Memecoins Reach $140B Market Cap and Gain Ground in Crypto Economy

Memecoins: A Growing Force in the Cryptosphere

Memecoins have captured significant attention within the crypto community, despite their polarizing nature. Data indicates that they are increasingly gaining prominence in the crypto economy.

Powered by cryptocurrencies like Dogecoin (DOGE) and Shiba Inu (SHIB), the memecoin sector constituted 3.16% of the total crypto market capitalization on December 1, a rise from 1.3% at the year's beginning. Excluding crypto giants Bitcoin (BTC) and Ethereum (ETH), memecoins' market share expands to 11.21% from 4.2%.

This translates to a substantial market value of over $140 billion, consisting of cryptocurrencies that lack apparent utility. Highly volatile by nature, they often draw inspiration from animals, internet memes, or political figures and events.

As Bitcoin surpasses $100,000 for the first time, memecoins are also surging. Dogecoin has experienced a 168% increase since Donald Trump's election announcement, which fueled a general rally in the crypto market. Dogecoin is now the seventh-largest cryptocurrency by market capitalization at $64 billion.

Analysts ponder whether memecoins are an early stage indicator of a bull market or a sign of excessive speculation.

"Historically, memecoins have witnessed significant capital inflows towards the end of bull runs," said Alexandr Kerya, Vice President of Product Management at CEX.IO.

"However, this cycle differs as memecoin influence has emerged well before the halving and persisted during Bitcoin's mid-year consolidation," Kerya added.

Dogecoin, the pioneer of memecoins, was created in 2013 as a joke and gained traction in the 2021 bull market, partly due to Elon Musk's social media support. Other dog-themed coins, such as SHIB, followed suit, reaching billions of dollars in valuation. Memecoins have evolved into a distinct investment category, akin to DeFi tokens or privacy coins.

"While memecoins may eventually reach a plateau, the market is still determining their equilibrium," wrote Kerya.

Accelerated Growth and Changing Landscape

The memecoin sector experienced explosive growth in early 2024, as the number of projects launched on Pump.fun, a Solana-based platform, skyrocketed. The report reveals that over 60,000 memecoins are created daily, with Pump.fun accounting for half.

Since January 1, memecoins have witnessed a 330% surge in combined market capitalization, outpacing Bitcoin's 140% and Ethereum's 71% growth. Memecoin trading volume has also increased by 979%, representing 5.27% of the total crypto market volume. Notably, memecoins maintained significant volume even during market downturns.

"The growth of memecoins underscores the influence of retail investors in the crypto market," said Kerya. "They reflect market optimism and anticipation of a sustained rally."

"However, the increased prominence of memecoins also raises concerns about the potential for speculative bubbles, which could amplify the intensity but potentially shorten the duration of a bull run," he added.

The memecoin sector has undergone diversification over the years. While Dogecoin and Shiba Inu dominated in 2021, newer coins such as Dogwifhat (WIF), Brett (BRETT), Peanut the Squirrel (PNUT), and Popcat (POPCAT) have gained prominence.

Dog-themed memecoins initially dominated, but cat-themed and AI-themed tokens have gained market share. Political memecoins also experienced a surge during the U.S. election in November, followed by a significant decline in trading volume.

Blockchain Networks and Integrations

The networks supporting memecoin trading have also evolved. Dogecoin operates on its proof-of-work blockchain, similar to Bitcoin. Ethereum-based memecoins have also gained traction.

However, Solana has emerged as a major beneficiary of the memecoin craze in 2024, due to Pump.fun. The network accounts for 30% of the sector's trading volume and 15% of its market capitalization.

Telegram's TON network has also seen substantial growth in memecoin trading volume, albeit with a still relatively small market share.

"Memecoins' ability to attract retail investors and generate revenue for DeFi platforms could lead to stronger integrations between launchpads and decentralized exchanges," said Kerya. "However, overreliance on memecoins in ecosystems like Solana could raise concerns and potentially hinder broader development."