Analyzing Investment Strategies for Memecoins

In the cryptocurrency market, Memecoins, as a special asset class, have attracted considerable attention from investors. This article will analyze the investment value and strategies of Memecoins from multiple perspectives.

Beta Effect

Some Memecoins have a high beta coefficient against Layer 1 (L1) assets, which means they can provide leverage effects on L1 assets without using leverage. For example, a moderate allocation to a Memecoin like BONK can yield amplified returns on L1 assets while avoiding liquidation risks.

Data shows that when BONK's 30-day Beta exceeds its 90-day rolling Beta, its 30-day and 60-day average return rates reach 124% and 413%, respectively. This highlights the importance of buying at the right time.

Typically, the explosive growth of BONK coincides with its related L1 asset SOL rising by more than 5% within a week. In this case, the average returns of BONK are as follows:

• 1-week average return 26%
• 30-day average return 141%
• 60-day average return 512%

It is worth noting that in about 1/3 of the cases, BONK actually declined, indicating that SOL's performance does not fully guarantee BONK's outstanding performance.

Correlation Analysis

BONK is usually correlated with SOL. However, during periods when BONK performs exceptionally well, this correlation often weakens. This phenomenon has been particularly noticeable in the fourth quarter of 2023, the first quarter and fourth quarter of 2024, and in April of this year.

On-Chain Data Analysis

In addition to price performance, on-chain data analysis is also an important method for evaluating the investment value of Memecoins. Here are a few key indicators:

1. Growth of Token Holders (90 days)
2. Median and Average Holding
3. The proportion of holders with more than $1000 and $100k
4. Whale Retention Rate
5. Whale DEX Net Inflow/Outflow

These indicators help to understand the quality and beliefs of the Token holder base.

Other Considerations

• Trading Liquidity
• Experienced multiple significant pullbacks
• Open Interest

Community and Faith

High-quality Memecoin projects typically possess the following characteristics:

• Resonant narratives and community slogans
• Strong sense of community belonging
• Effective leadership and coordination
• Deeply integrate into culture

Some communities have started promoting projects through platforms like TikTok to attract a younger user base.

Value Assessment

Methods for assessing the "fair value" of Memecoin include:

1. MVRV Ratio Analysis
2. Momentum indicators (such as RSI and moving averages)
3. Google Search Trends

Macro Environment

Memecoins are extremely sensitive to liquidity conditions. Favorable liquidity and economic environment, coupled with the return of risk appetite sentiment, are key considerations for allocating Memecoins.

Investment Framework

In summary, the Memecoins investment framework should include the following elements:

• Understand the role of Memecoins in the investment portfolio (Beta effect)
• Identify Memecoins with strong "fundamentals" (on-chain data)
• Assess "Fair Value" (MVRV)
• Seize the buying opportunity (turning point/macroeconomic/momentum)
• Determine the timing for selling (momentum/RSI)

Nevertheless, investing in Memecoins still carries high risks. This framework is designed to help investors make more informed decisions in this uncertain market.