Bitcoin Will Beat Meme Coins, Even while the value of some meme currencies is now surging, this doesn’t mean they’re better investments than the original cryptocurrency. Currently, there is an intriguing development in the cryptocurrency industry. Even if Bitcoin (BTC -0.71%) has increased by 65% this year, certain well-known meme coins are increasing by even higher margins. 2024 has seen gains of 85% for Dogecoin (DOGE -1.53%), 147% for Shiba Inu (SHIB -4.08%), and nearly 1,000% for the little-known meme coin PEPE (PEPE -2.76%).
The cryptocurrency market is beginning to resemble 2021, the year of its most recent significant wave of meme coin frenzy. Despite the allure of investing in those rapidly increasing coins, past performance indicates that industry mainstays such as Bitcoin will ultimately prove to be superior choices.
Short-Term vs. Long-Term Returns
Speculative meme coins’ main drawback is that they are designed primarily with the short term in mind. Sure, they can produce spectacular returns in brief bursts of time, but the picture becomes far less alluring when you look at their results over a longer horizon.
Consider Dogecoin as an example. It had incredible success in 2021, going from pennies to an all-time high of $0.74 in a matter of months. Dogecoin, however, fell to earth and is currently only worth $0.17. Throughout its almost ten-year existence, Dogecoin has never managed to cross $1.
In contrast, consider Bitcoin’s performance over the past ten years, which has consistently produced triple-digit annualized returns. Without a doubt, Bitcoin was the world’s best-performing asset from 2011 to 2021. The tech-heavy Nasdaq-100 index yielded yearly gains of approximately 20%, while Bitcoin produced returns of 230%. Although there have been some difficult years for Bitcoin, overall, investors have benefited from it.
The Scarcity Effect
Bitcoin Will Beat Meme Coins, The rarity of Bitcoin is another advantage. There are 21 million Bitcoins in the world at any one time. As of right now, 19.7 million of them have already been extracted, and as recently as last month, the rate at which new ones are extracted was also cut in half. This has a true scarcity effect, particularly in light of the recent purchases of Bitcoin by significant institutional investors.
The difference becomes especially noticeable when you compare the amount of coins in circulation for Shiba Inu and Bitcoin. There are 589 trillion Shiba Inu coins in circulation. This clarifies why it is extremely unlikely that the meme currency will reach a $1 price, as that would result in a $589 trillion market capitalization. To put things in perspective, the S&P 500 as a whole currently has a market value of over $44 trillion.
With other meme coins, the narrative is essentially the same. Their initial coin supply, which was enormous and frequently counted in the trillions, was the secret to their early success. Even at incredibly low costs of fractions of a cent, this leads them to billion-dollar market valuations. This method can give a coin that has just been around for a few months a market valuation of over $1 billion, making it seem safe. For example, Pepe, with its astounding 421 trillion coin supply, suddenly shot to the top of the cryptocurrency charts.
The fact that a new cryptocurrency may now be created in a matter of minutes and made available for trading in even less time exacerbates the situation. Every day, cryptocurrency speculators mint thousands of new coins. They stand to gain enormous financial benefit if one of them happens to garner some attention and succeeds greatly. If it doesn’t work, well, their few minutes of effort to create it were a waste. So, meme coins aren’t as “rare” as they were a few years ago when Dogecoin and Shiba Inu were the biggest things.
Dutch Tulips and Meme Coins
Bitcoin Will Beat Meme Coins, The present meme currency speculation reminds me a lot of the Dutch Tulip Mania bubble of the 17th century. Charles Mackay’s Extraordinary Popular Delusions and The Madness of Crowds beautifully recorded the first modern speculative asset bubble.
Dutch merchants used to pay exorbitant prices for rare tulip bulbs, often as much as ten expert workers’ annual salaries. For the speculators, however, the tale did not end happily. The price of the bulbs quickly fell as it eventually proved hard to find new purchasers prepared to pay more than the previous ones had.
Bitcoin as “Digital Gold”
Naturally, some doubters have also proposed that Bitcoin could be a Dutch tulip bulb. They argue that speculative cryptocurrency traders could be eliminated if the price of Bitcoin eventually drops to zero. That may be the case, but I don’t think so. What has happened to those claims since they were first made more than ten years ago? Over time, Bitcoin has gained value rather than lost it. Bitcoin resembles gold because of its scarcity. A lot of cryptocurrency speculators call Bitcoin “digital gold.” Therefore, if you are considering purchasing meme coins at this time, I have one bit of advice for you: Purchase Bitcoin.