Why community is a key factor in the development of cryptocurrencies?
The Internet revolution, which began in the second half of the 20th century, has dramatically changed human relationships. The rise of forums and social media has enabled users to simultaneously combine their roles as viewers and content creators. Very quickly it became clear that the Internet is an excellent tool for rapid social organization – through it we connect into groups where we can exchange experiences and views, learn from each other or provide entertainment. Ties connecting participants of groups and their solidarity make it safe to call them communities, and sometimes even organizations.
We are now facing another evolution, driven by blockchain technology. Its most recognizable fruit are cryptocurrencies, which were created, among others, to democratize the world of finance. A part of this trend are also the so-called. meme-coins.
In 2021, we had a rash of meme-based cryptocurrency projects that were spectacularly successful. Dogecoin and Shiba Inu turned out to be unrivaled in this category, whose astronomical increases in value make us dizzy. The fact is that in one year from a dollar bet on Shiba Inu at one point you could earn almost a million. Meme coins very quickly gained public attention and became a hot topic. In this discussion, however, very little time was devoted to the people behind their success. Meanwhile, the most interesting aspect of this part of the cryptocurrency market, is that it very clearly shows the importance of the strength of the online community in creating the value of an asset today.
Show me your community and I will tell you how much you are worth
Hedge funds were the first to learn about the power of a determined online community. A year ago, small investors gathered around Reddit led to sharp rises in the stock prices of companies like GameStop and AMC. The whole action was organized for one purpose – to lead to losses of investment funds, playing on falling stock prices. An anti-system campaign, driven by a community of small investors, caused huge losses of funds trading billions of dollars. According to the Wall Street Journal, Melvin Capital in January 2021 alone. lost 53 percent. of their capital. In the end, hedge funds betting on the drop in GameStop’s share price recorded total losses of about $12.5 billion.
A similar determination is displayed by the so-called. crypto-communities, connecting enthusiasts of the cryptocurrency project. These are groups of people meeting in forums, chat rooms and social networks where they discuss, share their knowledge or create memes. Contrary to what meme-coin critics would like to believe, these are often intelligent and educated people with experience in business, finance or technology. Most of them are united by the idea of freedom and belief in the free market.
The community of a given cryptocurrency plays a key role in its development. The people gathered in it are not only speculators, but also programmers, marketers or graphic designers. Their skill set directly translates into technological development of the project or its promotion, thus supporting the growth of the value of the cryptocurrency. Also of great importance is their activity in social media and whisper marketing, effectively increasing the number of enthusiasts of a given project.
The values or mission of existence adhered to by the participants of crypto-communities make it appropriate to call them organizations. And no wonder – the nature and idea behind blockchain technology promote a democratic and bottom-up way of governance.
Memes, or a pictorial way of communicating
A crypto-community, like any organization, has its own specific culture, which is shaped by the norms and behaviors of its members. Its elements include, among others, the language of. As befits a group of cryptocurrency enthusiasts based on memes, its members communicate primarily through memes. And there is no exaggeration in this statement. Memes accompany the conversation of the community regardless of the circumstances.
When the price of the cryptocurrency rises, members of the group send each other images encouraging further token purchases. Euphoria and emotions associated with this cause some coin owners to choose the color of their Lamborghini. Interestingly, humor does not leave them also during downturns, even the most drastic and violent ones. For some, it is even a reason to rejoice, associated with the opportunity to buy tokens “on the downside” (ang. “dip”.)
And here we touch on an important negative aspect of the mechanisms of this community. Impulsively giving in to emotion is not good for investing and investors are usually warned against such behavior. Meanwhile, the crypto-community culture is directly built precisely on emotions and collective speculation. Interaction in such groups stimulates greed and fosters a fixation on cryptocurrency success. Under the influence of such emotions investors usually make irrational decisions and take excessive risks, which may end up with the loss of even all invested money.
Where to find crypto-communities?
According to data from the cryptocurrency exchange Coingecko, there are already more than 12 thousand. cryptocurrencies. Most of them have their own channels for communication within the project, as well as outside it. Despite the prefix from the word “cryptography”, crypto-communities are very easy to find.
The most popular channels for internal communication are the instant messenger Telegram and the Discord app. This is where the greatest intensity of spontaneous interaction between community members occurs. As a rule, anyone can join such groups after passing a simple CAPTCHA verification.
Reddit and Twitter are most often used to communicate with the world. On the first one, there are already over 500 different crypto-communities. As a rule, these groups are very active, as evidenced in part by the fact that in 2021 “cryptocurrencies” proved to be the most popular topic of conversation on Reddit.
It is impossible to predict what future awaits specific meme coins and the communities behind them. The current situation and market excitement is reminiscent of what happened at the turn of the 20th and 21st century during the dot-com bubble. Despite all the advantages of blockchain technology, there are many cryptocurrencies on the market with zero utility and skyrocketing valuations. It is important to be aware of how much risk is involved in speculating on such projects. There is no shortage of people who have lost their life’s possessions in this way.
Krzysztof Raś, Vice President of Marketing. software engineer and managing director of Bitpanda in Poland