Meme coins, often compared to penny stocks, promise the exhilaration of affordability and the potential for exhilarating profits, but they ride on the rollercoaster of substantial volatility. These unconventional, light-hearted cryptocurrencies, exemplified by the likes of Dogecoin, originate from internet memes and viral jokes, spreading excitement across social media platforms and captivating a diverse audience. Investors are drawn by the allure of quick gains, often fuelled by the powerful FOMO phenomenon.
Example- Dogecoin (DOGE), Shiba Inu (SHIB), Pepe, Dogelon Mars (ELON)
In striking contrast, stablecoins resemble the reliability of blue-chip stocks. They come at a higher price, but they offer the appeal of stability and dependability, making them an attractive choice for long-term investors. Tied to external references such as fiat currency or commodities, stablecoins like Tether and USD Coin serve to provide price stability, facilitating seamless everyday transactions and reducing risks for all participants. These steadfast assets come in various forms, including fiat-collateralized, crypto-collateralized, and algorithmic stablecoins, each maintaining their stability through unique methods.
Example- Tether (USDT), USD Coin (USDC), Binance USD (BUSD).
In the exhilarating realm of cryptocurrencies, Bitcoin reigns as the original rockstar, renowned for its heart-pounding price swings and rich history. But how does Bitcoin compare to meme coins and stablecoins?
Meme coins, the zany, internet-inspired crypto, have stormed the world in recent years. With their meme themes and quirky names, they inject humour into the typically serious financial landscape. However, beneath their whimsical facade, meme coins exhibit astonishing volatility, with prices swinging wildly in response to internet hype and social media trends.
On the other hand, stablecoins are the rational, dependable anchors in the cryptocurrency universe. Tied to real-world assets like the US dollar or precious metals, stablecoins offer a serene oasis of predictability amid the crypto whirlwind. They often serve as a safe harbour for investors, especially during turbulent market periods.
The choice of the right cryptocurrency hinges on your risk appetite. If you seek thrills and are prepared for potential losses, meme coins may be your ticket. But for those eyeing a more stable investment path, stablecoins offer a smoother journey, even if it comes at the cost of less extravagant returns.
Here is the past 5-year daily return (%) data on the graph, which clearly tells us that on average, Meme Coins are more volatile as compared to Bitcoin.
As per calculations of past 5-year daily prices, the daily price return Standard deviation (Sd) data is as follows:
DOGE is three times more volatile than Bitcoin, signifying that its price is more likely to fluctuate wildly, both in daily and annual returns. In short, DOGE is as volatile as a roller coaster on steroids.
Comparison of Cryptocurrencies with S&P 500 and USDT
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.