Analyzing Memecoins Investment Strategies

Why Pay Attention to Memecoins?

Beta Effect

Some memecoins are favored mainly because they have a high Beta coefficient compared to Layer 1 (L1) assets. In short, a moderate allocation to tokens like BONK can achieve a leveraged effect on L1 assets while avoiding direct use of leverage and having no liquidation risk (.

The key signal we’re looking for is when the 30-day Beta) pink line ( surpasses the 90-day rolling red line Beta) ( – most recently on April 1. When this happened, BONK achieved an average 30-day and 60-day return of 124% and 413%, respectively ) with median returns of 45% and 57% (, respectively.

From the price comparison between BONK and SOL, it can be seen that changes in market risk preference often happen quickly, and BONK tends to outperform the market significantly in a short period. This highlights the importance of entering the market at the right time.

The explosive growth of BONK usually occurs simultaneously with the situation where SOL rises more than 5% within a week. In this case, the returns of BONK are as follows:

• Weekly 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 one-third of the cases, BONK actually declines, indicating that the performance of SOL does not fully guarantee the excellent performance of BONK. However, these situations mostly occurred before BONK’s explosive rise at the end of 2023.

Correlation Analysis )

BONK usually has a correlation 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, and this April, this correlation often weakens.

Core Viewpoints

BONK has shown a high Beta against SOL over rolling periods of 30 days, 60 days, and 90 days, with this coefficient being more pronounced from an absolute return perspective. This means that the fluctuations in BONK’s price typically far exceed those of SOL, making it a high-risk/high-reward asset.

BONK can be seen as a leveraged bet on SOL without the liquidation risks associated with traditional leverage.

This model applies not only to BONK/SOL but also to the relationship between other “blue-chip” memecoins and their corresponding L1 assets, such as PEPE/ETH.

On-chain Data Analysis

In addition to understanding the performance of memecoins relative to their L1 counterparts, on-chain data analysis can provide an assessment of the quality and conviction of the holder base.

Token holders increase (90 days )

The growth of token holders reflects the recent popularity and dissemination effect of the token.

Holding Analysis

The median and average holding data help us understand the strength of holders’ beliefs. It is worth noting that certain memecoin communities are more centralized in management, and such tokens often have a lower median holding amount, as a large number of small airdrops are distributed to many wallets.

( Holding Scale Analysis

The proportion of accounts holding more than $1000 can provide basic insights for holders. A higher proportion indicates stronger interest and belief.

The proportion of accounts holding more than $100k reflects the relative interest and belief of large holders in the token.

) Whale Behavior Analysis

The retention rate of giant whales examines the proportion of wallets that once held over $100k in tokens and still maintain at least 50% of their peak holdings, excluding price fluctuation noise ###, helping to measure the conviction of large holders.

The analysis of net inflow/outflow for the whale DEX focuses on wallets that have held over $100k in tokens, evaluating whether these accounts are increasing their holdings or exiting the project.

Other Indicators

In addition to on-chain data, we also pay attention to memecoins that have sufficient trading liquidity and have experienced multiple pullbacks of over 50%.

It is important to note that our data only includes on-chain activities and does not include tokens held by centralized trading platforms, such as BONK, which is approximately 20% of ###.

For tokens traded on major exchanges, the open interest is also an indicator worth paying attention to.

Community and Belief Assessment

When evaluating the investment value of memecoins, it becomes important to conduct an analysis based on crypto-native intuitions, including monitoring social media activities and sentiment.

When we filter memecoins, we pay attention to their “potential audience interest”. For example, the “disrupting the stock market” theme of SPX6900 may seem absurd, but it has the potential to attract attention and form a community movement.

Key performance indicators include:

1. Resonant narratives and community slogans
2. The manifestation of strong beliefs and sense of belonging among community members
3. Clear leadership and coordination skills
4. Degree of Cultural Integration

It is worth noting that some communities are now promoting projects through short video platforms to reach younger potential crypto users. Successful memecoin communities often have excellent marketing capabilities.

Value Assessment

( fair value

A clear method for assessing “fair value” is to analyze the relationship between the realized value of the agent ) based on 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 state, which may suggest that a local bottom is near, provided that bullish market conditions persist.

For example, the implementation price of BONK is $0.0002, while the current trading price is $0.0000145, indicating that it may be a good entry price.

( Momentum Indicator

In the absence of traditional fundamentals, momentum indicators are also an important tool for assessing “fair value.”

The Relative Strength Index ) RSI ### helps to understand whether the token’s recent momentum is overbought or oversold:

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

Moving average analysis helps to determine the performance of prices relative to key technical levels. The ideal situation is to buy strong assets when prices break through key support zones, provided there is confidence in the 3-6 month time frame.

( Market sentiment

Analyzing search trends and other social sentiment indicators helps to grasp market buying and selling opportunities.

Impact of the Macroeconomic Environment

It is worth emphasizing that memecoins are at the far end of the risk spectrum. Bitcoin relies on liquidity conditions, while memecoins are even more sensitive to this. Favorable liquidity and economic conditions, combined with a return of “risk appetite” sentiment and “animal spirits,” are the key conditions for allocating memecoins.

Investment Framework Summary

Based on the above analysis, we can construct a memecoin investment framework, which includes the following key points:

1. Why certain memecoins) with high Beta( are suitable as a very small part of an investment portfolio
2. How to Identify Memecoins with Strong “Fundamentals” Through On-Chain Data
3. How to measure “fair value” through MVRV
4. How to grasp the buying opportunity ) turning point/macroeconomics/momentum ###
5. How to determine the selling point ( momentum/RSI )

This framework is not foolproof; there are no easy returns in the investment world. Excess returns always come with higher risks.

However, having a systematic approach can help investors better navigate the “wild west” of memecoins.