I am no fan of meme coins.
But I am fascinated by the hype they can drive. The unbelievable amount of capital they've captured. And the attention they create.
During the last days, I have analyzed the market. I believe in the power of blockchain and utility tokens. So, I wanted to understand what’s happening in the market. Why have meme coins performed extraordinarily well? And why are most altcoins still close to their cycle lows?
This article summarizes my results.
So, before we discuss meme coins, we must understand three essential effects—all significantly impacting the crypto market's performance in 2024.
The ETF Effect
The launch of Bitcoin ETFs has been a game-changer. Institutional investors, who might have previously stayed on the sidelines, now have a regulated way to gain crypto exposure.
But here's a massive catch: most capital goes directly into ETFs. Accordingly, Bitcoin's price reached a new all-time high.
At the same time, due to the ETFs, money did not (continue) to flow into alts (as it did in previous cycles).
This has left the altcoin market in a tough spot. Essentially, we haven't seen a substantial capital inflow. The total market cap of altcoins has grown only ~405b from the beginning of the year to today, while Bitcoin's market cap has skyrocketed by almost $400b.
Key point: The altcoin market hasn't grown substantially in market cap.

The Missing Retail Investors' Effects
Retail investors drove the highs of the last bull run, flooding the market with fresh capital.
Indeed, times were different. There were low rates and free money, and everybody was trapped at home.
And yes, retail usually arrives as the last guest to the party—we're not there yet.
However, the fact that retail has yet to arrive makes it even more challenging for the altcoin market to thrive. Despite a small peak in February/March, retail hasn't been interested at all.
Key point: No retail interest, no (or limited) fresh capital.

The Over-Saturation Effect
Finally, we have to look at the supply side.
The token landscape has changed dramatically during the last few years, and the number of available tokens (utility, memes, etc.) has exploded.
Hundreds of new tokens are launched daily, leading to a massively oversaturated market. In other words, the supply exploded while the demand has stagnated.
Summarized: The altcoin market has a capital issue. Fresh capital flows into ETFs, and retail has yet to jump on the train. At the same time, the supply has skyrocketed.
Meme Coins: Masters of Attention
Now, what does this all have to do with meme coins?
Well, simple: They might lack the utility of more serious projects. Still, they are unparalleled when it comes to driving attention.
In an over-saturated market with limited capital, attention is everything.
And know what: money follows attention!
Meme coins, with their viral marketing campaigns, strong communities, and relentless social media presence, have captured and funneled attention and, subsequently, capital.
The Power of Community Hype
Meme coin communities are some of the most passionate and active in the crypto space. They rally around their chosen projects with an intensity that's hard to match.
This creates a self-reinforcing cycle: more attention leads to more buying, attracting even more attention.
While other altcoins might boast impressive technology or real-world use cases, they often struggle to stand out in a crowded market.
Meme coins, on the other hand, thrive on their ability to grab—and hold—the spotlight.
Can the Hype Last?
But here's the big question: Can meme coins keep this up?
The challenge is that attention is fleeting. Keeping the hype alive is no easy task, especially when there's no real utility to fall back on.
Investors can be fickle, and once the novelty wears off, they might move on to the next big thing (as it might happen just now with the attention shifting from Solana to Tron).
Moreover, the number of meme coins is growing rapidly. As the market becomes more saturated, it will be harder for any project to maintain its dominance. The competition for attention—and capital—will only get fiercer.
What's Next for Meme Coins?
Meme coins have enjoyed an extraordinary surge this year, outpacing much of the altcoin market. Their success lies in their ability to command attention, drawing in capital even when the broader market is tight.
But here's the catch: with the total amount of capital in the market currently limited and the number of meme coins rising, these tokens start cannibalizing each other.
In other words, as one meme coin gains traction, others might suffer as the available capital becomes scarce.
So, the big question is what happens when new capital eventually enters the market, driven by a wave of retail investors.
I think it is likely that only the big memes will benefit from it. The ones that have become famous even beyond crypto—at least in the first step.
What do you think?