If you don't know how to win, don't play.

Author: Stacy Muur

Translation: Gate.io, Golden Finance

In the past few weeks, memecoins have overshadowed all other Web3 narratives, making ordinary users feel that meme train is the only way to get good returns.

After the launch of $PNUT, $PEPE, $BONK, $BRETT, and other currencies, and with the daily trading volume of memecoins reaching an all-time high, the popularity of the 'meme' category is also increasing, so it is not surprising that they are followed.

But are the risks and rewards equal? How serious is the speculation in the memecoin market?

The Current Status of Memecoin

Is Meme really the hot topic of the year?

If you find someone who has been involved in the Web3 market for at least five years and ask them to define 2024 as the "year," they might say it's the year of memecoins.

Many people praise memecoin as the best performing currency of the year, and the charts and rankings also support this view. But does this really reflect reality?

If you analyze the industry performance so far this year, the data may tell different stories. For example, on Artemis, the RWA index (Ondo, Mantra, Clearpool, and Maple) leads with a growth rate of 1,900%, while the growth rate of memecoins is 258%, and Bitcoin's growth rate is 104%.

In addition, it is also important to understand which memecoins are being considered. On Artemis, the memecoin index currently only tracks the 19 largest memecoins.

The category ranking on CoinGecko faces another issue: many Memes belong to multiple categories, so a few strong winners can significantly improve the 7-day performance of multiple categories at the same time.

Using the Pump.fun ecosystem as an example to track 520 Tokens, I can understand why I think this is a problem. As the second largest Token in terms of growth this week, it looks very optimistic and triggers a strong fear of missing out emotion.

However, when you look at the rankings, you will find that only less than 20 Tokens have a 7-day increase of over 110% (the category's average), which is only 3.8% when converted to a percentage. In addition, less than 60 Tokens (11.5%) have a positive weekly increase.

This is no longer WAGMI, right?

From the perspective of performance tracking, the main issue with Meme coin is that its industry performance is usually measured by the largest or most popular assets in the category. This creates the illusion that Meme coin is superior to all other Web3 industries. However, a more accurate statement is that the performance of leading Meme coins is better than other categories.

This leads us to an important point: distinguishing existing memecoins from new memecoins, as they represent two completely different markets.

New memecoin

CoinGecko currently tracks 520 memecoins on its Pump.fun dashboard. Since the launch of Pump, 3,000,000 Tokens have been created.

This means that 99.982% of Tokens cannot be tracked on CoinGecko, so we cannot understand their performance.

Meanwhile, Pump attracts 50,000 to 70,000 new users every day, and the total number of active users has exceeded 150,000.

Here is additional background information on the research I conducted at the end of August:

Most top PNL Addresses are Token deployers

Among all Pumpdotfun traders, only 3% have profits exceeding $1000.

0.8% of the income exceeds $10,000

More than 60% of people are losing money

These are new memecoins. Not a good choice, right?

For the average new memecoin trader, the main issue is the inability to differentiate between 'new' and 'mature' memecoins. Most new traders chase early protocols, hoping to replicate the 0.001% success stories that have achieved widespread adoption - similar to $PEPE or $BONK.

I don't want to disappoint you, but the probability of dying after being struck by lightning is higher: 0.011%.

Establish memecoin

For mature memecoins, the outlook is much brighter. They have not gained a certain Market Cap due to VC support or specific valuation factors. Instead, their success lies in their community, a bit of luck, and strategic market management.

This may sound like a conspiracy theory, but I believe that most memecoins with a solid market share are not launched by random developers. Behind these successful memecoins, there are often professional memecoin development teams who have a wealth of liquidity and marketing resources.

It should be clarified that I am not saying that all popular memecoins are the result of perfectly executed plans, but this may apply to most memecoins.

Compared with many other areas in the Web3 space, there are several logical factors that lead to the outstanding performance of mature memecoins:

100% of the supply is in circulation (no low circulation or high FDV)

No venture capital support (eliminating additional sales pressure)

Organic active holder community

No product risk (no vulnerabilities, weak execution or user acquisition)

Memecoin rotation mode (income flows from one memecoin pump to another memecoin pump)

Has a strong correlation with the general market cycle

Low dependence on marketing

Memecoin trading is purely speculative, and this year it has become more predictable, forming a behavior pattern of transferring 'classic' Token volume and Liquidity, especially considering that Web3 currently lacks dominant or fresh narratives.

By the way, speaking of measuring the market depth of Meme Token at 1% of the US exchange, last week saw a record high liquidity of $110 million. SHIB and DOGE, among other major Meme Tokens, continue to dominate, accounting for over 70% of the total market depth.

However, their share has been gradually declining, indicating a growing interest in small Token.

Which stage is the market in?

Currently, over 50% of the volume on Solana comes from memecoins. On BNB, this proportion is close to 45%, while on Base, it's around 25%.

That's too much.

However, history has shown that when the market is busy promoting a certain narrative after price changes, it is usually too late.

In my opinion, the memecoin market has already reacted to the Rebound of Bitcoin.

As long as the price stays around $90,000, I doubt we'll see a new surge in mature memecoins - what we call cult coins, to avoid confusion with the 3 million Tokens created on Pump.fun this year.

However, the retail industry, which is always behind in popular trends, is still boarding this train, hoping to head towards Valhalla.

The main issue is not just that most of the recently enrolled students are late; this is a common occurrence in all stories.

The real question is, a large part of retailers have boarded the new memecoin train, and this train usually heads to hell (Hel) instead of Valhalla.

As a result, new users are being shut out and unable to join further. In the context of Web2, the difference between MEME coins and classic coins is very small; they are just stock symbols. Therefore, this bad experience extends to all verticals of Web3.

Just to clarify, I am not against cult coins - memecoins with a fixed market share. They have many advantages. However, I think we really need to stop using the same word on Pump.fun to describe great things and poorly designed lotteries. Let's solve this problem.

Here are my final thoughts.

If you are an experienced meme coin trader, please continue with your strategy, but be aware that the market may be overheated.

If you are a MEME coin Newbie, and have a strong fear of missing out feeling, consider allocating a small portion of manageable investment portfolio for experimentation, focusing on follow mature popular coins.

Don't play new games unless you know how to win. There is a very important rule: If you don't know how to win, don't play.