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Bernie Vs. Elon… and Vanishing Meme Coin Liquidity
The battle between Bernie Sanders and Elon Musk took an unexpected turn for the surreal this weekend.
“I keep forgetting you’re still alive,” tweeted Mr. Musk.
As the Twitter-verse turned its attention to the feud, something else was starting to die off:
Since Friday, Shiba Inu (CCC:SHIB-USD) has suffered yet another 5% price drop. The Ethereum token has now fallen 35% since I urged investors to take profits last month. Meanwhile, Reddit favorite Loopring (CCC:LRC-USD) has dropped under $3, seemingly unable to break through some made-up technical ceiling.
But one thing worries me far more than the price declines: a steep drop-off in meme coin trading volume.
It turns out that trade volume is often a better predictor of meme coin performance than price action. When Dogecoin (CCC:DOGE-USD) hit its 74 cents peak in May, declining trade volumes preceded its steady retreat back to 18 cents. The same was true for SafeMoon (CCC:SAFEMOON-USD), FEG Token (CCC:FEG-USD) and other popular coins that came crashing back to Earth.
That’s because, when it comes to meme tokens, trade volumes are an excellent proxy for investor interest. Unless buyers are piling in, chances are good that prices will struggle.
As meme coin liquidity continues to drop off, we’ll take a look at the higher-quality coins that can withstand (and even profit from) the volatility.
The 4 Tokens Enabling the Meme Coin Revolution
Crypto commentators make investing seem so easy. Surely, the upward-pointing crypto candlesticks should translate into easy money.
In practice, buying esoteric cryptocurrencies is harder than it seems. Robinhood (NASDAQ:HOOD) supports just seven cryptos, and COO Christine Brown made it clear that they’re in no rush to add more.
“The idea of meme investing needs a little bit of an attitude adjustment,” she said in an interview with Yahoo! Finance.
Even Coinbase (NASDAQ:COIN), the largest U.S.-based crypto exchange, only supports 120 different coins. Investors looking to buy popular meme tokens — Floki Inu (CCC:FLOKI-USD), LTO Network (CCC:LTO-USD) and Nervos Network (CCC:CKB-USD) — are forced to purchase elsewhere.
The Trust Issue
So what should Floki-starved investors do?
For those living in America, the choices are limited. The more reputable crypto exchanges, from Binance to Bitfinex, explicitly ban U.S. residents from creating accounts — though a thriving industry of “verified” black market accounts have sprung up to aid the more daring.
At the same time, those turning to smaller exchanges run the risk of having their money disappear. In April, Turkish-based crypto exchange Thordex vanished, along with $2 billion in investor money, adding to the storied history of crypto frauds and hustles.
That’s where Decentralized Finance (DeFi) tokens come in — an ecosystem that allows trading outside of main exchanges. Anyone who bought the largest of these, Terra (CCC:LUNA-USD), would have turned $10,000 into $770,000 this year. Some lesser-known platforms have done even better.
So rather than ask, “how to buy Shiba Inu,” perhaps a better question is “how to buy the sure-bet picks and shovel plays that make SHIB possible?”
4 “Sure-Bet” Coins to Buy For the Meme Coin Revolution: PancakeSwap (CAKE): The Queen of the Binance Smart Chain
When it comes to popular Meme Coins, the Binance Smart Chain (BSC) reigns king. Of the top-10 trending coins on aggregation site CoinMarketCap last week, nine were BSC tokens.
But how to buy tokens like Boom Shiba (CCC:BOOMSHIBA-USD) or MicroPets (CCC:PETS-USD)? The main Binance Exchange stopped accepting new U.S. users in 2019…
…And that brings us to PancakeSwap (CCC:CAKE-USD): the “Queen” of Meme Coins.
PancakeSwap launched in 2020 to help investors trade BSC tokens. And with its low 0.2% trading fees, CAKE has quickly become the largest Automated Market Maker (AMM) of the chain. Current staking rewards sit at a glorious 72% APY, though obviously, investors will still face price risk.
CAKE is also a relatively stable token thanks to the defining characteristics of large AMMs.
Market makers run on a positive feedback loop: the larger the liquidity pool, the easier it becomes to trade coins. That brings more liquidity into the pool, and so on. Even if meme tokens were to temporarily slow, CAKE will retain its pricing advantage relative to other AMMs.
Uniswap (UNI) and Sushiswap (SUSHI): The Two Princes of Ethereum Tokens
Despite higher fees, the Ethereum blockchain has still held its own against BSC with hits including Shiba Inu and Floki Inu.
And that brings us to the two largest AMMs on the Ethereum chain:
- Uniswap (CCC:UNI-USD). Founded in 2018, UNI has become the largest Decentralized Exchange in the world, processing over $2 billion of transactions per day.
- SushiSwap (CCC:SUSHI-USD). This smaller AMM was the basis for PancakeSwap and shares virtually identical code.
Both tokens look much like PancakeSwap on a practical level: users connect their independent wallet directly to the app and start trading. The two Ethereum-based AMMs also share a similar investment thesis with CAKE.
There are, however, some differences.
Uniswap is an ideal token for those looking to trade tokens cheaply (especially the more esoteric ones). Because fees are fully paid to liquidity providers (LPs), that incentivizes more LPs to join and create markets for smaller cryptos.
SushiSwap, on the other hand, distributes 0.05% of fees to its holders. That makes it attractive to people looking to yield farm; investors can earn 300% per year or more on this high-potential token.
Crypto.com (CRO): The Next In Line for the Robinhood Throne
Though I’ve already written about CRO’s potential, Loopring’s rise (and stagnation) means Crypto.com (CCC:CRO-USD) deserves a second mention.
Hong Kong-based Crypto.com has one of the largest collections of available cryptocurrencies (421), beating out Coinbase, Gemini and FTX. It’s also become the most popular finance app on the Google App Store, according to data tracking firm SensorTower. That puts it ahead of Square’s (NYSE:SQ) Cash App, Google’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Pay, and PayPal’s (NASDAQ:PYPL) mobile app.
In other words, Crypto.com is growing. And the Crypto.com token has become a cryptocurrency to watch.
Much like Binance’s Binance Coin (CCC:BNB-USD) and Bitfinix’s Tether (CCC:USDT-USD), Crypto.com’s native currency is designed to help investors trade coins. Taker fees can drop to 0.16% or less for large transactions.
CRO also has another use: powering Crypto.com’s payments apps. These services, which include escrow and wallet functions, give CRO significant real-world use (and those staking CRO can reduce trading fees to zero).
These ingenious applications for CRO tell us one thing: no matter where cryptocurrency prices go, Crypto.com’s success will send its native token higher yet.
Meme Coins With Falling Interest
When Safemoon jumped 4.5x in October, it seemed as if the former meme cryptocurrency had regained its mojo. Reddit posts on r/SafeMoon increased from 100 to 1,700 per day, and the community would add subscribers at a rate not seen since last May.
But just as quickly as investor interest came… it disappeared.
Trading volumes would quickly collapse in the first week of November. $40 million… $20 million… $9 million… Volumes are now where they were back in June and prices have fallen over 40%.
Safemoon isn’t the only cryptocurrency to see volumes collapse. Floki Inu now sees just $55 million in trade volume per day, down from $230 million at its peak. And Loopring’s “buy the rumor” spike has quickly turned into a game of quietly passing the hot potato to someone else: trading volume has fallen 87% in just three days.
Though these tokens might revert in the short term, history tells us we’re more likely to see a 50% loss than another 5x return.
Bottom line: Moonshot is now recommending taking 50% profits in Floki Inu in addition to those already recommended in Shiba Inu and Solana.
How to Buy Shiba Inu or Floki Inu?
Investors have often asked me how to buy these esoteric crypto names. It’s one thing to look at the price chart for Shiba Inu, but quite another to put real money into it.
You deserve a good answer.
The two most popular universal wallets are currently MetaMask and WalletConnect.
- WalletConnect. The chain-agnostic wallet was founded in 2018 and supports both Binance and Ethereum tokens.
- MetaMask. The Ethereum-based wallet was founded in 2016. Minor tweaking will enable Binance transactions.
These two wallets are generally considered quite secure. You’re more likely to lose the account by giving hackers your password in a phishing scam.
But as with all things crypto, all wallets have an element of risk; none are FDIC or SIPC insured. So my advice for wallets is the same as it is for all Moonshot investing:
Spread out your bets, never invest more than you can lose and don’t be too mean to people you don’t know on Twitter.
P.S. Do you want to hear more about cryptocurrencies? Penny stocks? Options? Leave me a note at firstname.lastname@example.org or connect with me on LinkedIn and let me know what you’d like to see.
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On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing.