In the financial markets, investors have a variety of options to choose from based on risk profile, skillset, and other factors like whether or not they have the time to stay locked on charts for hours or days. Whatever your profile, there’s something for you.
People who have time and basic skills can enter spot trades to buy and sell crypto for quick profits, or buy and hold for long term gains. People with more technical skills and higher stomach for risk can enter even more complicated territory like futures markets where risk and proportionately, rewards are higher. For either of these, a lot of analysis needs to be done before entering and exiting the market.
Real crypto investment is based on utility
One of the main factors that influences people’s decisions to invest in a cryptocurrency is utility, and that translates to community and sustainability. It’s just like how every other thing in life that unites people is purpose and interests. People need to see what use a cryptocurrency has, or what solution that cryptocurrency is addressing. Are they creating a solution that will in the future gain a lot of traction? If that is the case, there’s a chance the token will do well.
This is why I believe Polkadot will do well in this cycle with their Substrate project. Substrate allows anyone to be able to build custom blockchains with ease. As blockchain and crypto adoption becomes widespread, I think that more people are going to want to migrate their online infrastructure onto blockchains. Because of this, the need for custom blockchains will increase, making Substrate (and hence Polkadot) very appealing to investors. You can read more about Substrate here.
Taking this into consideration, spot traders who buy assets to hold long term do due diligence to ensure that the token or project they’re pumping their hard-earned money into is not a rug pull. But for people who don’t care about long term and are in the market for long term gains but don’t want to do any technical alternatives, that’s where Meme Coins come in.
Meme Coins are hit or miss
Meme Coins, are like the name suggests, based on memes. You know what memes are don’t you?
So, tokens like ShibaInu, Pepe, Bonk, and Doge are based on the memes that started them, and are supported by the community of memers interested in them. They weren’t really built with utility in mind. However, that does not necessarily imply that no utility can be attached to them in the future. Take Shiba for instance, Elon has talked about connecting it to Tesla payments in the future. This is a way for him to attach utility to it.
The baseline still holds that memecoins are created for fun, and not with utility in mind. This makes it difficult to be able to predict which memecoin is likely to do well and which is not. So it’s a matter of luck and hype, and you can’t control either. For hype, popular crypto enthusiasts like Elon can do a lot with as simple as a tweet. But even with their influence, it is not guaranteed whether people will be as responsive in FOMOing in or FUDing out based on news from them. This is why I say they’re a hit or miss.
Unlike utility-based tokens that take significant time to appreciate or depreciate under normal circumstances, memecoins are very volatile, and therefore are best suited for volatility traders who just want to pop in and out of the market with quick profits.
In our current market cycle, Solana memecoins have done amazing, with several leading and outperforming Bitcoin. Even though many of my friends are into memecoin trading like there’s no tomorrow, I have been quietly watching all the memecoins go ballistic from the sidelines because my risk appetite recently does not fit entering the memecoin market. Instead, I put a lot of my bag into projects with utility. I was initially completely invested in just Solana, but a very good friend gave me a tap on the shoulder, and let’s just say I have diversified. Maybe I’ll write a subsequent post on what I’ve spread my small money across currently.
All images here were designed by me on canva
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