With a market cap of $15.6 billion, Shiba Inu (SHIB -3.80%) is one of the meme kings of cryptocurrency. While it might not be a safe investment, its mind-boggling price gain in 2021 is more than enough to make investors curious about how to identify other meme token and coin investments with similar potential.
Despite the less-than-serious subject matter, taking a serious and structured approach to investing in meme cryptos can lead to favorable returns. So, if you're looking to find the next Shiba Inu, keep an eye out for these three things.
1. A highly engaged core team and community
If you were watching the cryptocurrency markets in 2021, you doubtlessly saw the many variations of the Shiba Inu mascot in meme format. When meme crypto holders are excited about their investment prospects, they tend to create new meme content and redistribute it online to spread the word about the merits of their purchase.
Therefore, one of the keys to profitable meme investments is that the most successful meme cryptos tend to have the most active and engaged development teams and a large community of equally enthusiastic holders. Those holders are typically distributed across several social networks, with defined workgroups for accomplishing specific tasks or discussing initiatives.
What does it look like when a development team is engaged? Strong teams are most visible in their interactions with their community of investors and advocates. Much like shareholders depend on management for earnings updates and other important news, a crypto's team usually provides a stream of informal updates and small announcements on social media to the core group of holders.
Getting new information about a project regularly helps to keep holders engaged rather than defecting to another crypto. Likewise, one of the important tasks for developers is to manage the community's marketing efforts, like reposting memes to make sure that those activities add to the meme token's brand value rather than detract from it. Developers are also responsible for empowering the community to market the token or coin more effectively by suggesting narratives to use, providing images to turn into memes, and offering favorable technical analysis of their recent price action.
So, do your own research and dig into the quality and size of a meme crypto's community and management before investing, as the winners usually look much more active than the rest.
2. Marketing materials with wide appeal
The most successful meme cryptos, like Shiba Inu, Dogecoin, (DOGE -3.69%) Bonk, and Floki, feature cute pets as their mascots. Their absurdly high valuations are partially a product of the widespread love of cute animals and the ability of such cute animals to reliably capture and retain people's attention over time.
The lesson here is that when a meme crypto's marketing efforts are set up from day one to appeal to a mass market, they're more likely to be a worthy investment than those attempting to appeal to niche interests or in-jokes that have no reach outside the cryptocurrency sector.
On that note, it is important to distinguish that only a meme token's initial presentation needs to be broadly likable for it to succeed. Shiba Inu, Dogecoin, Bonk, and Floki all have a Shiba Inu dog as their mascot. None of them could have hoped to rely solely on the unmodified dog image as their primary ingredient for higher prices, largely because, with the exception of Dogecoin, there were already other very similar competitors around.
All were able to reach higher valuations than most meme cryptos because the Shiba Inu dog was just the starting point for their communities to develop additional memes with a more unique character. And it's that differentiation via "memeing" that enables them to coexist on the market, rather than there only being one surviving Shiba Inu dog coin that dominates the segment.
3. A compelling narrative linking holders to the project's continued success
Maintaining conviction in meme crypto investments through the gyrations of the market is quite difficult, especially considering that most meme coins and tokens have no intended utility or roadmap for ensuring long-term performance. However, there is a somewhat surprising factor that can make the difference between a persistent investor community and a fickle one. In industry lingo, it's called the "lore" of a crypto.
This refers to the living narrative of a cryptocurrency project's history, as told by the community of holders, often through memes. Much of this lore is usually somewhere between a collection of tall tales and a set of weaponized misunderstandings about real events. Nonetheless, a good narrative keeps people engaged, especially when the narrative is being added to frequently.
Assessing the veracity of the claims made is less important than ascertaining whether the lore is compelling and extensive. Cryptos that have gone through challenges, whether due to internal strife, legal issues, being disliked by other communities, or surviving and rebounding after a grueling declines, are more likely to have lore that investors might find enticing. At the same time, be wary that nobody likes a persistently negative narrative.
Keep in mind that strong lore is primarily useful for helping to retain existing coin holders, as the narrative is something they may feel like they're a part of creating. In some cases, the narrative may help to recruit new holders, but potential recruits need to hear about the details in full (and not be bored or confused by them) before becoming converts.
