As someone who has witnessed the rise and fall of numerous crypto projects over the years, I find myself increasingly skeptical towards memecoins. Their growth, based on investor delusion rather than utility or vision, doesn’t strike me as a sustainable economic model. It’s like playing a zero-sum game where only the house wins in the long run.
The investment and memecoin analysis perspective put forward by Murad Mahmudov, a renowned investor, is gaining popularity among traders, as it suggests a cycle for the growth of memecoins.
Simply put, the theory proposes that a combination of specific elements will lead to an extended period of growth (supercycle) for digital currencies primarily driven by memes.
However, unlike many other cryptocurrency market stories which are often filled with intricate technical details and mechanisms, memecoins seem to be driven primarily by community, emotions, and the allure of potential riches.
In spite of the absence of substantial underpinnings for meme coins, they attract traders due to the feeling of community spirit and the potential for swift profits.
Kyle Kemper, creator of political memecoins like MAHA (Make America Healthy Again), posits that the memecoin boom, or “supercycle,” is not a sign of the demise of traditional analysis, but rather a change in the measurements employed.
As a researcher, I’ve noticed a shift in the evaluation of projects, teams, and missions. Instead of focusing primarily on critical analysis, we are now considering factors such as the strength of a project’s Key Opinion Leader (KOL) influence, coupled with the volume and graph performance. This new approach was shared during my recent discussion with CryptoMoon.
The widespread acceptance of the memecoin supercycle concept by cryptocurrency traders suggests they’re veering towards different investment choices.
“Memecoin investors are looking for 24-hour or less returns, whereas a typical venture capital firm has a seven-year outlook.”
Basel Ismail, the CEO of Blockcircle’s investment analytics platform, credits the growth of memecoins to the growing sophistication of cryptocurrency investors. He believes that as more traders have gone through at least one market cycle, they’ve gained invaluable insights from their experiences.
Ismail posits that seasoned cryptocurrency traders have come to understand that many tokens marketed as offering technical solutions, often referred to as “utility coins,” lack substantial inherent value and practical use beyond price fluctuations driven by speculation. Mahmudov discussed this topic during a talk at Token2049, citing an X user who made the point:
“Nearly all of the tech in crypto is a smoke screen designed to sell you a token that does nothing.”
According to Ismail, a large portion of the value assigned to utility tokens comes from their association with popular internet memes, and he approximates that about 70% of a utility token’s worth is due to speculative activity.
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He expressed that due to past events, traders tend to approach new opportunities cautiously, fearful of experiencing another financial loss similar to situations where cryptocurrency projects, boasting robust technological infrastructure, experienced a staggering increase of 100 times within three months, only to plummet by 99% in the same time frame.
“Right now, traders are acting like sheep. They’re just shifting their attention and their capital toward memes.”
According to Ismail, memecoins are driven significantly by sentiments that are critical of venture capitalism and private equity.
I’ve come to realize that sometimes, venture capitalists have given us, the crypto investors, a false sense of security. They tend to release locked tokens onto centralized exchanges, only to sell them swiftly to unassuming retail investors like myself.
“Memecoins fundamentally don’t try to deceive you and lie and try to make false promises and uncompleted expectations. People value that.”
The love for memes combined with the power of mimetics has created a social and psychological phenomenon where people want to unite with like-minded people. “We are all congregating, sharing joint beliefs,” said Ismail.
Ismail pointed out that although the incentive might appear shallow to certain individuals, the power of a collective belief among investors is substantial. He referred to the extraordinary occurrences of the AMC and GameStop stock surges as examples. “They galvanize support, uniting a lively, dynamic, and passionate group around an ideal or philosophy that they can create lasting change.
The memecoin supercycle is super unsustainable
Although it seems like meme coins are currently experiencing a period of success (referred to as the memecoin supercycle), there are concerns about their ability to endure in the long run. Jameson Lopp, co-founder of crypto custodian Casa, shared his opinion with CryptoMoon, stating that he thinks the meme coin craze might not continue and could potentially be based on misguided assumptions.
In simpler terms, an expert in cryptocurrency, known as Crypto Rand, stated that the market for meme coins operates primarily on excitement, with investors acting on instinct to make a fast profit. Such behavior results in significant price fluctuations and quick series of sell-offs.
In simpler terms, Crypto Rand explained to CryptoMoon that the prosperity of memecoins is largely influenced by their promotions and excitement, likening them to fashion trends which rapidly emerge and fade within a short span.
crypto enthusiast, Crypto Rand, mentioned that occasionally he invests funds in meme-based cryptocurrencies, likening this investment to placing a wager on a soccer game or U.S. election outcome.
“Memecoins can hardly be an ‘investment’ rather than quick trades.”
Angel Versetti, the founder and proprietor of the Dogecoin Foundation, expressed criticism towards Mahmudov’s “supercycle” theory, stating that it stems from a heightened irrationality among investors as a result of collective psychological and hormonal fluctuations.
He determined that “the behavior of investors in the memecoin market seems to suggest a psychological imbalance or disorder.
For Versetti, a market model that bases its growth on “a greater level of delusion” among market participants “doesn’t sound like a sustainable economic model.”
Since memecoins do not intend to create any utility, they can only keep growing “purely due to the growing delusion of investors,” he said.
an investor had roughly a 1-in-100 chance of success. However, many individuals aimed to not just profit but rather cultivate a vision and create something meaningful.
He pointed out how some legit products have emerged from the ICO explosion, such as Tezos (XTZ), Cosmos (ATOM), Chainlink (LINK), BNB (BNB) and Basic Attention Token (BAT), among others.
As a researcher, I hold the conviction that over time, the market’s inherent mechanisms will address such instances of irrational investment, where projects seem to be constructing castles in the sky. These speculative ventures, I believe, are inevitably destined to return to their intrinsic value, which is essentially nil.
Lopp champions initiatives that provide a versatile solution or digital asset, beneficial across various tasks, particularly those aiming for a long-term, sustainable existence.
He stated, ‘Projects which prioritize providing practical benefits and worth over competitive, non-productive games can thrive by disregarding the excitement and persistently working towards their objectives.’
In simpler terms, Kapil Dhiman, the CEO of the quantum-resistant digital ledger known as Quranium, explained to CryptoMoon that utility tokens aren’t merely investment tools, but they are crucial elements within decentralized systems.
I’ve come to realize that the robust underlying technology is what truly propels the blockchain industry forward. While memecoins can offer temporary gains fueled by hype, they lack the substance needed for lasting expansion and upholding the sector’s reputation over the long haul.
Mahmudov has a lot to gain from the memecoin hype
It’s been noted by some that Mahmudov could potentially gain financially as a result of the spread of his memecoin storyline.
As a crypto investor, I’ve come to realize that some people tend to deceive themselves into thinking they’ll effortlessly amass wealth for various reasons. More often than not, this is because someone with a genuine strategy for becoming wealthy requires these individuals to buy into their story.
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On October 9th, the on-chain researcher ZachXBT asserted that Mahmudov might possess approximately $24 million worth of meme-based cryptocurrencies.
As a crypto enthusiast, I’m putting my faith and resources into this memecoin surge, which could potentially be a game-changer for me if the memecoin supercycle story takes flight.
According to reports from on-chain analytics platform Lookonchain, Mahmudov earned approximately $23.6 million within a span of four months, primarily due to the rapid rise of the meme coin SPX6900 (SPX).
As a dedicated researcher delving into the intricacies of cryptocurrencies, I can attest to the extraordinary fervor surrounding the SPX6900, commonly recognized as $SPX. This digital asset boasts an unparalleled core group of steadfast believers who embody the essence of ‘diamond hands.’
— Murad 💹🧲 (@MustStopMurad) October 16, 2024
Lopp said that the success of memecoins reflects the nature of permissionless systems, where people will inevitably do foolish or even scammy things.
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2024-10-18 00:03