Memecoins

Meme Coins receive a high risk rating in the Crypto Report, here’s why

Published

on

Meme coins have received a high risk rating from Coin Metrics reports, underlining the greater volatility and market manipulation within this market. The analysis conducted by Coin Metrics aims to spread awareness of the speculative nature of these digital assets, urging caution among investors who intend to jump on the meme coin bandwagon.

The report flags meme coins as high risk

As the The meme coin market continues to expand rapidly extending its reach to a wide range of audiences across different regions of the world, it is important to understand the various risks associated with these digital assets. On June 11, Coin Metrics, a leading provider of cryptocurrency financial intelligence, released a report detailing the inherent risks associated with meme-based cryptocurrencies.

In the report, meme coins were assigned a risk score, marked by a high Gini coefficient of around 0.8. THE Gini coefficient is the statistical measure of economic inequality in a population. Assesses the dispersion of income or distribution of wealth among members of a particular population.

A Gini index of 0 represents perfect equality, while an index of 1 indicates inequality. In the context of meme coins, the Gini coefficient can be used to evaluate the distribution of cryptocurrency holdings across different wallet addresses.

The 0.8 Coin Metrics rating of meme coins highlights the significant aspect investment risks related to these digital assets. The crypto platform largely attributed the increased risks of meme coins to the rise concentration of token ownership within the meme coin market.

This suggests that most meme coins are held by a small portion of cryptocurrency investors. These investors are generally called “Whales” or large token holder and are recognized by massive token transactions and holdings. Coin Metrics revealed the impact of high token ownership, indicating its potential market manipulation and liquidity challenges in the market.

In addition to volatile nature of these coins, which in itself represents a substantial risk factor, a high Gini coefficient for meme coins also indicates greater centralization. This increased centralization poses substantial risks as large token holders tend to do significantly impact the price of a token when performing large-scale transactions.

Coin Metrics urged investors to remain cautious of the risks associated with meme coins, highlighting the need for careful consideration when valuing these coins. The crypto platform also encouraged investors to evaluate the stability of these tokens by understanding their market dynamics and activities before investing in them.

The growth of the meme coin market

According to the Coin Metrics report, as of June 2024, the meme coin industry has grown to a market capitalization exceeding $60 billion. This market, featuring coins based on humorous characters and animals, has grown significantly since its inception.

While the market growth While it can be mainly attributed to the speculative nature of meme coins, investor interest and demand for meme coins remains high. Some of the most popular meme-based cryptocurrencies such as Dogecoin (DOGE), Shiba Inu (SHIB) and Pepper (PEPPER) they have been the face of the market, expanding rapidly over the years.

Newer coins like Dogwifhat (WIF) AND Book of Memes (BOME) have taken the market by storm, reaching market capitalizations of more than $2.6 billion and $691 million respectively in less than a year. On the other hand, Dogecoin, Shiba Inu, and Pepe are three of the most popular and largest meme coins on the market.

Currently, Dogecoin’s market capitalization has exceeded $20 billion, while Shiba Inu’s market capitalization exceeds $13 billion. According to CoinMarketCap, Pepe’s market value also rose to $5.5 billion. Together, these three popular meme coins have risen to the remarkable market value of $100 billion in 2021.

DOGE price recovers | Source: DOGEUSDT on Tradingview.com

Featured image created with Dall.E, chart from Tradingview.com

Fuente

Leave a Reply

Your email address will not be published. Required fields are marked *

Información básica sobre protección de datos Ver más

  • Responsable: Miguel Mamador.
  • Finalidad:  Moderar los comentarios.
  • Legitimación:  Por consentimiento del interesado.
  • Destinatarios y encargados de tratamiento:  No se ceden o comunican datos a terceros para prestar este servicio. El Titular ha contratado los servicios de alojamiento web a Banahosting que actúa como encargado de tratamiento.
  • Derechos: Acceder, rectificar y suprimir los datos.
  • Información Adicional: Puede consultar la información detallada en la Política de Privacidad.

Trending

Exit mobile version