Author: Stacy Muur
Translator: Baihua Blockchain
In the past few weeks, memecoins have overshadowed all other Web3 topics, making ordinary users feel that the meme track is the only way to achieve good returns.
After the surges of $PNUT, $PEPE, $BONK, $BRETT and some other memecoins, it is not surprising that they have attracted attention as memecoins have reached the highest daily trading volume and the "meme" category is becoming increasingly popular.
But is the risk worth the returns? Has the memecoin market been overhyped?
1. The Current State of Memecoins
Are memes really the mainstream topic of this year?
If you talk to someone who has been involved in the Web3 market for at least five years, and ask them how they would define 2024, they would likely say it is the "year of the memecoin".
Many people have referred to memecoins as the best performers of the year, and there is data and rankings to support this. But does this really reflect reality?
1-month industry performance, source: Artemis.
If you analyze the industry performance so far this year, the data may tell a different story. For example, on Artemis, the RWA index (including Ondo, Mantra, Clearpool and Maple) leads with a 1900% increase, while memecoins grew 258% and BTC grew 104%.
Additionally, it is crucial to understand which memecoins are being considered. On Artemis, the memecoin index currently only tracks the 19 largest memecoins.
Category rankings on CoinGecko face another issue: many memes belong to multiple categories, so some strong performers may significantly inflate the 7-day performance across multiple categories.
Source: CoinGecko Categories
To understand why I see this as an issue, consider the Pump.fun ecosystem, which tracks 520 coins. It looks very strong, being the second-largest gainer this week, generating significant FOMO.
However, when you look at the rankings, you'll find that less than 20 Tokens (3.8%) have a 7-day gain of over 110% (the category average), and less than 60 Tokens (11.5%) have a positive weekly gain.
This is no longer a WAGMI (We're All Gonna Make It) situation, is it?
From a performance tracking perspective, the main issue with memecoins is that their industry performance is often measured by the largest or most popular assets in the category.
This creates the illusion that memecoins' performance exceeds all other Web3 industries. However, a more accurate statement is that the leading memecoins have outperformed other categories.
This raises an important point: distinguishing between mature memecoins and new memecoins, as they represent two completely different markets.
2. Emerging Memecoins
CoinGecko currently tracks 520 memecoins on its Pump.fun dashboard. Since the launch of Pump, 3 million Tokens have been created.
This means that 99.982% of Tokens are not tracked by CoinGecko, and we cannot access their performance data.
Source: Dune
Meanwhile, Pump is attracting 50,000 to 70,000 new users daily, with a total of over 150,000 active users.
Source: Dune
Here is some additional background from my research conducted in late August:
Most top PNL addresses are Token deployers, only 3% of Pumpdotfun traders made over $1,000, and 0.8% made over $10,000. Over 60% of traders lost money.
Source: @newtoneinsteinx on X
These are new memecoins. This bet doesn't seem very healthy, does it?
For the average new memecoin trader, the main issue is the inability to distinguish between "new" memecoins and "mature" memecoins. Most novice traders chase early-stage protocols, hoping to replicate the 0.001% success stories of achieving mass adoption - like PEPE or BONK.
I don't want to disappoint you, but the probability of being struck by lightning is 0.011%, which is higher than the chances you might encounter.
3. Mature Memecoins
The prospects for mature memecoins are much brighter. Their ability to reach a certain market capitalization is not due to venture capital support or specific valuation factors, but rather the power of their community, a bit of luck, and strategic market management.
This may sound like a conspiracy theory, but I believe that most memecoins with a solid market share are not launched by random developers. There is usually a professional memecoin development team behind them, equipped with ample resources for market making and marketing, which is why these memecoins have succeeded.
To clarify, I'm not saying that all popular memecoins are the result of perfectly executed plans, but this is likely the case for most memecoins.
Several logical factors explain the outperformance of mature memecoins compared to other Web3 domains:
100% of the supply in circulation (no low float or high FDV)
No venture capital support (eliminating additional selling pressure)
Organic and active holder community
No product risk (no vulnerabilities, execution issues, or user acquisition problems)
Memecoin trading dynamics (one memecoin's rise drives others up)
Strong correlation with the overall market cycle
Lower reliance on marketing
Source: Kaiko
Trading memecoins is purely speculative, and this year, this behavior has become more predictable, forming some patterns that divert trading volume and liquidity from "classic" Tokens, especially in the absence of a mainstream or fresh narrative in the current Web3 landscape.
By the way, according to 1% market depth data from US trading platforms, the liquidity of meme Tokens reached a historic high of $110 million last week. Large-cap meme Tokens like SHIB and DOGE still dominate, accounting for over 70% of the total market depth.
However, their market share is gradually declining, indicating an increasing interest in smaller Tokens.
Currently, over 50% of the trading volume on Solana comes from memecoins; on BNB, this ratio is close to 45%; and on Base, it is around 25%.
That's a lot.
Data source: Dune
However, history has shown that when the market is busy promoting a certain narrative after price movements, it is usually too late. In my view, the memecoin market has already reacted to BTC's rise.
As long as the BTC price remains around $90,000, I suspect we will see another round of surges in those memecoins that have already established a foothold (let's call them "faith coins" to avoid confusion with the 3 million Tokens created on Pump.fun this year).
However, retail investors often chase the last train of the trend, and now they are still getting on board, hoping to reach "Valhalla".
The core of the problem is not only that most new entrants are too late - this is a classic phenomenon in all narratives.
The real problem is that a considerable number of retail investors are jumping on the "new memecoin" train, which is usually headed for "Hel" rather than "Valhalla".
The result is that new users are being badly hurt, and further user entry is thus stagnant. For the average Web2 user, the difference between memecoins and classic Tokens is negligible, as they see them only as a few trading codes. As a result, this poor experience is amplified across all areas of Web3.
It should be noted that I am not against "faith coins" (memecoins with a solid market share). They have many advantages. But I do think we need to stop using the same word to describe those excellent projects and the "gambling" Tokens with poor design on Pump.fun. Let's solve this problem.
4. Summary: Some Suggestions
If you are an experienced memecoin trader, you can continue with your own strategy, but be aware that the market may have already overheated.
If you are a memecoin newcomer and feel a strong FOMO, you can consider allocating a small, controllable amount of funds to try, focusing on those "faith coins" that have already been recognized by the market.
Avoid participating in the issuance of new projects, unless you are clear about how to win in them. There is a very important rule: If you don't know how to win a game, don't participate.
Link to this article: https://www.hellobtc.com/kp/du/11/5539.html
Source: https://stacymuur.substack.com/p/are-memecoins-a-springboard-to-gains?utm_source=%2Finbox&utm_medium=reader2
