7 October 2024
Over the past weekend, there was a notable rise in memecoin prices, driven by heightened social buzz and increased risk appetite among crypto investors. The concept of a “memecoin supercycle,” which posits that memecoins will lead the upcoming crypto bull run, gained traction on X. In this context, crypto analyst Kai (@Kaiwen0x) released a widely-shared article explaining the ongoing allure of memecoins as a viable investment choice.
The Case For Memecoins In The Crypto Bull Run 2025
Kai argues that memecoins are poised to outperform the market by 2025, suggesting that owning a “curated basket of memecoins” could allow investors to surpass 99% of market participants. “Outside of Bitcoin and stablecoins, memecoin is the only category that has found a clear product-market fit. They combine the best features of an ICO (capital formation) and an NFT (community building) in delivering a killer product: global, permissionless speculation,” he states.
The analyst emphasizes that traditional crypto projects often juggle both product development and token management, whereas memecoins focus solely on the token itself. “Memecoins removed the product and made the token its entire business, with the value of the token deriving from the attention generated by its community,” Kai explains. Citing data from crypto analyst @MustStopMurad, Kai notes that in 2024, 16 of the top 20 tokens within the top 300 that outperformed Bitcoin were memecoins.
Kai identifies two main external factors which are crucial for a memecoin surge. First, the macro liquidity and interest rates need to be favorable for the entire market: “The macro setup points to higher liquidity and lower interest rates in the next 12 months. Memecoins act as levered beta on Bitcoin, allowing you to capture maximum upside in a risk-on environment,” Kai explains.
Second, the analyst references financial nihilism, a term popularized by Ikigai Investment CEO Travis Kling (@Travis_Kling). This theory suggests that a rise in financial nihilism and the “YOLO” mindset is drawing more participants into speculative markets.
Internally, memecoins have shown they possess a clear product-market fit and benefit from what is known as the Lindy effect—where the future life expectancy of some technologies or ideas is proportional to their current age, suggesting that memecoins are here to stay. Additionally, memecoins are particularly adept at creating and maintaining compelling narratives, a critical aspect in a market driven by speculation and investor sentiment.
The Art Of Memecoin Selection
Kai delves into strategies for selecting promising memecoins, emphasizing the importance of nuanced analysis:
Emotional Resonance: “I’m looking for memes that generate a strong emotional reaction. Is it funny, relatable, catchy, powerful, or memorable? The average retail investor is going to be the last marginal bidder of our magic internet coins, so you need to buy and hold what they emotionally resonate with,” Kai explains.
Ticker Simplicity: Favoring simple and powerful tickers, ideally 3 to 5 letters long, such as WIF, GIGA, and BULL.
Holder Count Growth: Monitoring steady growth in the number of holders as an indicator of increasing adoption.
Wide Token Distribution: Preferring coins with broad distribution to avoid centralization risks.
Resilience to Drawdowns: Identifying coins that have survived multiple significant price drops and rebounded, indicating strong community support.
Active Community Engagement: Looking for an “active army of reply guys getting engagements on X,” which signals a vibrant and engaged community.
Exchange Listings: Noting that announcements of centralized exchange (CEX) listings can significantly impact a token’s valuation.
Absence of Insiders: Being cautious of coins with insider involvement, such as pre-sales or venture capital backing, which can lead to uneven playing fields.
Potential Risks and Invalidation Scenarios
Kai acknowledges the risks associated with investing in memecoins:
Macro Regime Change: A significant rebound in inflation or a reversal of monetary easing could invalidate the macro thesis for being long on risk assets.
Idiosyncratic Events: Events like major exchange hacks, regulatory shifts, or significant market collapses could disproportionately affect memecoins.
US Election Outcomes: “Counterintuitively, memecoins could underperform this cycle if Trump wins the election,” Kai speculates.
Emotional Attachment: He cautions against becoming too emotionally invested in any one community, as this can cloud judgment. “Identity can create emotional ties that cloud your judgment as an investor.”
Kai emphasizes the importance of understanding investor psychology in the crypto market. “Ultimately, the question returns to: ‘What does the average crypto investor actually care about?’ It’s not the tech. It’s not the product. It’s the token—embodying greed and the expectation of greater profit—that ultimately consumes this investor,” he writes.
However, the crypto analyst advises investors to remain vigilant and adaptable: “To avoid getting wrecked, we need to monitor macro conditions for any signs of a regime shift. We must also keep an eye on idiosyncratic events that could invalidate the thesis for investing in any specific token.” Kai concludes, “Good luck, and for the love of dogs, don’t mid-curve this (still) 100x opportunity.”
At press time, WIF traded at $2.67.