What are memecoins and how to trade them?

Learn all about memecoins, how they work, their role in crypto markets, and how to trade memecoins.

What is a memecoin?

A memecoin is a type of cryptocurrency that gains its popularity primarily through online culture, social media, and internet memes rather than through any inherent technological innovation or utility.

Memecoins often launch as a humorous or satirical take on the cryptocurrency market, while some have developed practical uses over time, and they can gain significant traction due to their viral appeal and enthusiastic communities. Take Shiba Inu (SHIB) for example, which has developed its ecosystem to include decentralised exchanges and other utilities.

While traditional cryptocurrencies such as BTC and ETH aim to solve financial and technological challenges, memecoins are often created with playful or absurd themes.

As of January 2025 the largest memecoins by market capitalisation are DOGE, SHIB, PEPE and BONK. Source: CoinMarketCap.

Memecoins vs other cryptocurrencies: what are the differences?

Memecoins are distinct in the cryptocurrency market because they combine entertainment with finance. Here’s a closer look at how they compare to other types of cryptocurrencies:

Type	Main use case	Examples	Volatility	Value basis / mechanism
Memecoins	Speculation and community	DOGE, SHIB, PEPE	Typically higher	Viral appeal, community support, celebrity endorsements, and speculative trading.
Stablecoins	Stability and transactional use	USDT, USDC, DAI	Varies*	Fiat reserves, commodities, or algorithms*
Utility tokens	Powering blockchain ecosystems	ETH, SOL	Variable	Network usage, transaction fees, broader adoption.
Digital currencies	Store of value	BTC, LTC	Variable	Scarcity, decentralised consensus, and perceived value akin to 'digital gold.'

*Stablecoins pegged 1:1 with commodity or fiat are often lower risk, but algorithmically backed stablecoins are more volatile.

Learn more about stablecoins and the crypto market – read our comprehensive trader’s guides on what are stablecoins and what is cryptocurrency trading.

How do memecoins work?

Memecoins operate on blockchains, same as any other cryptocurrency, but they're distinguished by their value mechanisms and market dynamics.

Unlike utility-driven cryptocurrencies such as ethereum (ETH) or store-of-value coins like bitcoin (BTC) – most memecoins rely more on social momentum, viral appeal and speculative trading.

Here’s how memecoins work and what drives their value:

Community power and viral trends

The lifeblood of any memecoin is its community. Online platforms like Reddit, X (formerly Twitter) and TikTok are hubs for memecoin enthusiasts who amplify the coin’s visibility through memes, challenges, and viral campaigns. This collective activity can create a snowball effect, drawing in new traders and inflating the coin's value.

For instance, DOGE owes much of its success to its early adoption as a tipping and microtransaction currency, a robust community and celebrity endorsements from figures like Elon Musk. These external influences create bursts of demand that can lead to dramatic price spikes.

Speculation and volatility

Without intrinsic value or a clear utility, many memecoins remain primarily speculative assets. Many trade memecoins in hopes of significant short-term gains driven by hype. This speculative nature makes memecoins highly volatile, with prices capable of soaring or plummeting in a matter of hours.

Lower barriers to entry

Creating a memecoin is relatively simple and inexpensive compared to building a utility-based cryptocurrency. This accessibility has led to a flood of memecoins entering the market, ranging from popular names like SHIB to niche coins inspired by internet jokes or cultural moments.

However, not all memecoins gain traction. Successful ones typically have a unique narrative or meme that resonates with the online community. Others have introduced staking or DeFi features to broaden their appeal beyond just memes.

Memecoin trading: What are the risks and opportunities?

Consider the potential risks and opportunities when trading memecoins. Here’s some of the key ones:

Market volatility

Memecoins are known for their high sensitivity to market fluctuations and volatility, often influenced by viral trends and sentiment.

Potential opportunities

Rapid gains – Traders can speculate on sudden price surges due to social media hype or celebrity endorsements.
Short–term trading – Day traders may benefit from the volatility by timing the market effectively.
Low entry barrier – Many memecoins are priced low per unit, allowing traders to acquire large quantities with a modest outlay.

Potential risks

Sharp declines – Memecoin prices can plummet just as quickly as they rise, potentially leading to substantial losses.
Market manipulation – The lack of regulation makes memecoins susceptible to pump-and-dump schemes.
Speculative nature – Without fundamental value, memecoin prices are driven purely by market sentiment.

Community influence

The strength and activity of a memecoin's community can significantly impact its success.

Potential opportunities

Viral growth – A passionate community can propel a memecoin into the spotlight, increasing demand.
Grassroots initiatives – Community-driven projects or partnerships can add value and utility to the memecoin.
Network effects – As more people adopt the memecoin, its utility and acceptance may grow.

Potential risks

Over–reliance on hype – If the community's interest wanes, the memecoin's value may decline rapidly.
Misinformation – False rumors or misleading information can sway market perceptions and affect prices.
Community disputes – Internal conflicts can fragment the community and diminish the memecoin's appeal.

Regulatory environment

As memecoins gain prominence, they attract attention from regulatory bodies worldwide.

Potential opportunities

Increased legitimacy – Adherence to regulations can enhance credibility and attract institutional traders.
Broader adoption – Compliance with regulations may lead to listings on major exchanges, expanding access.

Potential risks

Legal crackdowns – Regulatory actions against certain cryptocurrencies can restrict trading or lead to bans.
Compliance costs – Adhering to regulations may require significant resources, impacting development.

Technological factors

While many memecoins start as simple tokens, technological advancements can influence their trajectory.

Potential opportunities

Ecosystem development – Introducing new features or platforms can enhance utility and attract users
Innovation – Technological improvements may differentiate a memecoin from competitors.

Potential risks

Security vulnerabilities – Memecoins may face risks of hacks and exploits if not robustly designed.
Scalability issues – As usage grows, technical limitations may hinder performance and user experience.

Liquidity and market access

Liquidity plays a crucial role in a memecoin's tradability and price stability.

Potential opportunities

High liquidity in popular memecoins – Well-known memecoins like DOGE and SHIB often enjoy substantial trading volumes.
Exchange listings – Being listed on major exchanges can boost liquidity and accessibility.

Potential risks

Low liquidity in niche memecoins – Difficulty in buying or selling can lead to slippage and unfavorable pricing.
Delistings – Removal from exchanges can drastically reduce liquidity and market confidence.

Learn how to identify and manage potential risks and opportunities while trading – read our comprehensive technical analysis and risk management guides.

What are the memecoin trading hours?

Memecoins often run on decentralised blockchain networks that are active 24 hours a day, seven days a week, 365 days a year. This means you can trade memecoins like DOGE, SHIB and PEPE at any time, including weekends and holidays.

Cryptocurrency exchanges – many exchanges facilitate 24/7 trading, allowing for continuous market participation.
Online trading platforms – some reliable and trusted brokerages provide memecoin trading via CFDs.

If you choose to trade CFDs, you can follow the DOGE, SHIB and PEPE performance live in US dollars with our comprehensive DOGE/USD, SHIB/USD and PEPE/USD price charts.

Monitoring the cryptocurrency’s activity can help you to keep an eye out for any key fundamental or technical events that may affect short-term movements in its value.

How to buy and trade memecoins

Memecoins are a type of cryptocurrency, meaning that they can be traded directly on a cryptocurrency exchange or peer-to-peer. Traders may also choose to trade memecoins via a derivative, a financial product that takes (or ‘derives’) its value from the price of the underlying asset.

You could use a contract for difference, or CFD, to trade on the price of memecoin pairs – such as the DOGE/USD price. A CFD is a contract, typically between a broker and a trader, where one party agrees to pay the other the difference in the value of a security, between the opening and closing of the trade.

You can use CFDs to trade on whether you think DOGE/USD will rise (called ‘going long’) or fall (‘going short’). CFDs give you access to leverage, allowing larger positions with a relatively small outlay. This amplifies your potential profits, but also your potential losses, making CFD trading risky.

You can learn more about trading cryptocurrencies with Capital.com in our comprehensive guide to cryptocurrency trading.

Aside from CFDs, you can also trade memecoins through instruments like futures, options, ETFs, and mutual funds. Each offers an alternative to the leveraged trading of CFDs, suiting different risk profiles and investment strategies.

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FAQs

What’s the point of memecoins?

Memecoins are a type of cryptocurrency inspired by internet memes, social trends, or jokes. They rely heavily on community support and viral appeal rather, although some may attempt to integrate limited utility, such as payment systems or niche applications.

How do memecoins differ from other cryptocurrencies?

Unlike traditional cryptocurrencies such as bitcoin (BTC) or ethereum (ETH), which have clear use cases or technological utility, most memecoins derive their value from social media hype, community engagement, and speculative trading. They are typically more volatile and often lack broader utility or technological innovation.

Are memecoins a good trade?

Memecoins can offer opportunities for significant short-term gains due to their high volatility and viral nature. However, they are highly speculative and risky, with prices often driven by trends rather than fundamentals. Traders should approach memecoins with caution, employing risk management tools such as setting stop-loss orders, diversification, and limiting their exposure.