Meme coins, known for their humor, have faced market instability this year. Despite significant losses, interest in these cryptocurrencies remains robust.
Ups and Downs of Meme Coins
According to Kaiko's recent report, popular meme coins such as Dogecoin, Shiba Inu, and newer tokens have seen significant price drops since the beginning of the year. Nevertheless, their popularity hasn't waned. Last year, these tokens outperformed many other cryptocurrencies due to hype and the potential for quick profits. Despite the volatility, the recent rise in new meme coin launches on Solana indicates continued trader engagement.
Profit for Exchanges and Market Makers
One reason meme coins continue to thrive is the profit they generate for exchanges and market makers. The spread between the buying and selling price of meme coins is higher than for major cryptocurrencies like Solana and Ripple. This allows market makers to profit more from these trades. Exchanges also benefit, as meme coin trading brings in millions in fees, with centralized exchanges accelerating their inclusion since 2020.
Liquidity and Volatility
Kaiko's analysis warns of the challenges that come with the rapid listing of meme coins. These tokens often experience massive trading volumes that far exceed their liquidity, especially at launch. For instance, the TRUMP token saw $16 billion in trading volume with limited liquidity. This mismatch can lead to extreme price swings, forcing market makers to widen spreads to manage risk.
While meme coin hype has slowed this year, it's far from over. Their blend of humor, community support, and speculative appeal continues to attract investors, prompting exchanges to adjust their listing strategies for new tokens.
