What To Keep in Mind Before Investing in Meme Coins

If you’ve been able to dodge conversations about crypto until this point, I’d say you’ve lasted longer than most. The hype around digital currencies has reached an all-time high, and interest in investing is continuing to grow.

But as is the nature of crypto, the world is fast-moving and new currencies are constantly popping up – and popping off. The latest term you may have heard floating around is Shiba Inu. If you’re wondering what that is, and why you keep seeing the same dog breed appearing on all your social media feeds, we’re here to help.

I reached out to the investors behind NZ-based finance podcast Girls That Invest, Simran Kaur and Sonya Gupthan, for a little insight into why Shiba Inu is gaining so much attention right now.

Kaur shared her thoughts with me over email.

You can thank other meme coins for the hype

If you’re familiar with Dogecoin, and the craze that followed its spike in value, you’ll know just how big meme coins can become. Shiba Inu is getting attention off the back of that.

“Shiba Inu is an ethereal based ERC-20 cryptocurrency token which has in recent days been riding the hype surrounding cryptocurrencies,” Kaur shared.

She explained that “very little is known about Shiba Inu”, and that the coin is one “with no intrinsic value that relies on popularity to rise in value. Unlike cryptocurrencies like Bitcoin or Ethereal, Shiba Inu wasn’t created to provide a real-world benefit but rather is part of the ever-growing hype of meme coins.”

In essence, she shared that folks are keen to find “the next big thing in the crypto world”. This is why so many are looking to SHIB right now.

Some investors believe due to the similarities between Shiba Inu and Dogecoin, in that they both feature the same animal [the Shiba Inu dog], Shiba Inu could possibly follow in Doge’s footsteps.

The interest and excitement has only intensified since the coin was made available for purchase on popular crypto exchange services.

“Binance, one of the largest crypto exchanges where retail investors can buy and sell cryptocurrency, announced on May the 10th that Shiba would be available to purchase from their platform, thus feeding further hype from investors,” Kaur said.

Okay, so what’s the deal with investing in this coin?

The general advice Kaur gave on this is that you should seriously consider all the risks before investing. That goes for any high-risk cryptocurrency (or investment in general).

“Shiba Inu is by no means the only meme coin that has taken off recently, many animal-based meme coins have been rallying in the past few days and there is no way of determining what the next Dogecoin will be, or if they ever will be one,” she said.

“Binance recently announced that they believe Shiba poses a higher risk than normal, which is saying a lot as cryptocurrencies are already quite high risk. Please exercise sufficient risk management, do your due diligence in regards to the token’s fundamentals and understand what you are investing in before investing in any cryptocurrency.”

Coinstash co-founder Ting Wang added that, while it’s tempting to jump on board when cryptocurrencies see loads of hype, there is a lot to consider.

Over email, he explained that “Shiba, at its peak, squeezed into the top 20 of all cryptocurrencies (out of thousands available), which is no easy feat. It is gaining a significant amount of attention right now due to its similarity to Dogecoin, strong followings and it being listed on some of the top exchanges.”

“When trading Shiba, beware that it can be extremely volatile, and make sure you consider factors such as liquidity as well [how easily it can be converted into money or other cryptocurrencies]. Also, it is worth noting that there are some addresses that collectively hold more than 50 per cent of all Shiba tokens.”

So, long story short. Don’t put your money into anything you haven’t thoroughly researched first.

Oh, and if you’ve decided to invest in any crypto over the past year (or earlier, even) it’s worth doing some research to ensure you’re approaching tax time correctly. Read our guide on that here.

This article has been updated to include comments from Ting Wang since publishing.