Memecoin Season Is Unstoppable

We have yet to see alts season following the Bitcoin and Ether hype, but a new memecoin mania has already come to town even before BTC making new ATH.

TradFi Is Getting Cultured

Why did the crypto community get so hyped up on rumors of an approved spot Bitcoin ETF last year? It's not supposed to be a landmark decision for only Bitcoin but also for the entire cryptocurrency market; see how spot Ethereum ETF applications are now being reviewed? TradFi needed regulators to green light the trading of cryptocurrencies, and now that the gate is already opened, there are plenty of opportunities to be seized.

Memecoins are the earliest to be on the rise this new bull run because they effectively illustrate the 'high-risk, high-return' principle. They emerged as a cultural counter-response to the serious and often complex world of cryptocurrencies like Bitcoin, with the first one being DogeCoin (DOGE). Memecoins are typically inspired by popular internet memes or social phenomena and are known for their vibrant communities and lighthearted nature. The value of memecoins is heavily influenced by social media buzz, celebrity endorsements, and community-driven initiatives, rather than intrinsic technological advancements, hence they don't need upgrade announcements or anything to soar. Quite the opposite, one new-born memecoin native to Solana is actually one of the main reasons behind SOL price increase: the Dogwifhat (WIF) token frenzy helped to push SOL back to the US$100 territory with its launch in November 2023.

BTC making its comeback with 11 spot Bitcoin ETFs began trading in January 2024 has sparked renewed interest in these shared jokes, with some seeing significant gains. Let us quote this conversation on X between Lumida Wealth CEO Ram Ahluwalia and Solana co-founder Anatoly Yakovenko here:

"Dogwifhat is the monetary equivalent of the art piece 'Ceci n'est pas un pipe' (a painting which makes viewers question everything they think they know). Is making money on a digital asset secured on-chain somehow less legitimate than a traditional asset?

Suppose I buy a token. I sell the token. Then I buy pizza with the token. And then I eat the pizza." - Ahluwalia tweeted.

"At a certain level of economic security, a meme coin becomes a culture coin, and at another level of economic security, a culture coin becomes a store of value." - replied Yakovenko.

To put it simply, they are saying that while memecoins may not fit the traditional mold of an investment asset, their market dynamics, community support, and evolving utility contribute to a form of legitimacy in the ever-changing world of finance.

The Billion Club

The recent memecoin rally underscores a fascinating dynamic within the crypto market, where community engagement, social media influence, and speculative interest converge to drive significant market movements. Take a look at the YTD return of the billion-market cap memecoins below:

DOGE, the biggest one by market cap, has the lowest YTD, understandably because large market cap normally translates to smaller room for growth. However, even with the most humble figure of 101%, it still easily beats the majority of TradFi assets, including the S&P 500 (+5%), the Dow Jones (+3.1%), the NASDAQ Composite (+8.1%), DAX (+5.9%), FTSE 100 (-1.0%), HSI (-4.6%), CSI 300 (+3.5%), and NIKKEI 225 (+19.6%). Two stocks with meteoric rise include Nvidia (+77.7%) and MicroStrategy (+105.9%), both of which have close ties with the cryptocurrency market. So yes, the memecoin sector is the first to flourish this new bull run, leading to a persistence of enthusiasm for these whimsy coins.

Here are some good explanations for the popularity of memecoins:

● Market Value and participation: Like traditional assets, the value of memecoins is determined by market forces, including supply and demand dynamics. The participation of buyers and sellers in the market, driven by various factors such as speculation, community support, and media influence, establishes a market value for memecoins, similar to stocks, commodities, or fiat currencies.

● Community and network effect: The legitimacy of an asset can also be derived from its community and the network effect. Memecoins often have strong, active communities that contribute to the network's security, development, and promotion. This community engagement is akin to shareholder involvement in traditional companies or user adoption rates for technological platforms, both of which contribute to the perceived legitimacy and value of the asset.

● Speculative investment: Much like traditional assets, memecoins are vehicles for speculative investment. Investors in both fields aim to buy low and sell high, driven by market trends, news, and community sentiment. The speculative nature does not inherently delegitimise an asset; instead, it highlights the market dynamics and human psychology that play crucial roles in financial markets.

● Digital asset evolution: The financial world is increasingly digital and interconnected, with cryptocurrencies becoming an integral part of the ecosystem. Memecoins, despite their novelty and origins in internet culture, are part of this digital asset evolution. They represent a new form of asset that combines technology, culture, and finance in ways that traditional assets might not, signaling a shift in what society considers valuable or legitimate.

● Utility and innovation: Some memecoins have started to develop utility beyond mere speculation. Through decentralised finance (DeFi) applications, charity work, or as part of larger ecosystems, certain memecoins contribute to the cryptocurrency space's innovation. This emerging utility can enhance their legitimacy, drawing parallels to traditional assets that provide value to their holders or the broader economy.

● Regulatory recognition: As the cryptocurrency market matures, regulatory bodies worldwide are beginning to recognise and regulate digital assets, including memecoins. This regulatory attention, while not always positive, acknowledges their existence and impact on the financial market, lending a form of legitimacy similar to traditional assets that operate under regulatory frameworks.

Overall, we know that the memecoin revival is driven by the allure of quick profits, but their long-term potential should never be underestimated. Investors are always recommended to exercise due diligence or, in crypto terms, DYOR, to get an overview of their future market valuations and map out a personalised strategy for profit maximisations.

Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.