Memes have become the most significant track-level opportunity that cannot be ignored or absent in the industry. They serve as a carrier of cultural thoughts, and the size of these thoughts determines the ceiling of a Meme.
Yetta, are you anxious in this market? This was a serious question posed to me at a dinner party. I was momentarily stunned, not understanding why we should feel anxious, 'Because many people think Memes are thriving and VC coins are going to die, haha.'
The biggest discussion at this DevCon was indeed about Memes. Colleagues joked that talking about primary markets would delay speculation on Memes, and some even asked if we included Memes in our asset allocation.
To be honest, we are not very anxious, or rather, we anticipated this situation at the beginning of the year. Primitive is a fund without external capital, allowing us to take a long-term view of the industry. We are not under pressure to deploy capital, and do not need to justify our investments in any sector to LPs who do not understand our industry (LPs can often be a massive pressure). Everything we do is driven by our curiosity to learn where the value and talent flows in this industry.
In this primary and secondary market of Crypto, VC's definition is closer to its essence: Bet on Things with Venture Return. Following any ideology or participating in political struggles is meaningless; learning from the market is key.
First, let me share our understanding of the structural changes in the industry.
Earlier this year, we conducted a thorough review of structural changes in the industry and wrote an internal report titled 'Cycle of Front Running.' TLDR: The polarization in our industry is becoming increasingly severe.
On one hand, as the industry grows, TradFi has integrated a large amount of Crypto assets into Wall Street through compliant means like ETFs, which has siphoned off this liquidity, making it difficult to convert it back to our market funds;
On the other hand, the intense expansion of populist capitalism and the further compression of attention economics make the entire financialization process increasingly simplistic and brutal. The most Crypto Native approach has become direct speculation on Memes, which is a domain TradFi cannot touch.
In such a macroeconomic and social context, liquidity in the market continues to shrink. In the past, we spoke of a Barbell Strategy hoping for a fusion at both ends, but the opposite has happened; our polarization has intensified. Thus, the middle ground in our industry is becoming increasingly difficult.
Who includes these intermediaries? It includes all institutions that have emerged due to the grassroots era's dividends. Offshore CEXs, Trading Firms, Crypto financial service providers, and VCs are all unavoidable.
This structural change will cause anxiety for Offshore CEXs. CME's Future OI has already surpassed Binance. If mainstream coins are increasingly traded in compliant venues due to TradFi's entry, and Memes can also pump projects worth over 1 billion on-chain, then is Binance's space being squeezed?
Apart from Offshore CEXs, how should those Market Makers that previously relied on Crypto and saw Wall Street's high-frequency quantitative teams bring their infrastructure and funds into the game navigate this situation? As they 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. Those who find the breakthrough point will be the ones who succeed.
Next, what exactly went wrong with VC Tokens?
I completely understand the market's sentiment towards VC Tokens. With projects launching at extremely high FDVs, and constant unlocks and dumps for profit after going live, 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 reflexes, rather than helping a VC coin worth tens of billions of dollars.
What is the essence behind this problem? It is that our industry's liquidity supply chain has encountered issues.
Why can Solana continue to hit ATHs? Because they have real products landing, and those products allow Sol to continuously generate revenue, turning the user community into a trading community, creating a positive feedback loop that becomes a self-fulfilling prophecy, which is key to generating buy pressure.
The DeFi of the last cycle was also like this: products launched with minor innovations were fun, DEXs created liquidity for continuous value discovery, and when the consensus formed between the product community and the speculation community, CEX listings further released liquidity, achieving a win-win-win for projects, communities, and CEXs.
A healthy ecosystem is one where those playing on-chain are willing to buy coins and are even more willing to spread the word. This liquidity supply chain has established a positive cycle.
And now? The problem VC Tokens face is the fracture between these two communities. The mainnet launches and immediately does TGE, but the product hasn’t landed, and the community is just there for airdrops, leading to selling pressure. In the last cycle, we had Sam/Su helping us leverage buy Alt, but this cycle has seen leverage largely cleared out. At the same time, in the previous bull market, many VCs raised substantial funds, creating pressure to deploy, and to show attractive returns to LPs, they had to continuously push up project valuations.
This has led to the current situation of VC Tokens, with high valuations at launch and no buying interest, leaving only the option to drop.
This naturally explains the logic behind the emergence of Memes. Since VC investments cannot take root, why not speculate on something with a lower and fairer valuation?
Memes have become the most significant track-level opportunity that cannot be ignored or absent in our industry.
Under the polarization analyzed at the beginning of the article, Memes have become one of the most indispensable tracks in our industry.
I always thought Memes were purely speculative, but this time I realized I was wrong. They are a carrier of cultural thoughts. Their value lies not in specific functions and technologies, but in their unique ability to carry collective consciousness, emotions, and recognition, which is no different from the logic of religion.
Beneath the absurd surface lies a profound expression of social psychological needs and values. It transforms thoughts and emotions into tokenized products for capitalization.
In other words, the core of its product is the thoughts and narratives it carries, and the size of these thoughts and narratives determines the ceiling of a Meme. Cutting-edge technology, idol worship, IP emotions, subcultural thoughts—analyzing the underlying potential is similar to how VCs assess the prospects of a product's sector and its position within that sector.
For Memes, the Token is its product. Therefore, what it needs to do around the product is to promote the interaction between price and community. Price, in a sense, is the iterative development of the product, building a solid community foundation through the ups and downs of price, transforming Paper Hands into Diamond Hands, encouraging them to spread the word, ultimately fulfilling a self-fulfilling prophecy.
In this respect, Meme Tokens actually have a huge advantage that VC Tokens lack. Because a Token is the product itself, the product community and the speculation community merge into one, creating a synergy between the two.
Due to the low issuance capital of Memes, the investment signal-to-noise ratio is very low, and it is impossible to analyze from the tangible product form. It requires an excellent taste for understanding thoughts and market emotions. I am still striving to learn whether there is a structured methodology to study this track, allowing us to select targets within a very low signal-to-noise ratio. If so, what types of targets would be suitable for our intervention and when should we intervene?
However, I firmly believe that Memes will become a cross-cycle opportunity because it is essentially a cultural phenomenon in the digital age. As long as thoughts are 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's vitality lies. Before this wave of Memes, it was said that this cycle's requirements for entrepreneurs were ten times higher than before, and it seemed that investments were consumed by VCs, suppressing the emotions of communities and retail investors. However, through Memes, young people can achieve 100x opportunities through early ambushes. Anti-authoritarianism is one of the core spirits of Crypto, and I believe it will always be present.
How long can Memes last in this cycle?
When everyone is passionately throwing themselves into the community, feeling they can earn forever, don't forget that profit-taking will inevitably occur; this is an unchanging principle in the financial industry. Think back to when the NFT Community felt the same: everyone took pride in using monkey avatars to help connect with brand owners, organizing events and collaborations all over the world, then what?
When various inflated confidence and unrealistic expectations arise, when it seems that holding Majors is not as good as holding Memes, and when various hacks and rugs occur, we should start to be vigilant. Once our industry lacks greater liquidity opportunities and BTC begins to encounter resistance, all enhanced versions of Alpha will plummet even faster.
By the way, is DeSci similar to the previous cycle's PeopleDAO and the logic of saving Assange? Under the banner of 'justice,' do we have the ability to distinguish between faith and speculation?
In fact, the significant turning point for Memes occurred with the launch of small Neiro on Binance. At that time, VC Tokens were in trouble, and the breakthrough came from embracing Community Memes, allowing projects, communities, and CEX users to profit, leading to ACT.
But now, doesn't the blind liquidity of on-chain Memes resemble the competition for TVL that followed high TVL projects on Binance, or the competition following the launch of the Ton ecological coin with a huge user base on Binance?
CEXs will change their listing strategies based on market expectations, thereby guiding the market's direction. Our industry is also falling into a homogenized competitive chaos due to the low issuance costs of assets and liquidity premiums, a chaos that everyone will become numb to and weary of.
This is the power of cycles.
In the short cycle, do not make moves just to support any Bet CEX; projects genuinely building for the industry will emerge.
In the larger cycle, during a bear market, it will clear out those over-supplied entities that are doing nothing and bring the market back on track.
The market is always swinging between long-termism and short-termism; it is a spectrum where the Main Character and Memes will become the two ends of the Barbell, with market sentiments rising and falling.
No need to be anxious, just find your own rhythm.
Investment is a game like this. We make judgments based on cognition and place our bets. If we are right, we make money; if we are wrong, we review. Always curious, always in awe.
