Meme Coin Hype Cycle: Why Do They Lose Value Rapidly

The meme coin market is attracting attention as an investment sector with unique characteristics. Its features include social media-driven buzz and rapid market expansion. However, it also possesses an extremely volatile nature. Many investors are drawn to the appeal of this market, but behind that lies an inherent risk structure that cannot be overlooked.

Hype-Driven Market Dynamics

The mechanism by which meme coins generate buzz in the market differs significantly from traditional financial assets. Instead of fundamentals, the value judgment centers on viral popularity on social media. When online attention increases, it is not uncommon for the market capitalization to swell to several billion dollars in a short period.

The essence of this phenomenon lies in hype-dependent price formation. Capital flows into these assets not based on intrinsic value or technological innovation, but solely because “it’s trending right now.” Network effects and FOMO (Fear of Missing Out) interact to produce rapid surges in price.

Past Meme Coin Booms and Rapid Declines

Market data tell the story of this bubble’s fragility. Many meme coins that experienced a boom in recent years have undergone dramatic value loss immediately after hype faded. In numerous cases, declines of 90–99% from their peaks have been recorded, with some instances leading to virtually zero value.

This pattern has repeated itself. In the early stages, a limited group of investors enters, and later, media coverage and influencer mentions attract a large influx of new participants. When the buzz shifts to other tokens, funds quickly flow out, leaving remaining investors with significant losses.

What is Needed for Investment Decisions

Investing is a personal choice, but especially in the meme coin market, cautious judgment is essential. It is important not to be distracted by short-term returns and to recognize that the market is driven by hype. A sober evaluation from the perspectives of technological foundation, practicality, and sustainable demand is required.

While it is impossible to completely deny the entertainment aspect of meme coins, understanding their nature and making decisions within the scope of funds that can be lost is a wise approach.