Memecoins have experienced a blistering run-up in the last year, with many tokens, including the likes of new-cycle entrants Pepe (PEPE), Dogwifhat (WIF) and Popcat (POPCAT) gaining well over 30,000% from their inception.
Many memecoin advocates expected a fresh wave of retail investors to show up and immediately start bidding memecoins to absurd new highs. So far, they appear to be more interested in what crypto-natives colloquially refer to as “dino coins.”
“Dino coins” are older altcoins such as Ripple’s XRP and Tron (TRX), which have recently rallied to new local and all-time highs.
Meanwhile, several of the major new-cycle memecoins — excluding Bonk (BONK) and Pepe (PEPE) — have failed to breach all-time-highs amid the recent market mania, sparking fears that the “memecoin supercycle” may be coming to a premature end.
Memecoin evangelist Murad Mahmudov etched the term “memecoin supercycle” into crypto’s collective consciousness in September when he delivered a bullish keynote speech on the asset class at the Token2049 conference in Singapore.
He looked at the massive out-performance of memecoins in the last year, when compared with legitimate projects, and extrapolated that this trend would continue amid a retail mania.
Memecoins are a notorious sub-class of hyper-speculative crypto assets. They offer no utility, they don’t speed up payments, they don’t usher in any new financial innovation, nor do they provide any benefit.
Still, this lack of fundamentals is what makes them primed to skyrocket to absurd valuations, and it’s one of the main reasons why Mahmudov said the memecoin supercycle is just beginning.
Mahmudov told Cointelegraph that, unlike mainstream projects in the realms of decentralized finance (DeFi) and infrastructure, the actual value of memecoins can never be worked out by using any quantitative techniques available in the world of high finance.
“If DeFi protocols actually start paying out dividends to their tokenholders, then we have 500 years of history in how to value cash flow-based assets. Then, investment banker types are going to come in and they’re going to say, ‘Well, why would I pay 200 price-to-earnings for this thing?’”
“So if you're an asset that’s going to trade and behave in a memetic style, then the sky's the limit because who knows how to value that?”
Memecoins are just a leveraged play on global markets
He said the key to figuring out whether the memecoin supercycle is already over can be found in “global macro,” referring to interest rates, central bank behavior and general financial conditions.
“As long as there's global liquidity, as long as there's risk-on behavior in the traditional markets, memecoins are going to do even better. But if there’s a recession, then memecoins are probably not going to do as well.”
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“The way I view it is that crypto as a whole is a 2x to 3x beta to traditional markets and memecoins are like 7x to 8x beta in the grand scheme of things.”
Could it really be over for memes?
Swyftx analyst Pav Hundal agreed with Mahmudov, saying that memes are nothing more than a riskier, leveraged play on the rest of the crypto industry and the broader global financial market.
If broader market conditions trend up, memecoins should outperform, however, if the scales tilt in the other direction, memecoin investors could be looking at a bloodbath.
“All you need to understand right now about this cycle is that global liquidity is higher, regulatory risk is lower, and I expect the US dollar to get weaker.”
“It’s like going to Monte Carlo. There’s money everywhere and it’s rotating into risk. The trend is technically up. If the market is going higher, so are memecoins,” he added.
Hundal warned that investors should expect to brace for impact in light of the recent rallies while also cautioning against meme fatigue.
“Maybe the market got a bit ahead of itself, but it’s reasonable to expect some kind of cool-off when you’ve just had 150+% rallies,” he said.
“It’s not impossible to imagine a future world where censorship, meme fatigue or cancel culture become a risk to memecoins. We’ve just seen CZ describe memecoins as weird,” Hundal added, nodding at a Nov. 26 tweet from former Binance CEO Changpeng Zhao.
Source: Changpeng Zhao
Lennix Lai, the chief commercial officer at OKX, said that while the term “memecoin supercycle” may be a bit far-fetched, the current market conditions suggest a “broadening” rather than a cycle ending for memecoins and crypto assets.
Still, Lai cautioned that the rapid emergence of the Solana ecosystem as the primary blockchain for new memecoins, combined with the temporary nature of the assets, pointed to outsized volatility for the assets moving forward.
“Traders should be mindful that the crypto market will continue to see volatility in the short term, with Bitcoin likely experiencing retracements of 10%-15% in the coming weeks, while memecoins may see much more dramatic price swings,” he said.
Memecoins are a ‘tokenized community’
Despite the “weirdness” surrounding memecoins, Mahmudov says it’s not all about spectacular valuations and ridiculous price targets.
Mahmudov, who often refers to memecoins as being profitable “cults” and invokes religious themes when describing them, said the tokens provide more than just the hope of a monetary return.
“At the risk of sounding a little bit blasphemous, if you actually look at religion as a product, right, as a service, um, you know, what does it give people?”
“It gives people meaning.”
“Memecoins give people family. They give people an identity, community and friendship. Um, and it gives people a sense of belonging, a sense of purpose and a mission.” To Mahmuov, this mentality among holders creates a symbiotic feedback loop for memecoin holders and the price targets in return.
XRP rallied over 420% in the last month. Source: TradingView
Mahmudov even traces the recent outperformance of older altcoins such as XRP, Cardano (ADA) and Chainlink (LINK) back to the “cult” status of their communities.
“You have to understand how notoriously culty members of these communities are, right — and that’s the biggest underlying force here.”
‘The most bullish thing you can have for a token is literally people becoming full-time, unpaid evangelists for the project. We’ve already seen this a lot with Ripple, Chainlink, Cardano and Dogecoin,” he added.
Still, pseudonymous trader 0x_kun took issue with the claim that all price performance can be traced back to the cult status of their communities, saying that a fundamental belief in the utility of a token — justified or not — is what really matters at the end of the day.
“The difference is XRP holders truly believe in the fundamentals, they aren’t buying them as social cults.”
“If you said to an XRP holder it’s a meme with fundamentals to back, they would shred you down,” he said in a Dec. 3 post to X.
Source: 0x_kun
Is pump.fun bad for memecoins?
The meteoric rise of Solana-based memecoin deployer Pump.fun has already caused a major stir in crypto circles. Several commentators have lashed the protocol for being the “most extractive” product of all time and view it as an inescapable net negative for the industry.
Other critics claim the memecoin launchpad has massively diluted user attention across hundreds of thousands of memecoins, essentially ruining the potential upward trajectory for larger “blue chip” memecoins on Solana.
On Nov. 25, Pump.fun halted its live-streaming function in response to reports of harmful content being streamed by users to drive attention to newly launched tokens.
Live-streaming debate aside, Mahmudov says the ability to launch memecoins at the click of a button is an inevitable step in the progress of technology, so it’s not worth getting too bothered.
“Being angry at Pump.fun is futile. One-click memecoin creation was always just going to arise on its own,” he said. “It’s a natural evolution of techno-capitalism, essentially tokenizing everything, meme coin-izing everything, turning everything into a coin.”
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Ultimately, Mahmudov said that Pump.fun or any single-click token launching platform, splits the industry into two sections.
“One part is the gambling side, which is all fast-paced rotations. It’s hyper-gambling. It’s all ‘flavor of the day’ type stuff.”
“But the second one is more long-term community building. It’s brand-building. It’s cult building. It’s more like — for lack of a better example— let’s try to build the next $100 billion movement, the next Dogecoin — and that second part is the one I’m interested in,” he said.
“You have to analyze those two markets separately.”
