Analysis of Memecoins Investment Strategies

In the cryptocurrency market, Memecoins have attracted the attention of many investors as a high-risk, high-reward asset class. This article will analyze the investment logic and strategies of Memecoins from multiple perspectives.

The beta attributes of Memecoins

Memecoins typically have a higher beta coefficient relative to the main chain assets (Layer 1) of their ecosystem. This means that the price fluctuations of Memecoins tend to be greater than those of the main chain assets. For example, in the Solana ecosystem, BONK exhibits this characteristic relative to SOL.

By observing the crossover points of the 30-day and 90-day rolling beta, we can capture the potential explosive opportunities for BONK. Data shows that when the 30-day beta exceeds the 90-day beta, BONK's average returns over the following 30 days and 60 days reach 124% and 413%, respectively.

It is worth noting that the strong performance of BONK is usually accompanied by a rise of more than 5% in SOL over a week. In this case, the average return of BONK is as follows:

• 1 week: 26%( median 14%)
• 30 Days: 141%( Median 11%)
• 60 days: 512%( median 27%)

However, the rise of SOL does not completely guarantee the excellent performance of BONK. In about 1/3 of cases, BONK may still decline.

The correlation between BONK and SOL is usually high, but during periods when BONK performs exceptionally well, such as Q4 2023, Q1 2024, Q4, and April of this year (, this correlation tends to weaken.

Overall, Memecoins can be seen as a high beta bet on main chain assets, but without the liquidation risk associated with leveraged trading. This characteristic applies not only to BONK/SOL but also to other "blue chip" Memecoins such as PEPE/ETH.

On-chain Data Analysis

In addition to price performance, on-chain data is also an important indicator for evaluating the quality of Memecoins. Here are a few key metrics for comparison:

1. Token holder 90-day growth rate: reflects the recent popularity and spread speed of the Token.

2. Median and average holdings: Reflect the overall belief of Token holders. Some Memecoins communities are more centrally managed, which may lead to a lower median holding.

3. The proportion of wallets holding value >$1000: reflects the overall interest and belief of the holders.

4. The proportion of wallets holding more than $100k: reflects the relative interest and belief of large holders in the Token.

5. Whale Retention Rate: Analyze the percentage of wallets that once held >) Token and still retain more than 50% of their peak holdings, measuring the conviction of large holders.

6. Giant Whale DEX Net Inflow/Outflow: Analyze whether large holders are increasing their holdings or exiting.

In addition, sufficient trading liquidity and having experienced multiple significant corrections are also important criteria for screening quality Memecoins. For tokens listed on major trading platforms, the open interest is also a noteworthy indicator.

Community and Faith Factors

In addition to quantitative indicators, the success of Memecoins largely relies on community factors. A successful Memecoin project usually possesses the following characteristics:

• Resonant narratives and community slogans
• Community members show a strong sense of belief and belonging.
• There is clear leadership and coordination.
• Able to integrate into a broader cultural context
• Skilled in using social media $100k such as TikTok ( for marketing promotion

Value Assessment

Evaluating the "fair value" of Memecoins can be approached from the following perspectives:

1. MVRV Ratio: When the MVRV is below 1, it indicates that the average holder is in an unrealized loss state and may be close to a local bottom.

2. RSI Indicator: An RSI near or below 30 indicates oversold conditions, while an RSI near or above 70 indicates overbought conditions.

3. Moving Average: Analyze the position of the price relative to key moving averages to look for breakout opportunities.

4. Google Search Trends: Reflect changes in public interest.

5. Macroeconomic Environment: Memecoins are highly sensitive to liquidity conditions and risk appetite sentiment, necessitating attention to the overall market environment.

Investment Framework Summary

A complete Memecoins investment framework should include the following elements:

• Understanding the high beta characteristics of Memecoins
• Use on-chain data to identify strong projects
• Use indicators like MVRV to assess fair value
• Grasp the macro environment and market momentum to time the entry.
• Use technical indicators and sentiment indicators to determine exit timing

It is important to emphasize that Memecoins are extremely high-risk assets, and even with a systematic analysis framework, investment risks cannot be completely avoided. Investors should strictly control their positions and manage risks properly.