A Safeguarded Approach To Investing In Memecoins

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30 May 2024

The Inevitable Rug
If you have spent any time monitoring or investing in memecoins, you have already witnessed or experienced a handful of rug pulls. Memecoins are synonymous with rug pulls. Partaking in this market will incur complete losses. The general idea is that the wins will significantly outperform the losing trades. This is an actual possibility due to memecoins being able to rally thousands of percent.
Losing $100 on a rug pull is different from securing $10K on a winning trade… and so this is the general mindset of the average memecoin investor. However, only some enjoy a 50X or even 100X, so the losses often begin to compound, especially if the individual in question is a Degen memecoin investor. Most of the memecoins that begin trending on Dexscreener are glorified rug pulls.
What investors need is a way to filter potential memecoin investments. To eradicate as much of the toxicity as possible. Platforms like Dexscreener provide insights into security and other metrics. However, I have seen many memecoin projects with excellent ratings eventually become rug pulls. At the end of the day, bad actors are raising the bar and it’s becoming increasingly difficult to identify them.
From creating an attractive website to a successful presale, and even building enormous followings on X, it’s almost impossible to discern between the fraudsters and the real deal. There is however one particular approach that seems to have a fair amount of legitimacy, and that is to avoid the “alpha opportunity”. This might sound strange, or even counterintuitive. However, it’s not.
It is unfortunately the only appropriate form of risk management that can eradicate the gambling dynamic associated with memecoins, at least to a large extent. It’s still an incredibly speculative asset class. However, adopting a few principles can significantly reduce the risks associated with memecoins. Generally speaking, rug pulls occur within the first 72 hours of trading activity.
That being said, many projects experience multiple rug pulls, as crazy as that may sound. The approach that I have found to be the most trustworthy is to invest in memecoins once they list on exchanges, and in particular, MEXC. I recently revisited BONK in a recent article and as you can see in the screenshot below, I captured the entire move by purchasing my coins on MEXC.

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Another memecoin that has performed relatively well is MAGA HAT, which is up 500% over the past 7 days. This is obviously alongside the Trump euphoria. However, once again, MAGA HAT is available on MEXC and has a market cap of $203 million. Remember, when I first introduced it to readers, BONK had a market cap of $24 million. It has since peaked at approximately $3.5 billion.

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Identifying memecoins as early as possible on MEXC not only provides an opportunity for enormous gains but also a level of protection. The likelihood of a rug pull is significantly reduced, making it a much better strategy for newer and inexperienced investors. However, as I mentioned earlier, even the knowledgeable are going to have a hard time discerning between the wheat and the chaff.

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Final Thoughts
As I have mentioned in earlier editions, securing a favorable outcome regardless of what transpires in the marketplace is the goal of effective risk management. This approach reduces risk while simultaneously providing a profitable opportunity. There might be a different approach for a Degen gambler. However, it might be an effective approach for the more conservative Crypto investor looking to gain exposure to the world of memecoins. See you next time!

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Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.