Analysis of Investment Strategies for Memecoins

Memecoins, as a special category in the cryptocurrency market, possess unique investment values and risk characteristics. This article will analyze memecoin investment strategies from multiple perspectives to provide references for investors.

The Leverage Effect of Memecoins

Some memecoins have a high beta coefficient against Layer 1(L1) assets, providing a leverage effect on L1 assets without using actual leverage. Taking BONK from the Solana ecosystem as an example, when its 30-day beta exceeds the 90-day rolling beta, BONK's average 30-day and 60-day returns reach 124% and 413%, respectively.

The price trend comparison between BONK and SOL shows that changes in risk appetite often occur quickly, with BONK significantly outperforming SOL in a short period. When SOL rises by more than 5% within a week, the average returns for BONK over 1 week, 30 days, and 60 days are 26%, 141%, and 512%, respectively.

It is important to note that BONK's performance does not entirely depend on SOL. During periods when BONK performs well, its correlation with SOL often weakens.

On-chain Data Analysis

On-chain data analysis can help us understand the quality and beliefs of memecoin holders. Here are a few key metrics:

1. The growth of Token holders (90 days ): Reflects the recent popularity and spread speed of the Token.

2. Median and Average Holdings: Reflects the degree of belief of Token holders.

3. Proportion of holders with holdings >$1000: reflects the interest and belief of the holder base.

4. The proportion of holders with holdings >$100k: Reflects the interest and belief of large holders in the Token.

5. Whale Retention Rate: Measures the confidence of the largest holders.

6. Whale DEX Net Inflow/Outflow: Reflects whether the largest holders are buying more or exiting the project.

In addition to on-chain data, memecoins that have sufficient liquidity and have experienced multiple significant pullbacks are worth paying attention to. For tokens traded on major exchanges, the open interest is also an important reference indicator.

Community and Belief Factors

The success of Memecoin largely depends on its community and belief. The following points are worth noting:

• Resonant narratives and community slogans
• The strong belief and sense of belonging among community members
• Community leadership and coordination skills
• The level of integration with culture
• Social media marketing capabilities, especially the appeal to young audiences

Value Assessment

Evaluating the "fair value" of a memecoin can be approached from the following aspects:

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

2. Momentum Indicator:

   • RSI( Relative Strength Index ): Helps to determine whether a Token is in overbought or oversold conditions.
   • Moving Average: Analyzing the relationship of the price relative to key moving averages.

3. Google Search Trends: Reflects the level of public interest in this memecoin.

Macroeconomic Considerations

Memecoins, as high-risk assets, highly depend on favorable liquidity and economic conditions. Investors need to closely monitor the overall market's "risk appetite" sentiment and "animal spirits."

Conclusion

Investing in memecoins requires a comprehensive consideration of multiple factors, including their relationship with L1 assets, on-chain data, community activity, value assessment metrics, and the macro environment. Although this article provides an analytical framework, investors should still keep in mind that memecoin investment remains a high-risk area, requiring careful decision-making and reasonable position control.