Analysis of Memecoins Investment Strategies

Recently, the memecoins market has attracted widespread attention from investors. This article will analyze investment strategies for memecoins from multiple perspectives, providing references for investors.

The Source of Value for Memecoins

The value of Memecoins mainly comes from their high beta characteristics relative to underlying blockchain assets. Taking BONK and Solana as examples, a moderate allocation to BONK can achieve leverage on SOL without increasing liquidation risk.

Data shows that when the 30-day rolling beta of BONK exceeds the 90-day rolling beta of SOL, the average return rates of BONK in the following 30 days and 60 days reach 124% and 413%, respectively. This high beta characteristic makes memecoins high-risk, high-reward assets.

It is worth noting that the rise of SOL does not guarantee the outstanding performance of BONK. Statistics show that in the case where SOL rises more than 5% within a week, there is still about a 1/3 probability that BONK will decline.

On-chain Data Analysis

On-chain data analysis can help us understand the quality and beliefs of memecoins holders. Here are a few key metrics:

1. Token Holder Growth Rate
2. Median and Average Holding Amount
3. The proportion of large holders (the ratio of those holding more than $1000 and $100k )
4. Whale Retention Rate
5. The net inflow/outflow situation of giant whales on decentralized exchanges

These indicators can reflect the popularity of memecoins, the beliefs of holders, and the behavioral trends of large investors.

Other Considerations

In addition to on-chain data, investors should also pay attention to the following factors:

1. Trading Liquidity
2. Price Volatility History
3. Open Interest
4. Community Activity and Beliefs
5. Marketing Strategy
6. Global Audience Potential

Valuation Methods

1. MVRV (Market Value to Realized Value Ratio): When MVRV is below 1, it may be a good entry point.

2. Momentum Indicator:

   • RSI (Relative Strength Index): Below 30 indicates oversold, above 70 indicates overbought.
   • Moving Average: Analyze the position of the price in relation to key moving averages.
   • Google Search Trends: Reflects public interest.

3. Macroeconomic Environment: Liquidity conditions and overall market risk appetite have a significant impact on memecoins.

Summary

Investing in memecoins requires a comprehensive consideration of multiple factors, including their beta with respect to underlying assets, on-chain data, community activity, valuation metrics, and the macro environment. While there is no absolutely safe investment strategy, establishing a systematic analysis framework can help investors make more informed decisions in this high-risk, high-reward market.

It is important to emphasize that memecoins belong to a very high-risk asset class, and investors should approach them with caution, manage their positions wisely, and always pay attention to market changes.