Memecoins Investment Strategy: Data Analysis and Market Insights

Why choose Meme tokens?

Beta Effect Advantage

Our preference for specific meme tokens largely stems from their high beta characteristics displayed towards the underlying public chain assets. Simply put, appropriately configuring meme tokens such as BONK( and Solana ecological culture tokens ) can provide leveraged returns on the underlying public chain assets without using actual leverage ( and avoiding liquidation risks ).

The signal we focus on is the performance when the 30-day beta( pink line) exceeds the 90-day rolling beta( red line), which last occurred on April 1. When this happens, the average 30-day and 60-day returns of BONK reach 124% and 413% respectively, with medians of 45% and 57%(.

Price comparison analysis shows that changes in market risk appetite usually occur very quickly, and BONK can significantly outperform the market in the short term. This highlights the importance of buying at the right moment.

The explosive growth of BONK is usually synchronized with SOL rising more than 5% within a week. In this case, BONK’s performance is as follows:

• 1-week average return: 26%) median 14%(
• 30-day average return: 141%) median 11%(
• 60-day average return: 512%) median 27%(

It is worth noting that in about 1/3 of the cases, BONK actually showed a decline - this suggests that the good performance of SOL does not guarantee that BONK will necessarily perform well. However, these declines mostly occurred before the explosive rise of BONK at the end of 2023.

Correlation Analysis

BONK is usually correlated with SOL. However, during periods when BONK performs particularly well, such as the fourth quarter of 2023, the first quarter of 2024, the fourth quarter of 2024, and this April, this correlation often weakens.

Core Points

BONK demonstrates high beta characteristics against SOL over rolling periods of 30 days, 60 days, and 90 days, with a higher beta value from an absolute return perspective. This means that the fluctuations in BONK’s price are typically much greater than those of SOL, making it a high-risk/high-reward asset.

We view BONK as a leveraged bet on SOL, but without the liquidation risks of traditional leveraged trading.

Although we use BONK/SOL as a data example, the same principle applies to other “blue-chip” meme tokens and their relationship with underlying blockchain assets, such as the PEPE/ETH pair.

On-chain Data Analysis

In addition to analyzing the performance of meme tokens relative to the underlying public chains, on-chain data provides us with an important quantitative analysis perspective, helping us understand the quality of the holder base and the strength of their beliefs.

The following is a comparative analysis of several top “blue-chip” meme tokens:

Holder Growth )90 Days (

The holder growth data reflects the recent popularity and spread efficiency of the token.

Holding Distribution Analysis

The comparison between median and average holdings helps us understand the structure of token holders. Some meme token communities are more centralized in their management, and these tokens have lower median holdings, primarily due to a large number of small airdrops distributed across numerous wallets.

Holding Scale Analysis

• Proportion of holders with value >$1000: This metric provides a quality perspective on the holder base, with a higher proportion of large holders typically indicating stronger interest and belief.

• Proportion of holders with a value >$100k: This indicates the relative interest and conviction of large holders in the token, compared to the total number of holders.

Whale Behavior Analysis

• Whale Retention Rate: We track the proportion of wallets that once held >$100k in tokens and still hold more than 50% of their peak unit amount, excluding the interference caused by price fluctuations ). This helps to measure the conviction strength of large holders.

• Whale DEX Liquidity Analysis: Analyze the DEX inflows/outflows of all wallets that have ever held >$100k tokens to understand whether major holders are increasing their positions or exiting the project.

Other Considerations

We only focus on meme tokens that have sufficient trading liquidity and have experienced multiple pullbacks of over 50%.

It is important to note that our data only analyzes on-chain activities and does not include tokens held by centralized exchanges, such as BONK, which has approximately 20% on centralized exchanges.

For tokens traded on major exchanges, the open interest is also an important reference indicator.

Community and Faith Factors

In this regard, intuitive analysis of the cryptocurrency market has become more important, including monitoring social media activities and sentiment trends.

We focus on the “potential audience interest” of meme tokens. For example, it must be a globally acceptable topic ( like the “disrupting the stock market” concept of SPX6900 - although it sounds not very serious, it has the potential to attract attention and form community movements ).

The qualities we are looking for include:

• Resonant and effective narratives and community slogans
• Signs of strong belief and sense of belonging among community members
• Leadership and community coordination skills
• Signs of cultural integration ( such as the cultural infiltration of Pepe Meme )

It is worth noting that some communities are now promoting projects through short video platforms to reach a younger potential cryptocurrency user base. The most successful meme token communities are often excellent marketers.

Fair Value Assessment

How to determine if it was purchased at “fair value”?

The clearest way is to understand the relationship between the realized value (, the proxy metric of the cost basis of all tokens in circulation, and the market value.

When the MVRV ratio is below 1, it indicates that holders of ) are on average in an unrealized loss position—this typically suggests that we may be approaching a local bottom, provided that the bull market environment continues.

Taking BONK as an example, its current implementation price is approximately $0.0002. At the time of writing this analysis, the trading price of the token was $0.0000145 — this may indicate that a good entry point was available at that time.

It is important to note that the price calculation does not take into account the token supply held by the trading platform. According to data from blockchain explorers, it is estimated that about 20% of the BONK supply is on major centralized exchanges.

Momentum Analysis

In the absence of traditional fundamentals, another way to assess “fair value” is to observe momentum indicators.

Relative Strength Index ( RSI )

RSI helps us understand whether the recent momentum of the token is in an overbought or oversold state:

• RSI close to or below 30 indicates an “oversold” condition.
• An RSI close to or above 70 indicates an “overbought” condition.

Moving Average

Another way to evaluate recent momentum is to analyze the position of the price relative to key moving averages. The ideal buying opportunity is when the price breaks through a key support area, provided that we have confidence in the 3-6 month time frame.

Search Trends

Analyzing search engine trends and other social sentiment indicators can also help determine the timing for buying/selling.

Macroeconomic Environment and Liquidity Cycle

It must be emphasized that meme tokens are at the far end of the risk spectrum. It is well known that Bitcoin relies on the liquidity environment, and meme tokens are even more sensitive to this. Favorable liquidity and economic conditions, combined with risk appetite sentiment and the return of “animal spirits” in the market, are key conditions for allocating meme tokens.

Investment Framework Summary

Based on the above analysis, a meme token investment framework can be established that includes the following elements:

• Why certain meme tokens ( with high beta characteristics ) are suitable as a very small part of an investment portfolio.
• How to identify meme tokens with strong “fundamentals” ( through on-chain data )
• How to evaluate “fair value” ( MVRV analysis )
• Timing selection for entry ( market turning point/macroeconomic environment/momentum indicators )
• Exit timing judgment ( momentum/RSI indicator )

Of course, this framework is not foolproof. There are no easy returns in the investment world, and excess returns are always accompanied by higher risks.

Nevertheless, having a systematic analytical framework should help investors better navigate the wild market of meme tokens.