Memecoins Investment Strategy Analysis

In the cryptocurrency market, memecoins have attracted the attention of investors as a high-risk, high-reward asset class. This article will analyze investment strategies for memecoins from multiple perspectives, including their relationship with underlying public chains, on-chain data analysis, community factors, and technical indicators.

The Relationship Between Memecoins and Underlying Public Chains

Memecoins typically exhibit a high beta characteristic in relation to the underlying blockchain assets. Taking a cultural token from a certain blockchain ecosystem as an example, there is a clear correlation between it and the underlying blockchain assets:

• When the 30-day beta of this cultural coin exceeds the 90-day rolling beta, its average 30-day and 60-day returns can reach 124% and 413%, respectively.
• When the underlying public chain rises by more than 5% within a week, the average return of this cultural coin is: 1 week 26%, 30 days 141%, 60 days 512%.
• The correlation between cultural coins and underlying public chains is usually high, but during periods when cultural coins perform exceptionally well, this correlation often weakens.

This feature makes memecoins a way to leverage bets on underlying blockchain assets without assuming the liquidation risks of traditional leveraged trading.

On-chain Data Analysis

By analyzing on-chain data, we can assess the quality and belief of the memecoin holder base:

1. Growth of Token Holders: Reflects recent popularity and spread rate.
2. Median and Average Holding: Understand the overall distribution of holders.
3. Proportion of large holders: the percentage of holders with over $1000 and over $100k, reflecting investor confidence.
4. Whale Retention Rate: Measures the long-term belief of large holders.
5. Whale Trading Behavior: Analyzing the buying or exiting tendencies of large holders.

In addition, trading liquidity and price volatility are also important considerations. For memecoins listed on mainstream trading platforms, the open interest is also a noteworthy indicator.

Community Factors

The success of memecoins largely depends on the activity and cohesiveness of their community. The following points are key factors in assessing a memecoin community:

• Resonant narratives and slogans
• Strong belief and sense of belonging among community members
• Community leadership and coordination skills
• Cultural Integration Level
• Ability to promote on social media, especially influence among young groups.

Value Assessment and Technical Indicators

Assessing the "fair value" of memecoins can be approached from the following aspects:

1. MVRV Ratio: The ratio of market value to realized value, which may indicate a near local bottom when it is below 1.

2. Relative Strength Index ( RSI ):

   • RSI close to or below 30 indicates possible overselling
   • RSI close to or above 70 indicates potential overbought

3. Moving Average: Analyze the position of the price relative to key moving averages.

4. Google Search Trends: Reflects the changes in public interest for this memecoin.

Macroeconomic Considerations

Memecoins, as high-risk assets, heavily depend on the overall market's liquidity conditions and risk appetite. A favorable macroeconomic environment and the return of "animal spirits" are key conditions for the excellent performance of memecoins.

Conclusion

Investing in memecoins requires a comprehensive consideration of various factors, including their relationship with the underlying public chain, on-chain data, community vitality, technical indicators, and the macro environment. Nevertheless, memecoins remain a high-risk investment area, and investors should approach them with caution, allocating only a small portion of their investment portfolio to them.