In this Clip, we unpack a lively discussion centered around Meme Coin. Originating from a dialogue between the author and fellow investors within the crypto community, this article offers a detailed dive into my opinions.
The insights and opinions presented in this article reflect my views as of the publication date and may contain factual inaccuracies or biases. This clip is intended for discussion purposes only, and feedback is welcomed.
In the bear market, the mantra often echoes: “Buy the dip, avoid the Meme Coin.”
It’s straightforward logic, isn’t it? Why would seasoned investors gravitate towards altcoins which potentially last from a few months to just a few days for long-term investment?
However, when referencing Meme Coins in this clip, we’re talking about the so-called “blue-chip Meme Coins” such as Dogecoin, Shiba, and Pepe. These digital assets have carved a significant niche for themselves, boasting impressive market capitalizations and getting listed on famous exchanges.
Some believe that emerging small-cap Meme coins, Pepe included, are poised to follow in Dogecoin’s footsteps, potentially soaring to multi-billion-dollar market cap in the next bull run.
Yet, I think this might not be a good choice. Betting on these Meme Coins during a bear market, especially for cross-cycle investments, might be a gamble that doesn’t pay off.
Contents
The Underlying Value Proposition of Meme Coins
The term ‘meme’ describes a cultural phenomenon where information and ideas self-replicate, evolve, and spread rapidly. In the crypto world, Meme Coins are tokens that embody this meme-centric ethos. What differentiates Meme Coins from other crypto assets is their lack of intrinsic value. They often find their identity anchored in meme IPs originating outside the crypto world. Examples abound: Dogecoin draws inspiration from the Shiba Inu meme, Pepe is a nod to Pepe the Frog, and the recently popular fun project HarryPotterObamaSonic10Inu stacked four buffs by utilizing “BITCOIN” as its token ticker, amalgamates pop culture icons including Harry Potter, Obama, and Sonic. Meme value isn’t confined solely to pop culture. Widespread sentiments within the community can give rise to financial memes. Take Litecoin’s historic branding as “digital silver”, a juxtaposition to Bitcoin’s moniker as “digital gold.” This play on words captures the cultural synergy between traditional precious metals and the pioneering world of cryptocurrencies.
Unlike other commercial crypto projects such as DeFi protocols and Web3 gaming platforms, Meme Coins might appear to lack a business model. However, its commercial strategy and PMF (Product Market Fit) are crystal clear: to be a speculative medium open to the general investors and with highly imaginative space.
By being “open to the general investors,” Meme Coins have straightforward and innovative concepts that can also be quirky or even contentious, making them stand out and effortlessly grab the public’s attention amid the information deluge.
The “highly imaginative space” tag implies a lack of concrete business foundations. Meme Coin valuations can skyrocket based solely on the community consensus.
Even the most dedicated crypto professionals cannot deny that “profiting from speculation” is a primary, if not the foremost, driving force in the crypto world. The proliferation of Meme Coin projects is a testament to their PMF in catering to this very demand.
When comparing Meme Coins to the traditional speculative targets, a few distinct advantages of the former become quite evident:
- Unprecedented Accessibility. As long as you have a crypto wallet and an internet connection, anyone from anywhere around the world can engage in its speculative activities. There’s no cumbersome KYC processes, no prolonged registration, and no oversight hurdles. There are no identity barriers, and trading operates 24/7. To put this in context, trying to join the Gamestop trading whirlwind of 2020-2021 in the traditional financial world was a far more challenging endeavor.
- Information Transparency. Even though there’s still potential manipulation by Meme Coin issuers concerning code, funds, and governance rules, Meme Coins are more transparent in terms of token information, capital flows and algorithmic structures. This is a stark contrast to traditional black-box Ponzi schemes and investors generally have a fairer “information baseline” to start their speculative journeys.
- Abundance of Opportunities: The Meme Coin arena is teeming with choices. Given the tangible cost of launching and creating a Meme Coin project is minimal, new projects sprout incessantly. There are limitless possibilities.
Meme Coins operate in a different dimension compared to typical Web3 projects, such as DeFi protocols. The growth in intrinsic value of Meme Coins derives purely from the incremental attention and marginal capital they attract from ensuing speculators (meant without any derogation). For typical Web3 projects, our predictions focus on the expansion or contraction of its business. For Meme Coins, we must anticipate the market’s future attention allocation and the capital commitment from speculative participants.
This also implies that the primary objective for Meme Coin operators is to capture and magnify public attention. They seek to channel this attention towards their chosen narrative, fervently instigating a wave of ‘Fear of Missing Out’ (FOMO) amongst potential investors.
However, capturing public attention and maintaining it is not just a difficult task, but may also not align with the long-term interests of the new-generation of Meme Coin founders.
Meme Coins Lack Competitive Edges
The life cycle of Meme Coin projects often traverses the following stages:
- Conceptualization and Narrative Design: This phase involves challenging mainstream ideas, igniting a form of rebellious energy and melding the bizarre with the avant-garde. However, it’s essential not to alienate the broader audience and become too niche.
- Early Promotion: This is all about drawing the attention of the first wave of speculators. The endorsement or support from celebrity influencers can spell the difference between obscurity and meteoric success.
- Fostering and Expanding FOMO: As early adopters reap rewards, their stories become the lore of the crypto community. This amplification lures in a larger swarm of speculators driven by a blend of ambition, with a belief that they aren’t the last ones jumping on the bandwagon.
- Mass Adoption: This involves getting listed on famous exchanges, shedding any derogatory labels like “Meme Coins,” and maturing into a universally accepted speculative asset.
- Maintaining Appeal: This stage focuses on retaining and safeguarding the project’s share of attention and speculative investments in the market.
In their early stages, the rug-me Meme Coin projects are vulnerable. Given the context of a larger market cycle, this article casts a spotlight on the more mature, “blue-chip Meme Coins” that have already navigated the turbulence to reach the more stable phases 4 and 5.
As previously mentioned, the operation of Meme Coin projects primarily revolves around public attention with a mercurial nature. Migrating public attention is far easier than altering entrenched financial allegiances, reshaping user behavior around product engagement, or pivoting established brand loyalties.
Crafting a fresh meme narrative and introducing it to the crypto world demands minimal investment. Consequently, established Meme Coins face relentless competition for the speculative attention and resources from new emerging projects.
However, facing the attention competition from later comers, the strategies available to established Meme Coins to maintain their share of attention are quite limited. Take Shiba as an example: birthed in a bull market, Shiba burst onto the scene with an audacious strategy, endearing itself to the public by airdropping half of its tokens to Vitalik Buterin. This move, reeking of novelty and buzz, perfectly tapped into the prevailing market trend, propelled further by Dogecoin’s price rise. Therefore, Shiba crowned itself the ‘heir apparent’ amidst the dog-themed Meme Coin dynasty.
However, after its integration into major CEXs, it was inevitable for its topical appeal and the attention-attracting ability to diminish. Subsequently, the Shiba team made a series of moves, from developing their own DEX and Layer2 to launching NFTs, diving into the metaverse, and venturing into gaming. These efforts aimed at transforming from being just another Meme Coin to a business-centric project. But both in terms of business milestones and token price, the outcomes were lackluster. Shibaswap, their proprietary DEX, had a TVL of just $21 million, and the $SHIB price notably lagged behind the market average over the year.
Source: coinmarketcap
Transitioning from a meme-based project to a business-focused venture is a challenging endeavor. On one hand, business-oriented projects require meticulous planning and execution in areas like strategy, product, and technology, testing the multifaceted capabilities of project management. More importantly, the gritty dedication involved in “hard work” doesn’t have the same allure. This approach often stands in contrast to the rebellious, edgy, subcultural, and high-profile demeanor that Meme Coin projects embraced from the outset, further diminishing the already-waning charm of the meme.
Contrary to business-driven projects that can carve out competitive edges through their business models, Meme Coin projects often fall short in mechanisms that preserve their inherent value. The waning attention from speculators is a given, and proactive measures often lead to unintended consequences.
Teams Behind Meme Coins Lack The Long-Term Motivation
In the context where attention for speculative ventures is incredibly scarce, the ascent of a new Meme Coin is rarely a stroke of chance. More often than not, there’s a centralized entity or consortium diligently planning and promoting them. This push doesn’t merely stem from robust financial backing or strategic alignments with key crypto exchanges. The endorsement from influential KOLs within the crypto ecosystem can make or break a Meme coin’s trajectory. Beyond this, Additionally, having access to potent business resources is pivotal—for instance, within a month of its launch, the PEPE project was integrated into OpenSea as an accepted payment method.
Yet, the real challenge emerges post the initial splash. As the novelty wears off, the cost to maintain its consensus and retain attention becomes increasingly demanding. For many Meme Coin developers, the playbook evolves towards a ‘racehorse’ strategy. Profits from one triumphant project, such as Pepe, are channeled into spawning an array of new Meme coins, each weaving distinct narratives, all in pursuit of recreating the magic of the original success. Paradoxically, these nascent tokens, intended as potential successors, end up competing for the market attention against their predecessor.
Given that the core teams behind Meme Coin projects are often anonymous, their attachment or obligation to a particular project is often far less than that of founders in traditional business ventures. This ability of the main teams to shift effortlessly, often likened to a “golden cicada shedding its shell”, further worsens the situation for original Meme Coin projects.
The Counterexample: Dogecoin vs. Bitcoin
The story of Dogecoin, birthed in 2013, and its resurgence during the last bull market cycle prompts the question: Why can’t newer Meme Coins, like Pepe, achieve the same?
Dogecoin stands as a prime illustration of the typical lifespan of many Meme Coins, which tend to fade as cycles progress. The notable success Dogecoin experienced during the last bull market can be largely credited to Elon Musk’s significant influence. The idea of “a project championed by the world’s wealthiest individual, Elon Musk,” itself became a potent meme propelling Dogecoin’s rise. If we were to disregard Musk’s continuous, both overt and subtle, endorsement of Dogecoin since 2019, one could argue that the Dogecoin story might have mirrored other Meme Coins, lost amidst the ever-evolving tapestry of crypto narratives.
This leads us to the crux of the matter: How many individuals with the stature of Elon Musk are willing, or even inclined, to channel their influence into projects like Pepe in the next market cycle? The global roster of personalities with an influence comparable to Musk is already scant. Narrow it down to those willing to vocally champion a meme, and you’re left with an even shorter, arguably negligible, list.
Launched in 2011, Litecoin holds the powerful meme: “If Bitcoin is gold, then Litecoin is silver.” Yet, as time marched on and without the sustenance of fresh narratives or significant influencers championing its cause, its cycle-by-cycle momentum has notably ebbed.
Actually, when we discuss the idea that ‘Meme Coins can’t weather multiple market cycles,’ the spotlight shouldn’t solely shine on Dogecoin. In fact, Bitcoin stands as a more profound testament. As the original archetype of Meme Coins, Bitcoin remains a portfolio cornerstone and a beloved choice for both seasoned and new crypto investors. However, Bitcoin, being the very first Meme Coin and the genesis of all crypto projects, derives its meme power from its irreplaceable sense of legitimacy.
The “legitimacy” that Bitcoin holds is unique, something other Meme Coins simply don’t have. As a result, they are destined to grapple with the attention of newer Meme Coins that arise with each generation.
This ‘legitimacy’ that Bitcoin holds is unique, setting it apart from other Meme coins. As a result, they are destined to grapple with the attention of newer Meme Coins that arise with each generation.
Such challenges are manifold: the fleeting nature of attention, the inevitable quit of the founding team, and the proliferation of rival projects.
The focus of investing in Meme Coins, therefore, lies in mastering a quick and efficient approach.
For an in-depth exploration of Meme Coin phenomena, you can read Everything is a Meme.
