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Here’s Why Some Cryptocurrency Investors Think There’s a Meme Coin Supercycle Right Now
One of the most popular narratives among cryptocurrency investors over the past six months is that the crypto sector is currently at the start of a “meme coin supercycle” that will send meme coin ratings in the stratosphere. These claims have also been made in previous cryptocurrency bull runs – and whether they were proven or not, investors who were properly positioned were seen as crooks.
So let’s dive into the meme coin supercycle hypothesis to see how plausible it is and how you can make money from the continued increase in interest in the segment, regardless of whether the loftier predictions come true or not.
The case for the supercycle
Half of Bitcoin‘s (CRYPTO: BTC) mining reward, which occurred in late April, is proposed as the starting point for the supercycle. The theory goes that once the price of Bitcoin adjusts upward to compensate for the permanent reduction in the additional supply of new coins through mining, it will carry the rest of the cryptocurrency ecosystem along for the ride, whether immediately or after its bull run itself runs out. The idea is that investors will be willing to liquidate some of their supposedly huge gains to pursue growth elsewhere once Bitcoin’s momentum slows.
At the same time, the bull run will be driven by huge amounts of new capital expected to flow in as a result of the approval of exchange-traded funds (ETFs) such as the Bitcoin Trust in Grayscale by the Securities and Exchange Commission (SEC). Previously, investors would need at least some type of cryptocurrency trading account to invest; With ETFs, people can buy a security whose value is closely tied to Bitcoin from their retirement accounts, thus opening the door to even more demand to fight for the newly limited coin supply. If other ETFs are approved, such as for Ethereumit could also have an additional additional effect.
Solana (CRYPTO:SOL), a popular blockchain for trading meme coins like Dog hat at this point, it will reportedly be the main beneficiary of capital flows into Bitcoin. The argument here is that for new investors it is the easiest chain to navigate as it operates quickly, requires minimal fees, and has a large selection of serious crypto projects in decentralized finance (DeFi), as well as numerous meme coins with no intended utility. .
Furthermore, there is reason to believe that investors in general are interested in gaining exposure to meme coins. Venture capital groups and hedge funds are now starting to get seriously involved in investing in meme coins as they want to capture some of the absurd returns that are sometimes possible to achieve in the space. Furthermore, since 2021, many small investors are familiar with the idea of a meme coin, having invested in Dogecoin or Shiba Inu and saw his impressive runs.
The story continues
Then there is the inflation situation and the Federal Reserve’s attempt to contain it. Crypto investors advocating the supercycle suggest that the Fed will likely cut the benchmark interest rate at least once in 2024. As the cost of borrowing money decreases, there is therefore more capital to invest further over the course of the year. risk curve than before, and toward the most speculative investments, such as memes.
Finally, supercycle proponents point to a growing sense of economic discontent among younger crypto investors. These investors have faced substantial financial barriers to achieving their life and financial goals, especially for major accomplishments like homeownership, and so are becoming increasingly nihilistic about their likelihood of future success. Hence their supposed desire to invest in the riskier corners of cryptocurrency, where they believe there are transformative returns lurking, will drive the meme coin bull market even more intensely, even after Bitcoin’s catalysts have kicked in.
Don’t put the horse before the cart
So far, it is ambiguous whether the meme currency supercycle hypothesis will be proven true or false. With that said, most arguments in favor pass the sniff test.
The halving process will, in effect, result in a scarcer supply of Bitcoin, and the ETF will facilitate the inflow of capital into the crypto ecosystem. Solana is indeed the lowest friction chain to use in my experience, and there is already a rich set of software and hardware tools that investors may need to research and transact. The meme coins of the moment are on this network and are gaining public consciousness every day.
But predicting the odds of a rate cut is vague at best. Market expectations regarding the Federal Reserve’s decisions on the matter have been refuted repeatedly over the last year.
Likewise, there are likely to be at least a few disenchanted young crypto investors. Still, predicting that their desperation will lead them to invest in large numbers in meme coins within a specific period of time is a bit of a stretch, even if the gist of it makes sense.
Don’t take this to mean that you should or shouldn’t invest in meme coins or other cryptocurrencies right now. If your portfolio is diversified and you have some extra capital to allocate to a riskier investment, it’s worth considering buying a coin like Solana or Bitcoin to get started. And if you can tolerate the volatility, choosing a meme coin or two to make a small investment might be appropriate – just don’t get carried away by the supercycle hype and over-commit if it starts to rise.
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Alex Carchidi has positions in Bitcoin, Ethereum, Shiba Inu, Solana and WIF. The Motley Fool has positions and recommends Bitcoin, Ethereum and Solana. The motley fool has a disclosure policy.
Here’s Why Some Cryptocurrency Investors Think There’s a Meme Coin Supercycle Right Now was originally published by The Motley Fool