#MemecoinSentiment

Meme cryptocurrencies, such as Dogecoin or Shiba Inu, are characterized by extremely volatile price dynamics driven by sentiment. Traditional option pricing frameworks, which assume that volatility stems from underlying risk factors, may underestimate the value of derivatives of these assets. We develop a theoretical model showing that the volatility of meme cryptocurrencies is an increasing function of investor sentiment. When markets anticipate a surge in enthusiasm, implied volatilities rise and are followed by option premiums, regardless of any underlying cash flows. We derive a closed-form expression under simplified assumptions and study extensions that capture the more complex interactions between sentiment and price formation.