Memecoin Research Report: From a Culture of Jokes to a $100 Billion Track

Author: 0xGreythorn; Source: PANews

Driven by the upcoming Bitcoin halving event, the wave of Bitcoin ETFs, and the continuous and drastic changes in market sentiment, Bitcoin has not only skyrocketed and plummeted, but also triggered a resurgence of meme cryptocurrencies led by tokens such as $PEPE and $WIF. In the past month alone, these currencies have risen by more than 600%.

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Driven by the upcoming Bitcoin halving event, the wave of Bitcoin ETFs, and the continuous and drastic changes in market sentiment, Bitcoin has not only skyrocketed and plummeted, but also triggered a resurgence of meme cryptocurrencies led by tokens such as $PEPE and $WIF. In the past month alone, these currencies have risen by more than 600%.

Coingecko data shows that in the first quarter of 2024, MEME coins were the most profitable cryptocurrency trend, with an average return of 1312.6% for its main tokens. Solana, followed by the newcomer Base, has become the key platform for trading MEME coins. This is due to their large daily active user base and low transaction fees on DEX, making them the preferred place to trade small-cap currencies.

The chart below shows the performance of key MEME coins compared to Bitcoin since the beginning of March.

Source: TradingView

It is worth noting that the profitability of MEME coins is 4.6 times that of RWA and 33.3 times that of Layer 2 (according to Coingecko, Layer2 ranked lowest in terms of return rate in Q1 of 2024).

 Source: Coingecko

If you are confused by these charts, don't worry. Many people find MEME coins and the wider crypto culture a bit difficult to understand. For the uninitiated, MEME coins are basically digital tokens that usually have no practical use other than to inspire "emotion" and cultivate a sense of community. While some people may regard them as something without value, the fact is that they are somewhat well integrated into today's experience-centric economy.

What the market has taught us is that the fundamentals of an asset often play only a secondary role in its potential to soar in value. MEME coins are an internet culture where people can come together and create meme value out of thin air.

 Source: Pepe on X

The GameStop phenomenon in 2021 is a perfect example, laying the foundation for the crazy success of meme coins such as $DOGE, $SHIB, and more recently $PEPE and $WIF.

Those who are good at spotting cultural trends early on may do well in MEME coins because they can predict where people's attention may shift.

In an age where our attention is constantly being fought for, it’s no surprise that meme coins have quickly become valuable. However, our short attention spans mean that interest can fade as quickly as it came. This is a double-edged sword, often leading to boredom when prices stop rising, often resulting in a sudden market drop as everyone moves on to the next big thing.

THE SURGE OF MEMECOIN

Between 2020 and 2021, memecoins became major players on the cryptocurrency scene. Leading coins like $DOGE and $SHIB not only established themselves, but also paved the way for smaller new coins. Their popularity showcases the unique appeal of the memecoin market, which is driven by speculative investment, volatility, and a passionate community.

Take the example of Dogecoin, which was created based on the Shiba Inu terrier and now represents a major cultural movement within cryptocurrency. It shows how an internet meme has evolved into a community-driven movement, with supporters deeply invested in both the meme and the coin. As the first memecoin, $DOGE remains a key indicator of interest in the crypto community, despite not reaching its "DOGE to $1" goal. Elon Musk's tongue-in-cheek endorsement and his decision to accept $DOGE to buy a Tesla have significantly increased its visibility, highlighting its influence and growth potential.

The memecoin market has developed a variety of themes beyond dog-themed, with cat-themed coins performing particularly well recently. This change highlights the dynamic nature and growing diversity of the memecoin ecosystem.

 Source: Messari

Over the past four years, the development of more complex L1 and L2 ecosystems has been noteworthy, some of which have created unique spaces for meme coins. In particular, Base has attracted a lot of attention, with $DEGEN, for example, reaching a market value of $800 million in a few weeks.

Since its launch in August 2023, Coinbase's Layer 2 platform has welcomed 5.03 million new users, especially experiencing rapid growth in March 2024.

Source: DuneAnalytics

As of today, some of the leading meme coins on Base, including $Brett, $Degen, $Toshi, $Normie, $Mochi, and $Doginme, have reached a total market value of $1.6 billion.

In addition to Base, meme coins on mature L2 platforms like Arbitrum and Optimism have seen a decline in popularity and support. These platforms are primarily designed for DeFi, which remains their core focus. Therefore, they are expected to perform well as DeFi regains momentum.

Exploring these other L2 alternatives, some notable memecoins can be found on ZkSync, such as $ZORRO and $MEOW, as well as on Scroll and Linea, such as $SCROLLY and $LUBE.

Outside of the Ethereum ecosystem, Solana has become a significant force in memecoin trading on L1 networks. It leads in daily active DEX traders and trading volume, surpassing user liquidity in other major ecosystems. This puts Solana at the center of a vibrant memecoin market. The Solana community's enthusiastic participation in memecoin and small-cap trading has given it the ability to challenge, and sometimes even surpass, the daily USD trading volume of Ethereum-based DEXs.

Solana is home to several leading memecoins, such as Dogwifhat, $Bonk, Cat in a Dog's World, Jeo Boden, Book of Meme, $Slerf, and $PopCat. The total market capitalization of the top 10 memecoins on Solana has reached $7.6 billion.

Source: Messari

In the Solana ecosystem, Dogwifhat has become the memecoin highlight this year. The dog-themed memecoin is raising funds to buy advertising space on the Las Vegas Sphere, which is known for its interior and exterior display capabilities. So far, it seems that we are about to see an image of a cute dog wearing a knitted hat on the sphere. This event is expected to take the enthusiasm for memecoins to a new level.

To conclude this section, it is worth noting that the total market capitalization of all memecoins is currently around $60 billion. Among them, Dogecoin, Shiba Inu, Dogwifhat, and Pepe, among others, feature prominently among the top 50 cryptocurrencies by market capitalization. However, this figure is still lower than the previous cycle's peak of nearly $100 billion driven by Dogecoin's significant growth in early 2021.

Source: Coingecko

Evaluating the Success of MEME Coin Investments

At the beginning of the article, we mentioned that those who are good at identifying cultural trends early may succeed in MEME coins, predicting where people's interests may shift. However, it is clear that MEME coins represent the most speculative part of the crypto market, which is already full of volatility and risk. Thousands of meme coin projects exist, but only a few have been able to gather any community consensus, and even fewer have been able to maintain it for a long time. Most projects and investors are essentially gambling, hoping to get a one-time big win. Still, we can’t ignore the role they play in the industry and the opportunities that come with keeping a close eye on the narrative.

That being said, here are some tips that may help you navigate these volatile waters:

• While real-world applications and strong fundamentals are critical to the success of most crypto projects and companies, memecoins operate differently. For memecoins, community engagement and hype are at the core of their success. The energy and excitement of the community, amplified through social media and other platforms, drives the popularity of memecoins. A community dedicated to their development and promotion is essential to guaranteeing the stability and growth of a memecoin.

• Be prepared for price volatility. While these fluctuations can provide profit opportunities, they come with significant risks. At the same time, beware of pump-and-dump schemes that could artificially drive up prices. Keep in mind that negative perceptions may affect the acceptance and longevity of memecoins more than other assets.

• As with any other type of investment, when investing in memecoins, the importance of research cannot be overlooked. With hundreds of memecoins out there, it’s vital to make sure your money is in the right coin, or at least one that has a higher chance of success. Take a close look at the coin’s history, its team, and its position in the market.

• Only invest money you can afford to lose,Recognize the speculative nature of memecoins. When investing in memecoins, always have a plan for potential gains and losses. This is important because our short attention spans can cause people to quickly lose interest and move on to the next big thing.

• Get involved early. This may seem obvious, but given the characteristics of people who invest in memecoins and how quickly these tokens rise, it’s more likely that someone will sell their tokens for a profit. They can rise just as fast as they fall, especially when the sense of community is only superficial. The earlier you get involved, the less likely you are to get caught up in the short-selling wave.

For example, the Greythorn team has recently started to pay close attention to the development of memecoins on Monad, especially after the rise of Base. The reason is that it is a mature and highly anticipated chain. While we are still waiting for its launch, there are signs that certain community members are beginning to cultivate a sense of community around the project through memecoins. Look for signs of early growth, such as social media interactions, surges in the number of holders and trading volume, and target coins that show sustainable, organic growth.

The Rise of DOGINALS and Bitcoin ORDINALS

Over the past year, the crypto scene has also been abuzz with the rise of Bitcoin ordinals, especially Bitcoin ordinals, Nodemonkes, and Bitcoin Puppets, which have all achieved significant value growth.

The introduction of inscriptions made it possible to create NFTs directly on Bitcoin, namely BRC-20 tokens. Unlike NFTs, these tokens are stored directly on the blockchain and are assigned a serial number based on the order in which they are mined. This allows images or data to be attached to specific satoshis within the Bitcoin network.

Ordinals, seen by some as a strategic investment in Bitcoin’s growth, are now making waves in the Dogechain ecosystem. Doginals, or Doge Ordinals, are becoming a popular narrative for those betting on DOGE’s growing meme value.

Buying Doginals is not simple, as it requires users to navigate the slow-moving Dogechain and decide which ones to invest in. Still, for many, owning Doginals is becoming a symbol of dedication to the Dogechain community, and their growing value only adds to that appeal.

As memecoins gain momentum, some believe that ordinals, especially Doginals, will follow suit, offering a unique way to display digital wealth. Dogechain is seen as the ideal platform for this trend.

Magic Eden is the go-to marketplace for trading ordinals, and there are rumors that a Doginal market may be on the horizon. As DOGE's value climbs, it not only boosts its own market, but also the value of all related memecoins.

Conclusion

Unlike Bitcoin or Ethereum, which have clear purposes and mature technology, memecoins generally lack significant real-world value or utility. Their popularity often stems from social media and online forums.

Because memecoins are unstable and lack solid support, investing in memecoins is highly risky and speculative. Despite the opportunity for quick profits, it is important to approach these investments with caution and thorough research.

Despite the potential pitfalls, memecoins continue to attract those looking for high-risk, high-reward opportunities in the crypto community.

A May 2023 study conducted by Chainplay titled "The State of Memecoins" showed that 64% of investors have purchased memecoins, while 36% avoid them. Surprisingly, while 70% of people recognize that there is a risk of fraud, 79% see them as a potential long-term investment. About 73% liken it to gambling. In addition, 20% of people entered the crypto space through memecoins, and 32% of memecoin buyers are new, with less than one year of experience.

More and more people are interested in memecoins, which means they are likely to become more popular and attract new investors and those who are already in the crypto world.

But remember that there are a lot of scams and "rugs" in memecoins, where the maker takes the funds and disappears, leaving the investor with nothing.

So if you are thinking about getting into the crypto or memecoin space, make sure to be very careful and do your homework!