Memecoins Promise a Strong Upside But Remain a High-Risk Investment, Binance Research Highlights Their Unique Value Proposition

According to Binance rerport, the rise of memecoins coincides with the expansion of the world's money supply.

Memecoins, a category of cryptocurrencies known for their rapid creation and community-driven nature, are playing a crucial role in the broader cryptocurrency market. Binance Research, the analytical arm of the world’s leading cryptocurrency exchange, has highlighted the unique value proposition of memecoins and their contribution to the market’s overall performance.

According to Binance Research, the rise of memecoins is closely tied to the expansion of the world’s money supply. As more money and capital become easily accessible, investors are shifting their attention toward risk-on investments such as Bitcoin, altcoins, and memecoins. These assets offer the potential for high returns but also come with a substantial degree of risk.

Despite the inherent volatility and lack of use cases, memecoins have managed to deliver impressive returns. Following the US election, memecoins as a whole experienced a surge of 22%. Among the top gainers are Doge and PEPE coins, which saw gains of 15% and 11%, respectively.

Binance Research: 75% Of All Memecoins Were Launched Last Year

A recent Binance research report from November 2024 reveals that meme currencies are gaining traction as people are turning to risk-on investments. The report highlights the expanding global money supply and the retail investors seeking alternative paths to wealth creation. Fueled by these coins, the market value of this segment has tripled since 2022.

Binance’s report also discusses the regulator’s skepticism toward Initial Coin Offerings (ICOs), which led developers to consider private venture capital (VC) funding to promote their projects. This method, known as “Low Float and High FDV,” involves making only a small number of tokens available for trading while boasting a higher valuation.

While this approach benefits developers and early adopters, it can leave regular investors vulnerable. As a result, many retail investors are considering memes as an alternative investment option. This explains the popularity and high accessibility of meme tokens.

Binance points out that approximately 75% of all meme currencies were launched last year. The Binance team observed that while launching these projects was easy, maintaining their operations proved to be more challenging. The report also reveals that about 97% of all memecoins have died, with the remaining memecoins managing to ride on the election hype this year.

These coins, which are typically community-driven and accessible investments, are also highly speculative. Many in the community bet on a “meme coin supercycle” to coincide with Bitcoin’s run. The wager paid off, with memecoins’ market cap surging by 22%, now standing at over $73 billion.