Author: Stacy Muur
Compiled by: Deep Tide TechFlow
In recent weeks, Memecoins have overshadowed all other Web3 topics, leading ordinary users to feel that riding the Meme wave is the only way to achieve high returns. With the surge of Memecoins like $PNUT, $PEPE, $BONK, and $BRETT, as well as the increasing popularity of the Meme category, the daily trading volume of Memecoins has reached peak levels and has drawn considerable attention. So, is this risk worth these returns? Is the Memecoin market overhyped?
The current state of Memecoins
Is Meme really the theme of this year? If you ask someone with at least five years of experience in the Web3 market how to define 2024, they are likely to say it is the 'Year of Memecoins'.
Many people believe Memecoins are the best-performing assets this year, supported by charts and rankings. But does this really reflect reality?
1 month of industry performance
Source: Artemis
If we analyze the industry's performance year-to-date, the data may show different results. For example, the RWA index on Artemis (including Ondo, Mantra, Clearpool, and Maple) leads with a growth rate of 1,900%, while Memecoins have a growth rate of 258%, and Bitcoin at 104%. Additionally, it is important to understand which Memecoins are included in the consideration. Currently, the Memecoin index on Artemis only tracks the 19 largest Memecoins.
The category rankings on CoinGecko face another problem: many Memes belong to multiple categories, so a few strong performers can significantly exaggerate the 7-day performance of multiple categories.
Source: CoinGecko categories
Considering the Pump.fun ecosystem, which tracks 520 tokens, it helps to understand why I believe this is a problem. It has performed very strongly, being the second-highest increase this week, triggering significant FOMO (fear of missing out).
However, a closer look at the rankings reveals that less than 20 tokens have seen a 7-day increase of over 110% (the average for this category), accounting for only 3.8%. Additionally, there are fewer than 60 tokens (11.5%) with a positive weekly increase.
This no longer seems to be "WAGMI" (We're All Gonna Make It), right?
From a performance tracking perspective, the main issue with Memecoins is that their industry performance is often measured by the largest or most popular assets in the category.
This leads to the illusion that Memecoins are outperforming all other Web3 sectors. In reality, it would be more accurate to say that only leading Memecoins outperform other categories.
This leads to an important point: we need to distinguish between mature Memecoins and new Memecoins, as they represent two entirely different markets.
New Memecoins
CoinGecko currently tracks 520 Memecoins on its Pump.fun dashboard. Since Pump launched, 3 million tokens have been created.
This means that 99.982% of the tokens are not tracked on CoinGecko, so we cannot obtain information about their performance.
Data source: Dune
This means that 99.982% of the tokens are not tracked on CoinGecko, so we cannot obtain information about their performance.
Data source: Dune
Here is some background information I researched at the end of August:
Most of the most profitable addresses are the token's deployers
Only 3% of Pump.fun traders made over $1,000
Only 0.8% of people made over $10,000
Over 60% of traders are losing
Data source: @newtoneinsteinx on X
For the average new Memecoin trader, the biggest problem is the inability to distinguish between 'emerging' and 'mature' Memecoins.
Most novice traders chase early protocols, hoping to replicate that 0.001% success case of achieving large-scale adoption, like $PEPE or $BONK.
I don't mean to disappoint you, but the chance of being struck by lightning is still higher: 0.011%.
Mature Memecoins
For mature Memecoins, the outlook is much more optimistic. They are not gaining market share due to venture capital support or specific valuation factors, but rely on their community, a bit of luck, and strategic market management.
This may sound like a conspiracy theory, but I believe that most Memecoins with solid market share are not created by random developers. Typically, behind these successes are professional Memecoin development teams with ample resources for market making and marketing.
I want to clarify that I am not saying that all popular Memecoins are the result of perfect planning, but this may apply to most cases.
There are several reasonable factors that make mature Memecoins perform better than many other Web3 sectors:
100% of the supply is in circulation (no low circulation or high FDV)
No venture capital support (eliminating additional selling pressure)
An organic and active holder community
No product risks (no vulnerabilities, poor execution, or inadequate user acquisition)
Memecoin rotation pattern (profits from one Memecoin surge flowing into other Memecoins)
Strong correlation with the overall market cycle
Lower dependence on marketing
Data source: Kaiko
Trading of Memecoins is primarily speculative, and this year's trends have become more predictable, forming some patterns that attract significant trading volume and liquidity, thereby diverting the market from 'classic' coins, especially in the current context where Web3 lacks dominant or novel narratives.
It is worth mentioning that, according to 1% market depth data from U.S. exchanges, the liquidity of Meme tokens reached an all-time high last week, hitting $110 million. Large-cap Meme tokens like SHIB and DOGE still dominate, holding over 70% of market depth.
However, their market share is gradually declining, indicating that investor interest in smaller tokens is increasing.
How are we doing now?
Currently, over 50% of the trading volume on Solana comes from Memecoins. On BNB, this figure is close to 45%, while on Base it is about 25%. This is already a significant proportion.
Data source: Dune
However, history tells us that when the market is busy pushing a narrative after price fluctuations, it is often too late.
In my view, the Memecoin market has reacted to Bitcoin's rise. As long as the price stays around $90,000, I think mature Memecoins are unlikely to see a new surge—we can call them 'cult coins' to avoid confusion with the 3 million tokens created on Pump.fun this year.
However, retail investors always chase trending topics, still hopping on this train, hoping for a journey to Valhalla.
Source: @_kaitoai on X
The main issue is not only that most people got on board too late recently, which is common across all narratives. The real issue is that many retail investors are pouring into new Memecoins, which are often more likely to bring losses rather than gains.
As a result, new users suffer losses, leading to further stagnation in user onboarding. For the average Web2 user, the distinction between Memecoins and classic coins is nearly negligible; to them, these are just code. Therefore, this negative experience impacts all areas of Web3.
It should be noted that I do not oppose those 'cult coins' that already have market share—namely, those mature Memecoins. They indeed have many advantages. However, I believe we should stop conflating excellent projects with those poorly designed lotteries on Pump.fun. Let's correct this issue.
Final thoughts
If you are an experienced Meme coin trader, you can continue executing your strategy, but be aware that the market may be overheated.
If you are new to Meme coins and feel a strong FOMO, consider allocating a small portion of controllable funds in your portfolio for experimentation, focusing on those already mature 'cult coins'.
Unless you know how to win in the market, you should avoid participating in new coin launches. There is an important principle: if you don't know how to win the game, don't play.
