Explained: What are shitcoins

But what goes up must eventually come down, and this is especially true for shitcoins. Once the value of such coins reaches a peak, investors tend to sell out in order to profit, causing shitcoins to fall just as quickly as they rose. This cycle is akin to pump-and-dump schemes, whereby some inflate the price of an asset by creating rumours or false information to trigger a buying frenzy. The asset is eventually dumped once its price booms, leaving inexperienced investors with a bulk of worthless assets that hold little to no value in the long run.

For instance, in March 2023, Ethereum co-founder Vitalik Buterin sold $700,000 worth of shitcoins that were airdropped to him. Buterin sold 500 trillion SHIKOKU (SHIK), which represented 50 percent of the project’s circulating supply, for 380.3 ETH. He also sold 50 billion Mops (MOPS) and 10 billion Cult DAO for 58 ETH and 1.25 ETH, respectively.

As a result, the prices of these coins plummeted, particularly SHIK, which plunged by 95.8 percent following the sale. In May 2021, Buterin also dumped Shiba Inu and Doeglon Mars, which resulted in a 40 percent and 90 percent drop, respectively. However, keep in mind that the term ‘shitcoin’ is loosely defined, and what makes a shitcoin is mostly determined by how an individual perceives it.

Thus, it could be said that the prices of shitcoins are highly influenced by their large investors, rumours, and in some cases, even celebrities. Dogecoin is a prime example of this phenomenon. Its value increased exponentially after billionaire businessman Elon Musk’s said that the coin would be accepted as payment for Tesla merchandise. The price of Shiba Inu, another meme coin, revolved around Dogecoin’s success as well.

As a result of these developments, Dogecoin and Shiba Inu are now classified as coins with several real-use cases. Dogecoin is presently accepted by a variety of outlets, while the latter has a burgeoning ecosystem that includes a decentralised exchange, a metaverse, and blockchain-based games. DOGE and SHIB are currently in the top 15 cryptocurrencies in terms of market capitalisation.

However, not all shitcoins are fortunate enough to be adopted by the wider community. On April 25, Good Gensler ($GENSLR), which had surged by 3,000 percent post-launch, dropped by 75 percent as a result of profit-taking. Social media activity surrounding the coin also appears to have dried up.

Good Gensler was trending with 1.18 million tweets just a few days after its release. The coin’s design is inspired by the growing animosity of the US Securities and Exchange Commission (SEC) chair Gary Gensler and his overreaching attempts to regulate cryptocurrencies. While the coin initially experienced a significant increase in value, many who were late to the rally took massive hits to their crypto portfolio once its price dropped.

Many argue that shitcoins are just ponzi schemes. However, if an investor does their due diligence and is ready to face the risks, shitcoins can be a very attractive investment. In contrast, those who look for long-term growth would likely steer clear of shitcoins. In the end, it is a matter of perspective and it comes down to the person investing in such projects to judge whether or not shitcoins are important or not.