By Stacy Muur
Compiled by: TechFlow
Memecoins have overshadowed all other Web3 topics over the past few weeks, making it seem like the only way for regular users to get high returns is by riding the meme bandwagon. Driven by the craze for memecoins like $PNUT, $PEPE, $BONK, $BRETT, and the growing popularity of the meme category, memecoins have been in the spotlight as their daily trading volume has reached its highest level. So, is the risk worth the gains? Is the memecoin market overhyped?
The Current State of Memecoins
Are Memes Really the Theme of the Year? If you ask someone with at least five years of experience in the Web3 market how to define 2024, they will most likely say it’s the “Year Zero” for Memecoins.
Many believe Memecoins are the best-performing assets this year, supported by charts and rankings. But does this truly reflect reality?
1 month of industry performance
Source: Artemis
If we analyze the industry's performance year-to-date, the data may present different results. For example, on Artemis, the RWA index (which includes 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 considered. The Memecoin index on Artemis currently tracks only the 19 largest Memecoins.
The category rankings on CoinGecko face another issue: many Memes belong to multiple categories, so a few strong performers can significantly exaggerate the 7-day performance across multiple categories.
Source: CoinGecko categories
Considering the Pump.fun ecosystem, it tracks 520 tokens, which helps to understand why I think this is an issue. It performs very strongly and is the second-largest gainer of the week, triggering significant FOMO (fear of missing out).
Upon closer inspection of the rankings, it is found that fewer than 20 Tokens had a 7-day increase exceeding 110% (the average for the category), accounting for only 3.8%. Moreover, fewer than 60 Tokens (11.5%) had a positive weekly increase.
It seems this is no longer '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 has led to the illusion that Memecoins outperform all other Web3 sectors. In reality, it is more accurate to say that only leading Memecoins outperform other categories.
This raises an important point: we need to distinguish between mature Memecoins and new Memecoins, as they represent two distinctly different markets.
New Memecoins
CoinGecko currently tracks 520 Memecoins on its Pump.fun dashboard. Since Pump's launch, 3 million tokens have been created.
This means that 99.982% of tokens are not tracked on CoinGecko, so we cannot obtain performance information about them.
Data source: Dune
This means that 99.982% of tokens are not tracked on CoinGecko, so we cannot obtain performance information about them.
Data source: Dune
Here’s some background information I researched at the end of August:
Most of the most profitable addresses are the deployers of the tokens
Only 3% of Pump.fun traders made over $1,000
Only 0.8% earned more than $10,000
Over 60% of traders lost money
Data source: @newtoneinsteinx on X
The biggest problem for ordinary new Memecoin traders 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 mass adoption, such as $PEPE or $BONK.
I don't mean to disappoint you, but the odds of being hit by lightning are slightly higher: 0.011%.
Mature Memecoins
The outlook for mature Memecoins is much more optimistic. They gain market share not because of 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 most Memecoins with solid market shares are not created by random developers. Typically, these successes are backed by professional Memecoin development teams that have ample resources for market making and marketing.
I want to clarify that I am not saying all popular Memecoins are the result of perfect planning, but this may apply to most cases.
Several reasonable factors contribute to mature Memecoins performing better than many other areas of Web3:
100% of supply is in circulation (no low circulation or high FDV)
No venture capital support (eliminating additional sell pressure)
Organic and active holders community
No product risk (no vulnerabilities, poor execution, or inadequate user acquisition)
Memecoin rotation model (profits from one Memecoin surge flowing into other Memecoins)
Strong correlation with the overall market cycle
Lower dependency on marketing
Data source: Kaiko
Trading in Memecoins is primarily speculative, and this year's trends have become more predictable, forming patterns that have attracted significant trading volume and liquidity, siphoning off the market from 'classic' coins, especially in the current context of Web3 lacking 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 a historic high last week, at $110 million. Large-cap Meme tokens like SHIB and DOGE still dominate, accounting for over 70% of market depth.
However, their market share is gradually declining, indicating that investors are showing increased interest in smaller tokens.
What is our current situation?
Currently, over 50% of trading volume on Solana comes from Memecoins. This ratio is close to 45% on BNB and about 25% on Base. This is already a significant proportion.
Data source: Dune
However, history tells us that when the market is busy pushing some narrative after price volatility, it often turns out to be too late.
In my view, the Memecoin market has reacted to Bitcoin's rise. As long as the price remains around $90,000, I believe that mature Memecoins are unlikely to experience a new surge—we can refer to them as 'cult coins' to avoid confusion with the 3 million tokens created this year on Pump.fun.
However, retail investors always follow trending topics, still getting on this train, hoping for a journey to Valhalla.
Source: @_kaitoai on X
The main issue is not just that most people got on board too late recently, which is common across all narratives. The real problem is that many retail investors are rushing into new Memecoins, which often lead to 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 barely noticeable; to them, these are just code. Thus, this negative experience affects all areas of Web3.
It should be noted that I do not oppose those 'cult coins' that already have market share—that is, mature Memecoins. They do have many advantages. However, I believe we should stop conflating excellent projects with the poorly designed lotteries on Pump.fun. Let’s correct this issue.
Final thoughts
If you are an experienced Memecoin trader, you can continue to execute your strategy, but be aware that the market may be overheated.
If you are a newcomer to Memecoins and feel strong FOMO, consider allocating a small portion of manageable funds in your portfolio for experimentation, focusing on those already established '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 participate.
