Discussion on Memecoins Investment Strategies

In the cryptocurrency market, Memecoins have attracted the attention of investors as a unique asset class. This article will explore why certain Memecoins may become part of an investment portfolio, as well as how to evaluate and select such assets.

The Beta Characteristics of Memecoins

Memecoins typically have a higher beta coefficient relative to the main assets in their ecosystem. This means that their price fluctuations are often more extreme than those of the underlying assets. Taking a cultural coin from a particular ecosystem as an example, a moderate allocation can provide investors with a leveraged effect on the main assets of that ecosystem without directly using leverage.

Observing the point when the 30-day Beta exceeds the 90-day rolling Beta may indicate a significant upward opportunity. Historical data shows that in such cases, the cultural coin may experience substantial positive returns in the following 30 and 60 days.

It is worth noting that the explosive growth of cultural coins usually occurs simultaneously with a moderate increase in the main assets of their ecosystem. However, the rise of the main assets does not guarantee that cultural coins will perform exceptionally, highlighting the importance of choosing the right entry timing.

On-chain Data Analysis

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

1. Growth of Token Holders: Reflects the popularity and spread of the Token.
2. Median and Average Holding: Measuring the overall confidence of Token holders.
3. Proportion of large holders: The percentage of holders with over $1000 and over $100,000 reflects the interest and confidence of investors.
4. Whale Retention Rate: Measures the long-term confidence of large holders.
5. Whale Trading Behavior: Analyzing the buying and selling behavior of large holders on decentralized exchanges.

Other Considerations

• Trading Liquidity
• Historical Volatility
• Open Interest
• Community activity and belief
• Marketing Ability
• Cultural Resonance

Valuation Method

1. Realized Value to Market Value Ratio ( MVRV ): When MVRV is below 1, it may indicate a proximity to a local bottom.

2. Relative Strength Index ( RSI ):

   • RSI close to or below 30 indicates possible overselling
   • An RSI close to or above 70 indicates potential overbought conditions.

3. Moving Average: Analyze the position of the price relative to key moving averages.

4. Social media sentiment and search trends: such as Google Trends data.

Macroeconomic Environment

Memecoins are extremely sensitive to liquidity conditions and market sentiment. A favorable economic environment and the return of risk appetite are key moments for allocating Memecoins.

Conclusion

Investing in Memecoins requires a comprehensive consideration of multiple factors, including market beta, on-chain data, valuation indicators, technical analysis, and the macro environment. Nevertheless, Memecoins remain high-risk assets, and investors should approach them with caution and manage their positions appropriately.