The Elon Musk Meme Coin Effect: How Tweets Shape the Market

Meme coins have become a hot topic in the crypto world, with some traders making huge profits by riding the wave of hype. But what exactly are meme coins, and how do they work?

In the realm of cryptocurrencies, a new asset class has emerged, fueled by the internet's boundless humor and the antics of key figures like Tesla's founder. This phenomenon has given rise to a category of digital assets that are largely defined by their memetic nature, with some traders using notifications and trading bots to capitalize on the subtle hints dropped by Elon Musk.

These meme coins, despite having little to no intrinsic value, have managed to garner billions of dollars in market capitalization, thanks in part to the joking references made by Musk. A prime example of this synergy is the LADYS meme coin, which soared to a market cap of almost 300 million at one point. This occurred after Elon tweeted an image from the Milady's NFT collection, subtly hinting at the meme coin.

As a further illustration of this amusing trend, another meme coin, Kekius Maximus, soared by over 4800% in price and market cap, which jumped from a mere $20 million to $380 million in a single day. This happened after Elon changed his X (formerly twitter) name to Kekius Maximus. A trader who bought in early with only $66 managed to flip this small investment into a whooping 3 million.

This amusing scenario, where a large number of retail investors eagerly await Elon's ‘signals,’ is ultimately the reason why “affiliated” meme coins usually end up with more capital chasing them compared to the rest. More importantly, the growing interest in this asset class and embracement by prominent figures is proving to be a strong force in shaping the internet culture beyond memes and jokes to financial assets that will be part of tomorrow's digital investing norms.

“No one understands how significant it becomes in the cultural zeitgeist. So many large investors view it as, ‘this is stupid and all these retail investors are going to lose all their money,’ but I think it has the ability to inform culture,” shared NYU undergraduate and meme coin investor Aulden Borthwick in a conversation with the New York Post.

According to a report by Coingecko, meme coins ranked as the second best performing narrative of 2024, with an average return of 2185%, while the AI narrative carried the day with an average return of 2940%. What's particularly intriguing about these metrics is that meme coins outperformed other crypto sectors, including DePIN, Layer 1, Gamefi, NFTs and DeFi which are considered to be more fundamentally attractive.

This crypto sector is also set to see more new meme coins springing up in 2025, thanks to the ease of launching with blockchains like Solana introducing Pump.fun. At the same time, Hyperliquid, a more nascent blockchain ecosystem, has also featured a seamless tool for launching called Hypurr Fun.