"Because many people feel that with Memes flourishing, VC tokens are going to die, haha." The biggest topic of discussion at this Devcon was indeed Memes. Colleagues joked that discussing primary issues delays trading Memes, and some even asked us if our asset allocation included Memes.
To be honest, we are not very anxious, or rather, we anticipated this situation roughly at the beginning of the year. Primitive is a evergreen fund without external capital, which allows us to view this industry over a longer time dimension. We also don't have the pressure of capital layout, so we don't need to explain to LPs who don't understand our industry the reasons for investing in any track (often LPs are a huge pressure). Everything we do follows our curiosity to learn where the value and talent flow in this industry.
In this primary and secondary market of crypto, the definition of VC is actually closer to its essence: bet on things with venture returns. Following any ideology and participating in any political struggle is meaningless; learning from the market is key.
First, let me talk about our understanding of structural changes in the industry.
Earlier this year, we conducted a lot of reviews of structural changes in the industry and wrote this internal report "Cycle of Front Running." TLDR: The polarization in our industry is becoming increasingly severe. On one hand, the industry has grown larger, with tradfi integrating a large amount of crypto assets into Wall Street through compliant means like ETFs, which has taken away liquidity and is difficult to convert back to on-site funds; on the other hand, the strong expansion of populist capitalism, further compressing attention economics, has made the entire financialization process increasingly simple and crude. The most crypto-native way has become directly trading memes, which is also an area that tradfi cannot touch.
In such a macroeconomic and social context, the liquidity on-site continues to shrink. In the past, we said that the barbell strategy was hoping for a fusion of both ends, but the result was just the opposite; our polarization has intensified. Therefore, the intermediate state in our industry is becoming increasingly difficult.
Who do these intermediate states include? All institutions that have arisen due to the benefits of the wild era. Offshore CEX, trading firms, crypto financial service providers, and VCs, none can escape.
This structural change will make offshore CEX anxious. CME's future open interest has already surpassed Binance. If mainstream coins are increasingly traded in compliant trading venues because of tradfi's entry, while memes can also pump projects over 1 billion on-chain, is Binance's space being squeezed?
Aside from Offshore CEX, those market makers that relied on crypto in the past see Wall Street's high-frequency quantitative teams entering with infrastructure and capital, what should they do to break through? With their decline, the presence of the third-party financial institutions serving them is also diminishing, let alone the VCs who cannot trade actively.
This polarization and liquidity squeeze is the fundamental change in our industry. Whoever finds the breakthrough point will win.
Secondly, what exactly went wrong with VC Tokens?
I fully understand the market's sentiment towards VC tokens. Projects with extremely high FDV open, and after listing, constantly unlock and sell off for profit. Since it's all a casino, why not go to a relatively fairer casino to play meme PVP? If I lose, I can only blame my slow hands, rather than helping multi-billion dollar VC tokens take over.
What is the essence behind this question? It is that our industry's liquidity supply chain has a problem.
Why can Solana continuously achieve ATH? Because they have real products landing, and these products enable Solana to continuously earn money. Thus, the user community transformed into a trading community, and the positive flywheel between the two became a self-fulfilling prophecy, which is key to forming buy pressure.
The DeFi of the last cycle was actually similar. Innovative and fun products launched, DEXs created liquidity and sustained value discovery. When the consensus between the product community and the trading community formed, CEX listings further released liquidity, achieving a win-win situation for projects, communities, and CEX.
A healthy ecosystem is one where those playing on-chain are willing to buy tokens, and even more willing to spread the word. This liquidity supply chain has entered a positive cycle.
And now? The problem with VC tokens is the split between these two communities. The mainnet just launched, and there is a TGE; the product has not landed at all, and the community is only here for airdrops, leading to sell pressure. In the previous cycle, we still had Sam/Su helping us leverage buy Altcoins, but in this cycle, leverage has basically been cleared; meanwhile, in the last bull market, many VCs raised substantial funds, creating pressure to deploy. To show LPs beautiful returns on the balance sheets, they had to continuously push up project valuations.
This is why we see the current situation with VC Tokens—high opening valuations without buy pressure, leading to declines.
This naturally helps us understand the logic behind meme generation. Since the projects that VC invests in cannot land, and they are all trading air, why not trade something with a lower valuation that is fairer?
Memes have become the most unavoidable and present opportunity in our industry.
Under the polarization analyzed at the beginning of the article, Memes have become one of the most unignorable tracks in our industry.
I always thought that Memes were purely speculative, but until this time I realized I was wrong. They are a carrier of cultural trends, and their value lies not in specific functions and technologies, but in their unique ability to carry collective consciousness, emotions, and identity. This is indistinguishable from the logic of religion. Beneath the absurd surface, it expresses profound social psychological needs and values, turning thoughts and emotions into tokenized and capitalized products.
In other words, its product core is the thoughts and narratives it carries, and the size of these thoughts and narratives determines the ceiling of a meme. Pioneer technology, idol worship, IP emotions, subcultural trends—analyzing the potential behind them is just like VCs analyzing the prospects of a product's track and its position in the track.
For Memes, the token is its product, so what it needs to do around the product is to promote mutual encouragement of price and community. Price, in a sense, is the iteration and development of the product. By constructing a solid community foundation through the ups and downs of price, it turns paper hands into diamond hands, encouraging them to spread the word, ultimately completing a self-fulfilling prophecy.
In this regard, Meme tokens actually have significant advantages that VC tokens do not have. Because the token is the product itself, the product community and the trading community merge into one, forming a synergistic force.
Memes have a very low issuance capital, leading to a very low signal-to-noise ratio in investments, and it cannot be analyzed from tangible product forms. It requires a great taste for understanding trends and market emotions. I am still striving to learn whether there is a structured methodology to study this track, thereby selecting targets in a very low signal-to-noise ratio. If so, what kind of targets are suitable for us to intervene in and when to intervene.
But I firmly believe that Memes will become a cross-cycle opportunity because at its core it is a cultural phenomenon of the digital age. As long as the thoughts remain immortal and emotions iterate, it will never run dry.
More importantly, I have always believed that providing opportunities for marginalized individuals to become wealthy is where our industry thrives. Before this wave of memes, it was said that the requirements for entrepreneurs in this cycle were more than ten times higher than before, and it seemed that investments were consumed by VCs. The emotions of communities and retail investors were greatly suppressed. However, through memes, young people can achieve 100x opportunities through early positioning. Anti-authority is one of the core spirits of crypto, and I believe it will always exist.
How long can Memes still last in this cycle?
When everyone is passionate and feels that they can dedicate themselves to the community and earn forever, don't forget that profit-taking will definitely occur. This is an unchanging truth in the financial industry. Think back to when the NFT community was the same: everyone was proud to use monkey avatars, helping them connect with brands, organizing events and collaborations everywhere, NFT parties spread globally, and then what?
When various inflated confidence and unrealistic expectations emerge, when it seems that holding Major is not as good as holding Memes, and when various hacks and Rug pulls occur, we should start to be alert. Once our industry lacks greater liquidity opportunities, and BTC starts to face resistance, all enhanced Alpha will plummet faster.
By the way, is DeSci logic exactly the same as the previous cycle's PeopleDAO and saving Assange? Under the banner of "justice," do we have the ability to distinguish between faith and speculation?
In fact, the huge turning point for memes occurred with the small Neiro on Binance. At that time, VC tokens were in trouble, and the breakthrough came when they discovered small Neiro. Embracing community memes allowed projects, communities, and CEX users to make money, leading to the creation of ACT.
But now, the blind liquidity of on-chain memes looks like the competition for TVL after high TVL projects on Binance, resembling the competition for the Ton ecosystem coin after the huge user base on Binance.
CEX will change its listing strategy based on market expectations, thus guiding the market direction. Our industry, due to the low cost of asset issuance and liquidity premium, will inevitably fall into homogeneous competition chaos, which everyone will definitely become numb to and weary of.
This is the power of the cycle.
In the short cycle, don't do anything just because CEX supports it; projects that truly contribute to the industry will eventually emerge.
In the long cycle, the bear market will certainly clear out a lot of oversupply that has not contributed anything, bringing the market back on track.
The market is always oscillating between long-term construction and short-term emotionalism. It is a spectrum, with Main Characters and Memes becoming the two ends of a Barbell, as market sentiment fluctuates.
There is no need to be anxious; just find your own rhythm.
Investment is like a game. We make judgments based on our cognition and place our bets. If right, we make money; if wrong, we review. Always curious, always respectful.
[Disclaimer] The market has risks, and investments require caution. This article does not constitute investment advice. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at their own risk.
