Meme coins are coming into the cryptocurrency space, promising investors something with potentially huge potential at very high risk. However, here are some of the risks of the meme coin: meme coin market manipulation since prices are made usually by social hype and not true utility. Knowing such risks will place the investor into a better position in making appropriate decisions.
1. High Volatility
Meme coins are price volatile. Meme coins grow and collapse drastically as compared to other popular cryptos, such as Bitcoin and Ethereum.
These bring about massive losses for investors primarily due to the phenomenon of a wrong investment in the market.
2. Lack of Fundamental Value
Most of the meme coins do not have a practical use except for other cryptos, whose values are tied to the planned application of the coin. The most part of value of meme coins is tied with social trends and internet communities that is pretty much speculation.
3. Market Manipulation
Most of them fall victims very easily to the meme coin market because whales pummel and dump on them with much ease. Mostly, that causes artificial inflation of prices before the crash coins leave severe losses that retail investors have to gulp in their money.
4. Rug Pulls and Scams
Mostly, it has been seen that most of the meme coins are created to scam people. Developers basically abandon the projects after earning money from investors and therefore complete loss is there for investors. Therefore, high diligence is really required before making an investment.
5. Regulatory Uncertainty
Every form of money governing bodies and all monetary regulatory governments worldwide are also recording this development in cryptocurrency use, even among the meme coins. Regulatory will certainly ban its usage or block it due to its crackdowns. This gigantic behemoth represents value and liquidity.
6. Liquidity is relatively low
This meme coin simply happens to be the worst concerning trading volume: trying to sell at decent prices is a challenge for any investor. That is, in case some person wishes to sell out then he or she risks being captured by the low-liquidity asset.
This might sound a bit far-fetched, but meme coins short-term return might give that. However, some of the risks associated with make it pretty hazardous investment sites include gross manipulation and scams through volatile market conditions among several others; in such light proper choices would imply good research alongside risk assessment in terms of deciding where to start.
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