Author: Benson Sun
Although the market is quite bullish now, to be honest, I don't think the meme season will last too long. At least the market capitalization of the meme sector will not be blown up as high as Murad's. After the meme craze, the overall altcoin market may face a bear market comparable to the collapse after the 2017 ICO wave.
This bull market clearly lacks enough narrative to attract external capital. Since the development of Ethereum smart contracts in 2015, decentralized computing platforms and applications have provided plenty of imagination space. But after nearly 10 years of industry development, we have dozens of public chains and Layer 2 solutions, as well as countless infrastructure. However, we can count on one hand the number of DApps with over 100,000 DAUs, and most of them are speculative or trading-related applications. Instead of seriously reflecting on the industry's problems, everyone just started buying meme tokens in droves after Murad's Token 2049 shilling, because the token distribution seems "fair" and meme tokens have no P/E ratio, so their valuation has no ceiling. Decentralization, Web3, mass adoption - who cares, I'm just here to make money.
Memes have value in terms of cultural dissemination and identity, but when the entire industry is talking about memes, and top-tier institutions are listing low-cap, high-risk meme tokens for traffic, it indicates some fundamental issues in the industry. The fact that the market hasn't crashed yet allows everyone to turn a blind eye, but the truth is, each participant is waiting for the right moment to quietly exit the deafening party. Last time, Musk shilled Doge; this time, the meme tokens are the crypto industry's own infighting. After the collapse of Silicon Valley Bank and FTX, regulations have become stricter, making it more difficult for off-ramps to enter crypto. The capital inflow from BTC ETFs has limited spillover effects on memes, as their attributes differ greatly. Without new money coming in to take the other side, the sustainability of this meme craze will be even shorter than expected.
During my recent trip to Dubai, I chatted with some industry insiders, and we all noticed something amiss. But from the perspective of exchanges, media, projects, or VCs, it's really hard to voice this "unease". After several high-valuation blue-chip projects crashed soon after their listings, speculative capital needs an outlet, and Murad's speech opened Pandora's box, leading the crypto world from idealism to nihilism. The super-high returns in the 2021 bull market's primary market have forcibly rationalized the high valuations of projects. From an external perspective, how can a project with just a prototype and no revenue already have a valuation of tens of millions of dollars in the primary market? Earlier this year, the market cap of $WLD even briefly exceeded OpenAI - what the hell is this?
This phenomenon continued until the 2024 bull market finally became unsustainable. When there are not enough new retail investors, the valuation illusion cannot last.
Nowadays, any kind of theme can spawn memes. Communities are constantly digging up the names of celebrities' dogs and cats, and a single concept can be minted on 3-4 chains simultaneously, with endless debates over capitalization. Countless new projects are dying every day - how is this different from the ICO craze in 2017, where any concept wanted to ride the blockchain hype and issue tokens? At least ICOs would still pretend to have a whitepaper, find some partners, and put together a fancy team profile. Now, devs can just mint a token with a single click, create a Twitter account and a Telegram group, and start shilling - at this rate, retail capital will be depleted even faster. Many meme liquidity pools with billion-dollar market caps only have a few hundred million in actual liquidity. When the crash comes, I don't know what it will look like.
Where are we now? Honestly, I don't know. But I know that when the bear market arrives, the altcoin valuations will likely face an even more brutal shakeout than the 2022 bear market, and meme coins will be hit the hardest. In the late bull market, the most ambitious players will suffer the worst. As a secondary trader, the short-term profit potential is there, so just go for it. But I've been thinking about how to exit this liquidity game early. Here are some of my thoughts:
1. Use the market cap ratio of meme coins to estimate the current level of market frenzy (see my 10/10 tweet);
2. Use the app rank of "moonshot" apps to estimate the degree of off-chain capital inflow (the apps are new, so there's not much data, but at least it can serve as a reference);
3. Closely monitor the ratio of total contract holdings and spot trading volume to circulating market cap in the overall meme sector - the former represents leverage, the latter represents turnover;
4. Closely watch when the Bitfinex ETH/BTC whale positions are unwound, as each time they do, ETH/BTC tends to crash, and altcoins may also go down with it.
Finally, in my subjective opinion, in the upcoming bear market, with the complete collapse of memes and the revaluation of altcoin prices, BTC Dominance % will likely reach levels not seen in the past five years. But shorting memes and longing BTC is too risky if we encounter a late-stage rally, so I'll choose to use no more than 3x leverage to systematically long the BTC Dominance % contract when market sentiment is at its most FOMO-driven.
That's it for the meme part. As for BTC, I'm relatively optimistic, but still can't be too ambitious. If BTC is like an AMM pool, the emergence of spot ETFs has significantly increased the pool's liquidity, making both the upward and downward resistance greater. Plus, options ETFs will also be launched later, further reducing the momentum of unidirectional trends (the sellers are the big guys who have the goods, so I won't go into this). If Trump gets elected and triggers a sudden pump, it won't be like the violent rise at the beginning of this year. Without a special catalyst, breaking $100,000 will be difficult. But in the event of a bear market, BTC may not crash as hard as it did in 2022 with the aggressive rate hikes, as there are no LUNA-like multi-billion-dollar implosion bombs in the current market (assuming no external black swan events).
Although I've sounded quite pessimistic, I believe in the resilience of the crypto industry. The next cycle will bring true innovation. Stay hopeful and keep the faith.
New addition:
Perhaps I'm wrong, and memes may become the hope of the entire village, bringing a never-ending stream of new users (or bagholders) to the crypto world. Maybe we're in the midst of a new paradigm shift, and memes will become a new alternative asset.
If this happens, there will be telltale signs. If mainstream trading platforms with direct fiat on-ramps (like Robinhood) list new meme tokens, or the overall trading volume of "moonshot" apps surpasses a certain threshold, I may change my view.
Until then, I'll maintain my stance. If a repeating pattern (meme season = the end of the bull market) keeps getting validated, and there are no obvious changes in the environmental parameters, I have to assume it's correct.
