This article takes an in-depth look at the behavior and impact of meme coins in the current market. Through a detailed analytical framework, it reveals the diverse performance and investment potential of this type of cryptocurrency. The data and charts used in the article come from a dataset compiled specifically for Farcaster meme coins, providing a comprehensive perspective to help readers understand the community and financial performance of meme coins. By combining community data with financial data, the author attempts to provide a more scientific evaluation and classification of this type of token to provide decision support for investors and analysts.
introduction
Every market cycle is accompanied by the emergence of meme coins. If you are not familiar with the concept, think of the 2021 reddit forum craze that drove AMC's stock price up. A group of people centered around a meme and pushed the price of an asset up in a short period of time (ranging from a day to a few months). This has become a popular market strategy in the crypto space from the blockchain layer to the application layer, because people drive not only the price, but also the attention of an ecosystem. Some projects like Avalanche even went a step further and created an official foundation for meme coins.
The distinction between a meme coin and any other token may not be crystal clear, but typically there is nothing backing the token other than the meme image itself. For example, DOGE is a token that is really backed by a Shiba Inu image, unlike ETH which is secured by the Ethereum blockchain, UNI which has the full Uniswap protocol behind it, or MKR which has a full collateralized stablecoin service behind it.
Farcaster meme coins like DEGEN are the latest trend and their main advantage is that their community is publicly accessible. Therefore, I wanted to do some basic analysis combining community and financial data.
How to evaluate a meme coin
We can use the following chart to divide all meme coins:
There are five main areas identified in the above chart:
Very high risk: meme coins with low liquidity and trading volume are very dangerous and prone to RUG because there are too few liquidity providers
Bot Arena: Most memecoins will never make it out of the war, as there are thousands of them, even many memecoins with the same or similar token names, competing for the attention of the community and the asset.
Volatile growth: Those meme coins that break out of the initial period need to maintain their momentum and growth. During this period, you may see price fluctuations of 100-500%, and whether the fluctuation is upward or downward, many KOLs will begin to catch on to the meme.
· Maturity and stability: The leader in the meme coin market will occupy a high position in community attention and financial value for a period of time, forming a clear gap with other competitors. This leading state may be manifested as less price fluctuations, showing a kind of stability, because the number of new investors interested in the meme coin and the number of investors exiting the meme coin have reached a balance, thus maintaining the continued attention on the meme coin.
Sleeping Giants: A meme coin that has had a lot of growth in both community and funding and has not suffered a “RUG” may go quiet for a while. Most likely a DAO has been formed and they are starting to roll out minting or products and deal with the community chaos while hoping to get noticed again.
Most memecoins should be stuck in the "bot arena", some notable memecoins in the "volatility growth" section, and maybe one or two memecoins can become "mature and stable". In the process, some may lose community power and become "sleeping giants", while others may lose liquidity and become "very high risk".
The roadmap for a successful meme coin should be as follows:
You may see that many meme coins have received a lot of media attention due to the promotion of bots or KOLs, but in fact their liquidity is not strong, which may put investors at risk of being "RUG", that is, if the project party suddenly withdraws the liquidity, investors will suffer losses.
After a lot of data analysis, I created a chart related to the Farcaster meme coin on Dune:
This is actually pretty much what I expected, you can see DEGEN is at the far end in the top right corner, and then a few others like ENJOY, HIGHER, TN100X, and EVERY are in the middle. The rest of the meme coins are all stuck on the left side, competing for attention and liquidity.
It is worth noting that I have not filtered out Sybil attacks or bots here, so the community scores of some meme coins may be biased. This is a direction that can be improved in the future.
Now, let’s explain how these two scores came about from this final chart. I’ll also pose further research questions and detail my logic for those who want to dig deeper.
There are some icons that I didn't list in this article, you can find them here if you need them.
Community Score
Each score consists of a "base" component and a "growth" component. For the community score, we first measure the delivery and participation of token mentions. Therefore, according to this method, "$DEGEN" will be counted, but "DEGEN" will not. Symbols related to the token, such as degen hat, higher arrow, tn100x ham, are also counted in the total.
This gives us five main indicators:
· Stakeholders: The number of people who staked a particular token
Percent of Receivers: The percentage of senders who have previously received the token
Release number: contains the release number of a specific token
Number of channels: The number of channels that have made a distribution containing a specific token
Activity level: Engagement (likes + replies) plus the number of posts multiplied by the cube root of the number of posters multiplied by the cube root of the number of channels.
The overall community score is calculated using a "base" activity level and a "growth" multiplier based on the weekly change in unique senders and receivers. Essentially, if we see more and more people staking a token, and those people are finding ways to own those tokens, that's definitely a very healthy sign.
Overall, it looks like this in table form:
Funding score
Here are a few financial indicators:
Fully Diluted Value (FDV): Fully Diluted Price, Total Supply x Price
Price: The latest price based on DEX transactions
Daily, Weekly, Monthly Price Change Percentage: The percentage change in price on a daily, weekly, and monthly basis
Liquidity: This liquidity refers to non-token liquidity, meaning that for a DEGEN-WETH (Ethereum) pool, we only count the WETH portion of it. Doing so gives us a more stable signal of how much good liquidity a given token has.
Volume: DEX transaction volume in the past 30 days
Transfer volume: The number of ERC20 transfers in the past 30 days
Total volume: USD trading volume on DEX in the past 7 days
The “base” portion of the financial score is determined by its non-token liquidity and DEX trading volume, while the “growth” portion is calculated based on the week-over-week change in liquidity. All in all, it looks like this in a table:
Follow-up Questions
Here are some of the questions I hope to explore further from here:
How to score “dumpers” for Sybil attacks or bot behavior based on the value of tokens held in their wallets?
Can “dumpers” be classified based on their relationship to known groups or communities?
How are the stages of community and financial growth categorized? How do they relate to each other? Are there time lags or interdependencies?
Are there the same groups or types of people driving the initial growth phase? What are the characteristics of those who join a meme first, last, and last? How does this relate to the hierarchy of users?
When a meme moves from one hot spot to another, what is the driving factor behind it?
How is a person’s level of interest assessed based on how invested they are in the community or financially? Do people change their “investment” behavior after buying or selling a particular token?
What is the average lifespan of a meme in terms of both community and financial success?
Data Query Guide
Although all the output here seems to come from a single dataset, the data behind the scenes is actually somewhat complex. You can query the relevant data according to the following instructions:
dune.neynar..." The dataset was uploaded by Neynar's team, which indexes all Farcaster data. If you are not familiar with the concept of Farcaster data, start with my beginner's guide. Generally speaking, if you see "dataset" in the tab name, it means it was uploaded by the team name shown after the "dune." prefix.
Whenever you see "result" in a table name, it is a matview. I created an "erc20 token summary table" to get all the trades, prices, liquidity, and transfer data for a specific token. This summary table was further broken down in subqueries so that the final query only took 3 minutes to run. The total run time for all queries took about 60-70 minutes.
If you see a table name that does not follow the above prefix (and is not a raw table or a decoded table), then it is most likely from a spellbook. So, tokens.erc20 gives me a table with symbols or
decimal’s tokens, dex.trades gives me all DEX trades on all blockchains, etc. You can find the logic of the tables in the github repo by searching for the table namespace or table name like “dex” or “trades”.
Summarize
As a unique type of cryptocurrency, meme coins are often strongly influenced by community media and community dynamics. In addition to proposing a systematic framework for evaluating meme coins, the data analysis built on the Dune platform can more accurately monitor and predict the performance of these tokens.
Although there are certain challenges, such as the potential risk of Sybil attacks or Bot manipulation, the analysis of meme coins can be made more precise and practical through continued monitoring and technical improvements. Future research may further deepen the understanding of these complex factors and bring new insights to the broad field of cryptocurrency.
