The Meme Coin Phenomenon from 2024 to 2026: The Mechanism of the Surge and Investment Decisions

The meme coin market has evolved from a playful experiment in internet culture into a significant trend within the cryptocurrency industry. This article provides an academic and practical analysis by the AU Research team on the essence of meme coins, their rapid proliferation mechanisms, ecosystem development, and the realistic risks investors should be aware of.

The Essence of Meme Coins: From Cultural Theory to Cryptocurrency

Tracing the origin of the concept of memes leads us back to the theory first proposed by British evolutionary biologist Richard Dawkins in his 1976 book The Selfish Gene. Dawkins defined a meme as the smallest unit of cultural information that replicates within minds and spreads through imitation.

Dawkins applied the principles of genetic evolution to cultural phenomena, suggesting that memes propagate via mechanisms similar to biological genes. Memes encompass all cultural elements such as religion, rumors, news, knowledge, ideas, customs, slogans, and proverbs. Crucially, meme replication is not perfectly accurate like genetic copying; it involves human interpretation and creativity, subject to natural selection.

Today, in the realm of digital assets, the term “meme” carries a more limited meaning. While mainstream cryptocurrencies like Bitcoin and Ethereum are based on technological innovation and practicality, meme coins are recognized as digital assets characterized by simple consensus, humor, viral spread, and limited technological innovation.

How Propagation Science Explains the Surge of Meme Coins

Understanding why meme coins achieved the highest returns in the crypto market during Q1 2024 requires examining the intersection of communication science and psychology.

SIR Propagation Model and Infection Speed

Originally developed to explain epidemic spread, the SIR model can also describe information diffusion. The key condition for rapid spread is that “the infection rate exceeds the recovery rate.” In other words, as long as the number of new individuals exposed to the information surpasses those leaving the information, the dissemination accelerates.

Meme coin diffusion exemplifies this principle perfectly. If the inflow of new participants outpaces the rate at which profit-taking sellers exit, the market continues to rise.

Four Core Elements of Meme Coin Propagation

1. Content Design

The initial success of a meme coin depends on simple, adorable, and widely understandable content. Dogecoin (DOGE), for example, used the popular Japanese Shiba Inu “Doge” meme to appeal to dog lovers—a universal emotion. This approach is accessible and creates a long-tail effect, increasing favorability with each view. Similarly, Pepe Coin (PEPE) leveraged existing popular internet memes, and Shiba Inu (SHIB) drew from pop culture references.

The key principle is that overly technical content does not spread well. Complex technical explanations tend to attract only industry insiders, limiting broader dissemination. Conversely, simplicity and immediate understanding enable explosive virality.

2. Economic Cycles and Environmental Factors

The bullish market in Q1 2024 brought in a large influx of new participants from outside the traditional financial sector. For many newcomers, complex concepts like blockchain, oracles, staking, and smart contracts are difficult to grasp. Meme coins, however, are straightforward: you can buy thousands of units for tens of dollars, and a tenfold increase turns $1,000 into $10,000.

Additionally, global economic downturns have affected consumer psychology. As many countries experience economic stagnation, the public’s curiosity about new technologies wanes, shifting focus toward low-energy, easy-to-understand investment options. This trend accelerated the activity in the meme coin market.

3. Promotion by Key Opinion Leaders (KOLs)

The success of meme coins heavily relies on marketing efforts by KOLs. From project creation, issuance, liquidity pool setup, to influencer promotion and community building, each stage leverages KOL influence.

A critical point is that when multiple community managers simultaneously endorse the same meme coin, investors should recognize they are being collectively persuaded. Some investors are “brainwashed” into blindly trusting, only to have their funds drained by trading bots or suffer losses at market peaks.

Assessing the authenticity of cultural consensus can be aided by observing KOL support across different cultures. When influencers from diverse regions endorse the same meme coin, it likely reflects a universal cultural agreement.

4. Wealth Creation Myths and FOMO Psychology

One fundamental reason meme coins have become mainstream is the myth that they can generate quick wealth. Success stories like “Mr. X made $30 million in two hours” spread within communities, fueling FOMO (Fear Of Missing Out).

This mechanism aligns with propagation laws and serves as an efficient marketing strategy: price surges attract new entrants, stories of wealth spread, and both reinforce FOMO within the community, creating a feedback loop.

Current State of the Meme Coin Market: From Q1 2024 to Present

According to CoinGecko, in Q1 2024, the meme coin sector delivered the highest profit margins among cryptocurrencies. The average return rate of high-market-cap tokens in this category reached 1,312.6%, far surpassing other sectors like AI or RWA.

Projects like BOKE (Book of Meme), Brett, and MEW (Cat in a Dogs World), which emerged in March, quickly climbed the ranks of top meme coins by market value. Their rapid rise demonstrates the vitality of the meme coin market and the effectiveness of propagation mechanisms.

Meme coin creators often use themes such as dogs, frogs, other animals, or celebrities like Elon Musk to attract speculators and trading volume. Unlike traditional cryptocurrencies, developers typically design meme coins as light social experiments with limited technical value. This “lack of seriousness” appeals to new generations, creating a sense of freshness and familiarity, serving as an entry point into blockchain technology.

The Evolution of Meme Coins: From 2013 to Today

The history of meme coins begins with the launch of Dogecoin (DOGE) in 2013. Developed by software engineers Billy Marcus and Jackson Palmer as a joke, DOGE was based on the popular Shiba Inu meme. Its low price and fast block generation times unexpectedly gained popularity in the crypto world.

From online communities like Reddit to international charitable donations, DOGE evolved from a joke into a functional medium of exchange.

Following DOGE’s success, a series of meme coins inspired by internet culture and humor appeared, including PEPE and SHIB. These projects found their unique features and gained acceptance within the crypto community.

Interestingly, Bitcoin itself can be considered the largest meme coin, as its value is largely based on social consensus and decentralized belief rather than technological innovation—highlighting that social agreement is often more critical than technical development.

DeFi and NFT Integration: The Evolution of the Meme Coin Ecosystem

Meme coins have evolved beyond mere speculation into complex digital asset ecosystems.

NFT Integration: Digital Asset Ownership

Meme coins have merged with the NFT market, transforming viral internet characters into unique digital assets that users can own and trade. Early NFT projects like Rare Pepes and Fake Rares originated from internet memes.

The Shiba Inu (SHIB) project launched the “Shiboshis” NFT series, comprising 10,000 anime-style dog characters inspired by Shiba Inu. These can be used in the game Shiba Eternity for battles. NFT owners can form private communities and gain access to exclusive offline events and merchandise.

DeFi Integration: Liquidity and Revenue Mechanisms

Decentralized Finance (DeFi) has added new functionalities to meme coins, including:

Staking: Rewards for Participation

Holders can stake their meme tokens on DeFi platforms to earn rewards, often in additional meme coins or other tokens, encouraging ongoing engagement.

Shiba Swap, for example, allows users to exchange ERC-20 tokens and perform various tasks to earn native tokens like SHIB, BONE, and LEASH. Doggy DAO, a decentralized autonomous organization, grants voting rights to token holders for protocol governance, offering additional benefits.

Mining: Lending for Interest

Lending meme coins via smart contracts to others to earn interest. DeFi platforms facilitate these loans, and users receive rewards as mining income.

Liquidity Provision: Supporting Trading and Earning Fees

Users can supply meme tokens to liquidity pools on decentralized exchanges, supporting trading activity and earning a portion of transaction fees, thus enhancing market liquidity.

Realities of Meme Coin Investment: Understanding Risks Accurately

The viral nature of meme coins has led many projects to experience dramatic price surges, but many also face sudden collapses. Investors must recognize the following risks carefully:

1. Extreme Volatility

Meme coins can skyrocket in value instantly and crash just as quickly. Influences such as mentions by prominent figures (e.g., Musk), viral news, or trending topics can cause market swings. Investors are always at risk of significant financial losses.

2. Lack of Fundamental Value

Many meme coins lack underlying technological innovation or real-world utility. Their value depends entirely on market sentiment, which can evaporate rapidly. Even projects with NFT, DeFi, or community features often remain rooted in humor or satire.

3. Market Manipulation and Fraud

The concept-driven nature of meme coins attracts malicious actors. Pump-and-dump schemes, false information, and coordinated manipulation are common. Projects with anonymous developers or pre-sales are especially risky, with reports of exit scams or address hijacking.

4. High Failure Rate of Projects

Due to low barriers to entry, countless new meme coin projects are launched daily, most of which become worthless within days or weeks.

Strategies for Identifying Trustworthy Meme Coin Projects

To survive in the meme coin market, investors need strategic judgment beyond emotional participation.

1. Cross-Cultural Support Verification

Check whether the meme coin is supported by KOLs across different cultures. When influencers from diverse regions endorse the same project, it likely reflects a broader, more universal consensus. Support limited to a single community or region suggests limited sustainability.

2. Transparency of Development Team

Verify whether the development team is publicly identified and if their past projects are verifiable. Anonymous teams pose higher risks of evasion or scams.

3. Substantiveness of Technical Integration

Distinguish between superficial and meaningful integrations of DeFi or NFT features. Genuine economic incentives foster long-term community engagement.

4. Community Quality and Engagement

Assess the depth of community discussions, interaction with developers, and shared long-term visions. Communities driven solely by wealth myths are more prone to instability.

Conclusion: Navigating the Meme Coin Market and Investor Choices

Meme coins represent an intriguing fusion of digital currency, internet culture, and humor. From their rapid rise in early 2024 to their integration with DeFi and NFTs, they have developed into complex ecosystems.

As the market continues to evolve, investors are advised to avoid blind speculation and instead develop critical judgment skills. Evaluating project fundamentals, community quality, global support, and technological substance is essential to minimize risks and maximize opportunities.

Risks always exist, and investment decisions are personal responsibilities. This article provides information, not investment advice. Readers should conduct careful assessments based on their own circumstances. The AU Research team will continue providing tools, analysis, and in-depth technical insights.