Are you still looking for the next meme coin that'll pump 1000x? Or are you trying to time your entry into one of the meme coins that dominated the first part of the bull market, such as PEPE, BRETT, or FLOKI?

If so, you should continue reading. In this article, I put together scientific facts that explain why there is a huge chance that utility tokens will outperform meme coins during the next months.

However, before we dive in, there's one important aspect to mention: The article assumes that we will see a continuation of the bull market that leads to a bull run by the end of 2024 or early 2025.

Fact 1 — Behavioral Finance & Rational Market Hypothesis

Behavioral finance is a vast field with tons of research. However, two very important studies have to be proven right over and over again.

  • Banerjee and others showed in 1992 that early market phases are usually driven more by social influence and hype than by fundamentals. This also applies to the early phase of a bull run. Meme coins typically benefit massively from this psychological phenomenon. However, as markets mature, investors become more rational and start to focus on fundamentals, such as utility and project development (Barberis & Thaler, 2003).

  • As the bull market progresses, more rational investors enter the market. As a result, this typically leads to a shift in focus from speculative assets to those with intrinsic value (Malkiel & Fama, 1970).

Fact 2 — Profit-Taking and Capital Rotation

You have probably already seen the capital rotation chart that is shared repeatedly on social media. The chart shows a rotation from Bitcoin to Ethereum, to large caps, finally leading to an altseason and meme hype.

As simple as the chart is, I think it has many deficits, particularly regarding meme coins. Typically (and similar to this cycle), the pump comes much earlier and struggles at the end.

The reason why is based on the Capital Flow Theory: 

Studies on capital flow dynamics suggest that during profit-taking phases, capital tends to rotate from high-risk, high-reward assets to more stable, fundamentally strong assets (Karolyi & Stulz, 1996).

Simply put, investors who made a lot of profits with meme coins in the first part of the cycle will not continue investing in them but switch to utility tokens. Accordingly, utility tokens, which often represent tangible projects or services, are more likely to attract this capital in the latter stages of a bull market.

Fact 3 — Shift in Focus from Speculation to Fundamentals With Retail Joining

The later phase of a bull market is usually the part when retail jumps in.

Initially, retail investors may flock to meme coins due to the allure of quick gains and social media hype. However, as the bull market progresses and these investors gain more experience, there is a documented shift toward assets with more intrinsic value (Grinblatt & Keloharju, 2000). This aligns with the notion that capital eventually rotates into utility tokens as the bull market matures.

Lo came to a similar conclusion in his Adaptive Market Hypothesis in 2004: The Adaptive Market Hypothesis (Lo, 2004) posits that investors learn and adapt to changing market conditions. As retail investors accumulate experience and knowledge, their investment preferences evolve from speculative assets like meme coins to those with real utility and stronger fundamentals.

Fact 4 — Over-Hype and Market Saturation

The massive success of early meme coins in this cycle (PEPE, FLOKI, BRETT, etc.) has led to a massive explosion in the number of meme coins being launched.

This phenomenon has been described in financial literature as the "over-hype" or "bandwagon" effect, where the initial success of a few assets leads to a flood of similar offerings, diluting the market concentration (Shiller, 2000; Hong & Stein, 1999).

As a result, the pool of available capital is spread thinly across a much larger number of meme coins, making it harder for any single coin to sustain significant gains.

This over-saturation also reduces the likelihood of any single meme coin achieving the same level of success as the early pioneers in this bull market. Investors who might have previously funneled large amounts of capital into a few high-performing meme coins are now spreading their investments across many, reducing impact and smaller returns for each coin.

What Does This All Mean?

While top meme coins like PEPE, Doge, and others will certainly have their moments in the second part of the bull market, their potential to replicate the explosive gains seen earlier is probably limited.

The scientific evidence suggests that we won't see a repeat of the meme coin frenzy that dominated the first half of this bull run. The market is saturated with meme coins, and as more emerge, the concentrated capital thins out, reducing the impact of each new project.

On the other hand, utility tokens are poised to take center stage as the bull market progresses. The behavioral shift towards fundamentals, driven by more sophisticated and experienced investors—including retail entrants—points to utility tokens as the likely leaders in the next phase.

These tokens, backed by real-world applications and intrinsic value, are better positioned to attract capital and deliver sustainable growth. As such, while meme coins may have their moments, the latter half of the bull market will likely be dominated by tokens with genuine utility, reflecting a more mature and rational market environment.

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