative nature.

Figure 1: CoinDesk view of $TRUMP which plummeted shortly after launch.

What are memecoins?

Memecoins are cryptocurrencies that originate from internet culture, social media trends or jokes. Unlike bitcoin or ether, which, over time, have built a case for inclusion in a diversified portfolio, memecoins thrive on hype, community sentiment and celebrity endorsement. While they often start as a parody or joke, viral marketing and speculative trading can give them serious traction — although this is usually short-lived.

Why meme coins matter

Memecoins have gained mainstream visibility due to their cultural relevance and potential for outsized short-term gains. High-profile figures like Elon Musk have fueled rallies with a single tweet, driving speculative interest. But while traders are drawn to the possibility of overnight riches, meme coins are high-risk assets with unpredictable price swings.

The price of meme coins can skyrocket or collapse within hours, leading to massive gains or total losses, such as ‘Fartcoin,’ a joke token that hit a $2.2 billion market cap purely through viral appeal before plummeting as early investors exited. Platforms like Pump.fun amplify this speculation by enabling users to create and trade meme coins with minimal technical knowledge. This has led to a flood of short-lived tokens that reinforce the market’s high-risk nature.

But are they legal?

Ironically, the Securities and Exchange Commission’s regulatory stance has helped memecoins thrive. While utility-driven crypto faces scrutiny and legal hurdles, memecoins operate in a grey area as they make no promises of financial returns. This has fuelled their proliferation.

The dark side: rug pulls and scams

Unfortunately, memecoins are a breeding ground for ‘pump-and-dump‘ schemes, where influencers hype a token to drive up its price and then cash out, leaving everyday investors with worthless holdings.

A recent example is viral internet personality Hailey Welch, who launched $HAWK after online infamy. Within a day, the coin’s market cap neared half a billion dollars before collapsing and sparking fraud accusations. Similarly, Argentina’s President Javier Milei inadvertently triggered a scandal when he promoted $LIBRA, which also surged and crashed, leaving him open to allegations of market manipulation. These incidents highlight why meme coins are often considered cryptocurrencies with little intrinsic value or long-term viability.

Figure 2: CoinDesk view of Hawk Tau ($HAWK), which plummeted shortly after launch.

Memecoin investment considerations

Investors must remain cautious as many memecoins lack transparency. For those still interested, key risk factors include:

• Liquidity: Low trading volumes lead to extreme price swings, making it hard to enter or exit positions.
• Community sentiment: Social media drives price movements. Monitoring X (Twitter) and Telegram can provide market insights.
• Tokenomics: Some memecoins drive scarcity, while others have an unlimited supply, diluting value over time.
• Pump-and-dump risk: Aggressively marketed tokens with unrealistic promises often signal a short-term hype cycle rather than a sustainable investment.
• Early entry vs. longevity: Getting in early can be lucrative, but the risk of a sudden crash is high. Some investors prefer established memecoins with strong communities over chasing the latest trend.

While memecoins can offer quick gains, their volatility and susceptibility to manipulation make them high-risk assets. Advisors should educate clients on their speculative nature and emphasize proactive risk management. Ultimately, memecoins are more akin to gambling than traditional investing.

–Janine Granger, CEO, Easy Crypto

Q: I see people on social media getting rich from memecoins…Can I do the same?

A: While some people have made significant profits from memecoins, it’s important to remember that social media often highlights success stories while ignoring the many who lose money. Memecoins are highly speculative, and their prices can be driven by hype, celebrity endorsements like Elon Musk, and market sentiment rather than solid fundamentals.

If you’re considering investing, approach it with caution. Timing is everything — many early buyers see significant gains, while those who buy in late often face losses when the hype fades or the rug is pulled. If you invest, treat it as a high-risk bet rather than a guaranteed path to wealth. Never invest more than you can afford to lose, and always do your own research before making any decisions.

Q. What role does community play in the success of a memecoin?

A: Community is the backbone of any successful memecoin and supports the overall sentiment towards the project. Unlike traditional investments, where value is often tied to revenue or utility, memecoins thrive on social media presence, viral trends, and grassroots enthusiasm. A strong, engaged community can drive adoption and keep a project relevant, but without sustained interest, even popular memecoins can fade quickly. Before investing, check how active the community is on platforms like X, Discord, and Reddit.

Q: How can I learn about memecoins before investing?

A: The most effective method to acquire knowledge regarding memecoins is through thorough research and active participation in the community. Commence by following reputable cryptocurrency news outlets, examining whitepapers, and engaging with forums such as Twitter, Reddit, and Discord, where communities actively discuss projects in real time. Consider factors such as the project’s website, roadmap, developer engagement, and tokenomics.

It is also crucial to comprehend the risks involved — memecoins are frequently characterized by high speculation; therefore, familiarizing oneself with market trends, trading strategies, and potential scams can assist you in making well-informed decisions. Do not depend solely on hype or social media influencers; conducting your due diligence is essential.

–Kieran Mittha, crypto enthusiast & communications major

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