Analysis of Memecoins Investment Strategies

Why Choose Memecoins?

Memecoins have a high beta coefficient for layer one blockchain assets, which is a significant advantage for them. By moderately allocating memecoins, one can achieve leverage on the underlying assets without directly leveraging, while also avoiding liquidation risks.

The signal we are focusing on is when the 30-day beta exceeds the 90-day rolling beta. When this occurs, the average 30-day and 60-day returns of certain memecoins can reach triple-digit percentages.

Price trend analysis shows that changes in risk appetite can occur rapidly, and memecoins can significantly outperform underlying assets in the short term. This highlights the importance of buying at the right time.

The surge of certain memecoins often occurs simultaneously with an increase of over 5% in the underlying assets within a week. In this case, the average return of memecoins is considerable:

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

However, the good performance of underlying assets does not guarantee the excellent performance of memecoins. In about 1/3 of cases, memecoins actually decline.

Correlation analysis shows that memecoins are usually highly correlated with underlying assets. However, during periods when memecoins perform well, this correlation often weakens.

Key Points

• Memecoins have a high beta relative to underlying assets, and their fluctuations usually far exceed those of the underlying assets.
• Can be viewed as a high-risk/high-return leveraged bet on underlying assets
• The same conditions apply to other "blue-chip" memecoins and their relationship with underlying assets.

On-chain Data Analysis

On-chain data analysis helps to understand the quality and beliefs of the holder base. Here are some comparisons of key metrics:

• Token holder 90-day growth rate
• Median and Average Holding
• The proportion of wallets holding over $1000 and $100k
• Large holders ( used to hold >$100k ) retention rate
• Net inflow/outflow of large holders to decentralized exchanges

In addition to on-chain data, we also focus on:

• Sufficient trading liquidity
• Experienced multiple pullbacks of over 50%
• The open interest of ( mainly comes from mainstream trading platforms )

Community and Faith

When evaluating memecoins communities, we focus on:

• Potential interest of a global audience
• Resonant narratives and community slogans
• Signs of strong belief and community belonging
• Leadership and coordination skills
• Signs of Cultural Embedding
• Social media promotion capability ( such as TikTok )

Fair Value Assessment

Methods for assessing fair value:

1. Achieving a comparison between value and market value ( MVRV ratio )
2. Momentum Indicator:
   • Relative Strength Index ( RSI )
   • Moving Average Analysis
3. Google Search Trend Analysis

Macroeconomic Factors

Memecoins are highly dependent on liquidity conditions. A favorable liquidity environment and a return of risk appetite sentiment are key factors in allocating memecoins.

Investment Framework Summary

• Understand the value of memecoins as a small part of an investment portfolio.
• Identify memecoins with strong "fundamentals"
• Assessing "fair value"
• Grasp the timing of buying and selling

Nevertheless, investing in memecoins still carries high risks. Excess returns are often accompanied by higher risks. Establishing a systematic analysis framework can help make more informed decisions in this high-risk area.