How should we correctly understand the “Meme Coin Super Cycle”?

Author: Daniel Ramirez-Escudero, CoinTelegraph; Compiled by: Tong Deng, Jinse Finance Investor and Memecoin analyst Murad Mahmudov's Memecoin Supercycle theory has gained attention among traders. In short, the theory suggests that the combination of various factors will create an essentially endless supercycle for Meme-centric cryptocurrencies. But unlike other crypto market narratives with complex technical explanations and mechanisms, Memecoins seem to rely entirely on community, sentiment, and the promise of wealth. Despite the lack of fundamentals for Memecoins, traders are still attracted by the promise of camaraderie and quick profits. Kyle Kemper, who developed political Memecoins like "Make America Healthy Again" (MAHA), believes that the Memecoin supercycle does not mean the demise of fundamental analysis, but rather a shift in the indicators used. He points out that "critical analysis of the project, team, and mission is being replaced by the strength of the project's key opinion leaders (KOLs), as well as factors like volume and chart performance." The apparent success of the Memecoin Supercycle theory among crypto traders indicates a bias in their preferences. "Meme coin investors are looking for returns in 24 hours or less, while the typical venture capital firm's horizon is seven years." Blockcircle CEO Basel Ismail attributes the rise of Memecoins to the increasing maturity of crypto traders, stating that many traders have experienced at least one market cycle and gained valuable lessons from their experiences. Ismail believes that seasoned crypto traders have realized that most tokens aimed at providing technical solutions (so-called utility tokens) lack real intrinsic value and utility beyond speculative price fluctuations. Mahmudov addressed this issue in his Token2049 speech, citing the perspective of an X user: "Almost all crypto tech is a smokescreen, designed to sell you useless tokens." Ismail estimates that around 70% of the valuation of most utility tokens is driven by their Meme component, speculative in nature. He says that, influenced by past experiences, traders are cautious about being "burned again" after witnessing so-called solid tech crypto projects surge 100x in three months, only to crash 99% in the same period. "Now, the behavior of traders is like sheep. They just shift their attention and capital to Memes." Ismail states that a "very strong anti-venture capitalist and anti-private equity sentiment" has also driven the rise of Memecoins. He explains that investors feel misled by venture capitalists, who often release locked tokens on centralized exchanges and then dump them on unsuspecting retail investors. "Fundamentally, Memecoins don't try to deceive you, lie, and make false promises and unmet expectations. People value that." The love of Memes combined with the power of mimicry has created a social and psychological phenomenon where people want to unite with like-minded individuals. Ismail says, "We gather together, sharing a common belief." Ismail points out that while this motivation may seem superficial to some, the power of a shared ideal within the investor community is immense. He cites the unprecedented phenomenon of the AMC and GameStop stock squeezes. "They came together, built a young, vibrant, and energetic community around an ideal or idea, and were able to create a lasting impact."

The Memecoin Supercycle is Unsustainable

Despite the apparent success of the Memecoin Supercycle, some express doubts about its long-term sustainability. Casa co-founder Jameson Lopp notes that he believes the Memecoin frenzy is unlikely to last and may be misleading. Anonymous crypto market analyst and trader Crypto Rand explains that the Memecoin economy thrives on hype, driven by impulsive traders chasing quick profits. This mentality fuels extreme volatility and rapid liquidation cascades. Crypto Rand points out that the success of Memecoins lies in their marketing and hype, comparing it to the ever-changing fashion trends. Crypto Rand says he sometimes puts money into Memecoins, stating that it has the same value as betting on a football match or the US elections. "Memes can hardly become an 'investment', but only a quick trade." Dogecoin Foundation founder and owner Angel Versetti criticizes Mahmudov's Supercycle theory, noting that it is based on investors becoming irrational due to collective psychology and hormonal changes. His conclusion is that "the state of Memecoin financial market investors essentially indicates they have a mental disorder." For Versetti, a market model built on "a greater delusion of market participants" does not sound like a sustainable economic model, as Memecoins have no intention of creating any utility. He explains that the Initial Coin Offering (ICO) era went through a similar process, where investors had only a 1% chance of success, but at least some "tried to have a vision and build something." Lopp believes that in the long run, the market will resolve this delusional investment, as "those who build castles in the clouds are destined to return to their true value of zero." Lopp advocates for projects that provide solutions or tokens useful for any activity, especially if the project requires a sustainable lifecycle. He says, "Those projects that focus on providing actual utility and value rather than a zero-sum game will do well as long as they ignore the hype and continue to work towards their goals." Quranium CEO Kapil Dhiman points out that "utility tokens are not just speculative tools, but an essential component of decentralized ecosystems." He states that "without this strong technical foundation, the entire blockchain industry risks stagnation. [...] While Memes may generate quick profits driven by speculative frenzy, they cannot sustain long-term growth and credibility in the field."

Mahmudov Profits Greatly from the Hype of Memecoins

Observers also note that Mahmudov personally stands to benefit from the spread of his Memecoin narrative. Lopp says, "Some people will be happy to deceive themselves, thinking they will magically get rich for one reason or another, usually because someone with an actual wealth-building plan needs them to believe a narrative." On October 9th, on-chain investigator ZachXBT claimed that Mahmudov allegedly holds $24 million worth of Memecoins.

This may indicate that he is a man of his word, but it also suggests that he can benefit greatly from the takeoff of the Meme Coin super-cycle narrative.

The on-chain analysis platform Lookonchain reported that thanks to the surge in the Meme Coin SPX6900 (SPX), Mahmudov made $23.6 million in just four months.

Lopp stated that the success of Meme Coins reflects the nature of permissionless systems, in which people inevitably engage in foolish or even fraudulent activities.