Meme coin supercycle + AI supercycle = Ultimate AI Meme coin cycle.
Author: Taiki Maeda, HFAresearch Founder
Compiled by: Deep Tide TechFlow
At the market peak in the first quarter of 2024, the circulating market cap of the top 10 'AI technology tokens' totaled $30.9 billion. On the other hand, despite attracting more attention, the total market cap of the top 10 AI Meme coins was only $2.54 billion.
I believe that the emergence of $GOAT and @truth_terminal has opened a whole new field in AI, which may see a hundredfold growth in the future. This is an excellent opportunity to get ahead in a PvE (Player vs Environment) mode, just like the early days of the 2020 DeFi summer.
Market opportunities
Meme coin supercycle + AI supercycle = Ultimate AI Meme coin cycle
In the first quarter of 2024, with NVIDIA (NVDA) stock prices skyrocketing, many AI-related tokens also exhibited parabolic growth despite having some issues with fundamentals and token economics. We observed that the total valuation of the top 10 'AI technology tokens' surpassed $30 billion, not including fully diluted valuation (FDV) and smaller market cap tokens. I believe this is merely a speculative price increase in the crypto and AI sectors, and by 2025, we will witness a larger scale parabolic growth.
However, I believe that most of the excess returns will occur within the AI Meme coin category. Currently, the total market cap of AI Meme coins is only equivalent to that of Ethereum Classic. AI Meme coins will gradually attract capital through 'vampire attacks' from AI technology tokens, static Memes, and VC tokens.
'DeFi Summer' moment
Many people compare the phenomenon of $GOAT rising from $0 to $1 billion to this new sector's 'YFI moment'. An important catalyst during the DeFi summer of 2020 was the emergence of $YFI. It was 'fairly launched' in July and reached a market cap of $1 billion within two months. This phenomenon activated a significant influx of on-chain capital into the DeFi space, as it validated the possibility of a fairly launched DeFi token starting from $0 and reaching a market cap of $1 billion.
DeFi became a hot sector in the last cycle because it was novel, engaging, and filled people with imagination about the future. Against a backdrop of 0% interest rates, the narrative of DeFi was about attracting capital from traditional finance (TradFi) through 'vampire attacks' and becoming the future financial system. This sparked a speculative frenzy on-chain, helping DeFi applications gain total value locked (TVL) and users, and provided practical testing for the ecosystem. When $YFI launched, the total market cap of DeFi was around $5 billion, and at the market peak, this number reached about $170 billion, a growth of 34 times. If we compare $GOAT to $YFI, then we are indeed in a very early stage now, as the total market cap of AI Meme coins is still less than $5 billion.
The rise of the DeFi cycle relied on catalysts within the crypto space (such as liquidity mining, high-return mining mechanisms, and speculative behavior) and benefited from external conditions (such as interest rates dropping to zero, with capital flooding into the crypto space seeking returns). This process ultimately formed a bubble.
The ultimate cycle of AI Meme coins is similar to this. Within the crypto space, the current mainstream narrative is the supercycle of Meme coins, while in the stock market, AI technology has brought sustained growth momentum. The combination of these two creates ideal conditions for a bull market.
In the crypto space, sectors that can inspire limitless imagination often present parabolic growth opportunities.
Reflexivity in the new paradigm
Reflexivity theory suggests that investors' decisions are not based on reality, but on their perception of reality. This perception-driven behavior can, in turn, alter reality (or fundamentals), further influencing investor perceptions and market prices.
In this context:
Price refers to the overall market cap of the AI Meme coin sector.
Perception is the market's view of the significance represented by these tokens.
Fundamentals are based on attention and how much dreams these tokens can inspire.
I believe these tokens are not 'purely Meme coins', but are closer to 'Tokenized AGI'. They were all fairly launched on the pumpfun platform. If these tokens were launched by venture capital (VC), they might have been released with a $1 billion fully diluted valuation (FDV) and 10% circulation, then sold off by VC to retail investors. But these AI Meme coins start from $0, offering early participation opportunities for everyone. This phenomenon is similar to the ICOs (Initial Coin Offerings) we've been reenacting in real-time.
Here is how I believe reflexivity plays a role:
The 'AI Meme coin' category has attracted speculators. Most people overlook it, thinking 'it's just another PvP Meme coin narrative.' (We are currently in this phase)
Over time, the capabilities of AI entities gradually improve (e.g., Zerebro launching a record label, Truth Terminal releasing Infinite Backrooms v2, etc.), and investors' views on these tokens shift from 'just Meme coins' to 'a whole new field.'
This shift will attract more capital and attention from both within and outside the crypto space, sparking more speculative activity. Some failed AI startups may pivot to issuing tokens as a last-ditch effort, while wealthy tech billionaires may also start investing in a handful of tokens.
Unlike 'static Memes', these AI entities will perform activities on-chain, launch NFTs and DeFi projects, and even have real-world impacts. They are not static, but continuously evolving to attract more attention.
All these factors together drive the potential valuation to limitless heights, ultimately forming a bubble that ends in a boom-bust cycle.
It is particularly important that these tokens were launched on the pumpfun platform. This launch method aligns with current trend dynamics, including the formation of cult-like followings, the overlap of Meme coins and AI supercycles, and anti-VC sentiment. If you believe in the four-year cycle theory, then the arrival of AGI predicted by Elon Musk in 2025-26 might coincide with the crypto market peak in the fourth quarter of 2025.
My investment strategy
Frankly, I am not sure how to allocate funds correctly. If this is just a 'meme' category, then current winners might continue to lead, making it worth betting on them. On the other hand, if $GOAT performs similarly to YFI, it might experience a significant surge—but ultimately might be replaced by 'better technology'. Personally, I am clear that I cannot accurately predict which tokens will ultimately prevail, so I choose to build a portfolio of AI Meme coins to profit in a 'rising tide lifts all boats' scenario in the overall market.
Here is a rough framework for allocating funds in this emerging sector:
For Tokenized AGI, you are essentially betting on which AI entity can consistently attract and grow attention. Here, 'attention' is akin to 'revenue' in traditional markets, serving as a core metric for measuring value.
Large Language Models (LLMs) will continually improve over time, so you need to bet on founders or developers motivated to create the best agents through fine-tuning models.
This sector is currently in a long-term bull market. Watch for AI entities that have the potential to attract attention beyond crypto Twitter/X, as they can break through the small bubbles in the crypto space and gain broader visibility.
As the market evolves, tokenomics will become increasingly important. You need to think about what the token's use is? What does it represent? If the token's price rises, does it help the AI entity further achieve its goals? The interaction between price, perception, and fundamentals (i.e., reflexivity) is crucial for every token.
In the last cycle, the total market cap of DeFi reached $170 billion. If this sector can reach a similar valuation, it would mean a growth of about 40 times from current levels. However, given that the current overall market cap of crypto is higher, we could very well exceed these levels. The key lies in maintaining faith, being patient, and flexibly adjusting investment strategies based on market fluctuations and rotations to maximize your 'sleep-friendly returns'—that is, obtaining the best returns without affecting your sleep.
Please take my words seriously, I really don't know what I'm doing. In fact, I don't think anyone truly knows what they're doing. This situation could change at any moment, but currently, my AI Meme coin portfolio includes:
$GOAT: The current leader, performing the strongest in the market.
#ZEREBRO: Led by native founders of the crypto space, well-versed in cultural trends and developing at a rapid pace.
#Fartcoin: Balancing the needs of 'left, middle, and right curves', aimed at satisfying different levels of investors. After all, everyone farts.
#Ai16z: Despite ongoing controversies, it maintains a developer community with a 'cult-like' nature. If they can endure this period, they will become more antifragile.
$FOREST: An AI monkey project attempting to save rainforests, with real-world impact.
