Memecoin buyers are playing the crypto-equivalent of Powerball — with many “playing” hoping for “life-changing money” yet only a few will walk away with the jackpot, says Matrixport’s head of research.
Memecoins have seen a huge resurgence over the last week. Crypto tokens such as Pepe (PEPE) and Milady (LADYS) have boasted staggering price surges despite each having little to no discernable utility.
Speaking to Cointelegraph on May 10, Matrixport’s Markus Thielen suggested some buyers of memecoins bear resemblance to those that participate in the lottery.
“There are numerous studies done on how most people in lower socio-economic classes play the lottery […] as that is their way to get out of their lower economic class,” he said, adding:
“The people that speculate in the lottery are trying to make money lightning fast, and I think that’s very similar with crypto.”
One memecoin that recently gained the attention of enthusiasts is PEPE, a cryptocurrency cashing in on the “Pepe the frog” meme. It launched on April 14 and hit its peak $1.83 billion market cap only weeks later on May 5.
The price of the token plummeted almost as quickly as it rose however, falling 57% from its peak in just five days, according to CoinGecko, which puts its market cap now well below a billion dollars.
One should not discount the “entertainment” factor of buying memecoins however.
Dr. Anastasia Hronis, a clinical psychologist who specializes in gambling addiction believes younger investors are more likely driven by the “fun, entertainment element” of memecoins.
“Many crypto investors might buy memecoins to be a part of a community or for entertainment value.”
However, for the many hoping to gain from their investments, Hronis cautioned:
“Memecoins like PEPE might be fun, but they generally are highly risky investments and can end up holding no intrinsic value in the long run […] Investors are essentially gambling on its popularity, which undermines the principles involved in investing.”
In an emailed statement, Lucas Kiely, Chief Investment Officer at digital wealth platform Yield App argued that unlike Bitcoin (BTC), Ether (ETH) and stablecoins, memecoins don’t have the same fundamentals. Their prices are driven solely by “arbitrary factors” such as community sentiment and are “almost impossible to predict.”
“Even the most sophisticated models have been unable to discern any clear…
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