As a seasoned crypto enthusiast who has navigated the digital jungle since its inception, I can confidently say that the world of memecoins is like a rollercoaster ride without a safety harness. The recent developments, from Pump.fun to the cult-like following of certain projects, have only served to underline this fact.
In the past year, meme coins have seen an extraordinary surge, with numerous tokens such as Pepe (PEPE), Dogwifhat (WIF), and Popcat (POPCAT) skyrocketing more than 30,000% since their launch.
Instead of the anticipation that numerous meme coin supporters had for a surge of new retail investors driving up meme coin prices to unprecedented levels, it seems they are currently drawn towards what cryptocurrency enthusiasts casually call “dinosaur coins.
Dino coins” refer to established cryptocurrencies like Ripple’s XRP and Tron (TRX) that are older in the altcoin market, and they have recently spiked to fresh record highs both for this year and in their entire history.
Currently, many popular meme coins from the latest cycle, other than Bonk (BONK) and Pepe (PEPE), have not been able to surpass their all-time highs during the recent market frenzy, causing some investors to worry that the “memecoin boom” could be slowing down earlier than expected.
In simple terms, Memecoin enthusiast Murad Mahmudov popularized the phrase “memecoin boom period,” during his optimistic talk about this type of cryptocurrency at the Token2049 conference held in Singapore back in September.
Last year, he noticed a significant outperforming trend among meme coins compared to established projects, and predicted that this momentum might persist during a frenzy of retail interest.
As an analyst, I’d put it this way: In my perspective, memecoins represent a unique category of highly speculative cryptocurrencies. They don’t serve any practical purpose, they don’t enhance transaction speed, they don’t foster financial advancements, and they offer no tangible benefits.
As a researcher, I’ve come to realize that the inadequacy of foundational elements is precisely what positions these entities for exponential growth in value. This is a significant factor contributing to Mahmudov’s assertion that the meme coin supercycle has only just commenced.
Mahmudov explained to CryptoMoon that unlike traditional projects within the decentralized finance (DeFi) and infrastructure sectors, the inherent worth of memecoins cannot be determined through qualitative methods commonly used in financial analysis.
If DeFi protocols begin distributing dividends to their token holders, we can draw upon over five centuries of experience in valuing income-generating assets. Consequently, analysts who specialize in investment banking may question the justification for a high price-to-earnings ratio (200 times), given this circumstance.
“So if you’re an asset that’s going to trade and behave in a memetic style, then the sky’s the limit because who knows how to value that?”
Memecoins are just a leveraged play on global markets
As a crypto investor, I believe that deciphering whether the memecoin supercycle has reached its end can be traced back to “global macro” factors. These include scrutinizing interest rates, observing central bank actions, and keeping an eye on overall financial market conditions.
So long as the world economy maintains its liquidity and investors continue with their ‘risk-on’ approach in conventional markets, memecoins could potentially perform exceptionally well. However, if a recession occurs, it’s likely that memecoins might not fare as well.
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From my perspective, the overall crypto market tends to be about twice or three times more volatile than traditional financial markets. Meanwhile, memecoins exhibit significantly higher volatility, often being around seven to eight times more volatile compared to the broader crypto landscape.
Could it really be over for memes?
Swyftx expert Pav Hundal concurred with Mahmudov’s viewpoint, stating that meme-based cryptocurrencies represent a riskier, amplified investment strategy tied to the overall crypto sector and worldwide financial markets.
If the overall market is moving upward, memecoins are likely to grow more than average. Conversely, if the market shifts negatively, investors in memecoins might face a severe downturn or significant losses.
“All you need to understand right now about this cycle is that global liquidity is higher, regulatory risk is lower, and I expect the US dollar to get weaker.”
Going there feels similar to Monte Carlo, where wealth abounds and investments seem to be focused on high-risk ventures. Technically speaking, the market is rising. If the overall market continues to climb, so will the value of meme-based cryptocurrencies,” he concluded.
Warning investors to prepare for potential market turbulence following the recent surges, Hundal also advised against becoming overly reliant on popular trends or “memes.
He remarked, “Perhaps the market grew a little too enthusiastic, but it’s quite likely we’ll see a slowdown following such significant gains of over 150%. In other words, a cooling-off period might be on the horizon.
There’s no denying that in the future, memecoins might face potential threats from censorship, overuse (meme fatigue), or cancel culture. This view was recently expressed by CZ when he called memecoins ‘weird,’ as Hundal points out, referencing a tweet from Changpeng Zhao on November 26.
According to Lennix Lai, OKX’s chief commercial officer, though the phrase “memecoin supercycle” might seem a bit exaggerated, the present market trends indicate a broad expansion instead of a cycle conclusion for memecoins and cryptocurrencies.
Nevertheless, Lai warned that the swift rise of the Solana ecosystem as the preferred blockchain for new meme-tokens, given their fleeting nature, suggests a high degree of potential volatility for these assets in the future.
It’s important for traders to remember that the cryptocurrency market is expected to remain volatile in the near future. This could lead to Bitcoin dropping by around 10% to 15% over the next few weeks. On the other hand, memecoins might witness more significant price fluctuations.
Memecoins are a ‘tokenized community’
Despite the “weirdness” surrounding memecoins, Mahmudov says it’s not all about spectacular valuations and ridiculous price targets.
Mahmudov frequently compares memecoins to “profitable religious cults” and uses spiritual imagery when explaining them. However, he points out that these tokens offer something beyond mere financial gain.
In an attempt to phrase this delicately, if we were to view religion as a commodity or a service, one might ask: what benefits does it offer to its consumers?
“It gives people meaning.”
Memecoins foster a sense of camaraderie among their owners. They provide individuals with a sense of identity, connection within a community, and friendships. Additionally, they offer a feeling of belonging, purpose, and a shared mission. This mindset among holders forms a mutually beneficial cycle, as it influences the price expectations for memecoins.
As an analyst, I’ve traced the recent success of older cryptocurrencies like Ripple (XRP), Cardano (ADA), and Chainlink (LINK) to the influential “community culture” that surrounds them.
“You have to understand how notoriously culty members of these communities are, right — and that’s the biggest underlying force here.”
‘The most bullish thing you can have for a token is literally people becoming full-time, unpaid evangelists for the project. We’ve already seen this a lot with Ripple, Chainlink, Cardano and Dogecoin,” he added.
0x_kun, an anonymous trader, disagreed with the assertion that the fame of a community entirely drives price performance. Instead, he argued that the fundamental faith in the usefulness of a token—whether it’s justified or not—is what truly impacts its worth in the long run.
“The difference is XRP holders truly believe in the fundamentals, they aren’t buying them as social cults.”
If someone told an XRP holder that it’s merely a meme supported by solid fundamentals, they might strongly disagree or argue with them, as suggested in their December 3rd post on X.
Is pump.fun bad for memecoins?
The swift ascension of Pump.fun, a memecoin deployer on the Solana network, has sparked significant controversy within cryptocurrency communities. Numerous analysts have criticized the platform for being excessively exploitative and perceive it as an inevitable detriment to the overall industry.
Some analysts argue that the proliferation of meme coins through the meme coin launchpad has dispersed user focus across tens of thousands of meme coins, potentially hindering the growth and upward momentum of established “blue chip” meme coins on the Solana platform by fragmenting attention.
On November 25th, the live-streaming feature on Pump.fun was temporarily paused due to concerns about users streaming potentially dangerous content as a tactic to attract attention towards recently introduced digital tokens.
Regarding live debates, Mahmudov suggests that the capability to swiftly create “meme-based cryptocurrencies” with just a single click is a natural advancement in technology, making it unnecessary to worry excessively about this development.
Expressing anger towards Pump.fun is pointless because the one-click memecoin creation was destined to emerge on its own,” he explained. “It’s simply the natural progression of techno-capitalism, essentially converting everything into tokens, meme-ifying everything, and transforming everything into a coin.
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Essentially, Mahmudov stated that platforms like Pump.fun, which enable one-click token launches, are dividing the industry into two distinct sectors.
One aspect involves rapid, exciting betting experiences, often referred to as ‘extreme gambling’. It’s more about trends of the moment rather than long-term strategies.
He mentioned that the second option focuses more on long-term community development, essentially it’s about branding and cultivating a following, much like building a powerful movement or the next significant financial phenomenon similar to Dogecoin – and this aspect is what particularly piques his interest.
“You have to analyze those two markets separately.”
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2024-12-04 19:33