The resurgence of memecoins in the cryptocurrency market has sparked a lot of interest, with many investors hoping to hit the jackpot. However, experts warn that investing in memecoins like PEPE is akin to playing the crypto-equivalent of Powerball. Matrixport’s head of research, Markus Thielen, suggests that memecoin investors resemble those who play the lottery, hoping to make money quickly. He adds that the unpredictability of memecoins means that even the most sophisticated models cannot predict their prices. Investors are essentially gambling on their popularity, which undermines the principles of investing.
Despite the risks, the entertainment factor of memecoins should not be discounted. Younger investors are more likely driven by the fun and entertainment element of memecoins, according to Dr. Anastasia Hronis, a clinical psychologist who specializes in gambling addiction. Investors might buy memecoins to be part of a community or for entertainment value.
However, professional investors and “crypto whales” have been and will continue participating in trading memecoins like PEPE. According to blockchain analytics firm Lookonchain, former tech entrepreneur Jeffrey Huang purchased a total of 73.4 ETH, equivalent to roughly $137,000, of Pepe in the past four days. After prices dropped, three other whales also started to buy PEPE on May 9.
Thielen cautions investors of memecoins such as PEPE, where the development team is anonymous and has no discernable roadmap. He suggests working with stop loss and stops when trading risky assets and being ahead of others to get out once the momentum is turning.
Investing in memecoins like PEPE might be fun, but they generally are highly risky investments that can hold no intrinsic value in the long run. Investors are essentially gambling on their popularity, and the unpredictability of memecoins means that even the most sophisticated models cannot predict their prices. Therefore, investors should exercise caution and be prepared to get out once the momentum turns.
