They are notoriously volatile and account for most of the new cryptocurrencies in the market. The term shitcoin highlights this trait, as projects like Shiba Inu have famously pumped and crashed in the past. Elon Musk’s tweets have been known to disrupt cryptocurrency markets, creating both rallies and huge sell-offs, after he lends public support for or lays criticism against, various projects. Musk also shares his thoughts on Bitcoin regularly using Twitter, like announcing in 2021 that Tesla bought USD $1.5 billion worth of Bitcoin. Shiba Inu is an ERC-20 token built on Ethereum that’s reported to be 100% run by its community. For every cryptocurrency, there will be a debate over whether or not it’s a shitcoin.
It is seen by many as a way to "cash in" on cryptocurrency success. This is a meme-based cryptocurrency that was designed around a comical picture of a Shiba Inu dog called Doge. Much of the coin's success has been the result of influencer encouragement and hype. Alternatively, lower market cap coins may be acquired through a decentralized exchange , where there are no restrictions on what coins can be listed. Even if tokens are not sold directly after an ICO, offering a cryptocurrency at a very low price can result in a large proportion of tokens sitting in the hands of a few people.
The diminished value of a shitcoin is often due to failed investor interest because it was not created in good faith or because its price was based on speculation. As such, these currencies are considered to be bad investments. Cryptocurrencies like Dogecoin, Shiba Inu, and Monero are popular coins classified as shitcoins. These coins have a bountiful supply that affects their price and gives them little or no value.
Small-capped coins are often seen as opportunities due to their low price. As such, many people create unrealistic expectations and end up losing a lot more than they invest. A good example of this phenomenon was the impressive rise of value in XVG, a privacy coin that many people regarded as a shitcoin.
They’re often used to describe cryptocurrencies that were developed after bitcoins became popular, like Dogecoin or Shiba Inu coin. The catch, however, is that shitcoin currencies are often considered to be bad investments, because their prices are usually based on speculation. It is, after all, the internet, where anonymity reigns supreme, and the entire premise of crypto has always been just that, to transact anonymously, like digital cash. But the end might be nigh for these pump-and-dump shit coin schemes, special thanks to Elon Musk. Some have theorized that Musk’s move was the ultimate pump and dump as he was able to buy low and sell some of his holdings high .
Other marketing techniques used for shitcoins are giveaways, airdrops and token burns. Through a combination of these, shitcoins try to create a sense of scarcity while driving up the demand for the coin. However, since most of these tokens have a freakishly high token supply, in the trillions or even quadrillions, the only purpose of these techniques is to create a satoshi sense of FOMO. A shitcoin is generally launched in a bull market when the investor sentiment is at its highest. At the peak of a bull market, investors care less about utility and fundamental value and more about short-term gains and leveraging their capital.
However, most shitcoins are implicit or explicit pump-and-dump schemes. Their only purpose is speculation, and they aim to increase their token price as much as possible to yield more profit. In the worst-case scenario, the projects behind them turn out to be rug pulls specifically designed to enrich their founders. A shitcoin is often created with no intention to have utility besides speculation on a rising token price. Many shitcoins do not hide the fact that they have no intrinsic value and even try to play on the notion of being a bad investment. As such, they are considered extremely risky investments since they can yield outsized gains but have no fundamental value and can lose all of their value in a bear market.