Analysis of Memecoins Investment Strategies

Memecoins, as a special class of assets in the cryptocurrency market, have always been a subject of controversy regarding their investment value and risks. This article will analyze the investment logic and strategies of memecoins from multiple perspectives.

Beta Coefficient and Leverage Effect

Some investors favor memecoins, mainly because of their high beta coefficient relative to Layer 1 assets. Taking BONK as an example, a moderate allocation can create a leverage effect on Solana without increasing actual leverage.

Data shows that when BONK's 30-day beta exceeds the 90-day rolling beta, its 30-day and 60-day average returns reach 124% and 413%, respectively. This highlights the importance of buying at the right time.

Typically, the surge of BONK occurs simultaneously with SOL rising more than 5% within a week. In this case, the average return of BONK is as follows:

• 1-week average return 26%
• 30-day average return 141%
• 60-day average return of 512%

It is important to note that in about 1/3 of the cases, BONK actually declines, indicating that SOL's performance does not fully guarantee BONK's outstanding performance.

The correlation between BONK and SOL is usually high, but during periods when BONK performs exceptionally well, this correlation often weakens.

Overall, BONK has a high beta relative to SOL, meaning its price fluctuations are usually much greater than those of SOL, making it a high-risk, high-reward asset. Investors can view it as a leveraged bet on SOL, but without the liquidation risks that actual leverage entails.

This feature applies not only to BONK/SOL, but also to the relationship between other "blue-chip" memecoins and their corresponding L1 assets, such as PEPE/ETH.

On-chain Data Analysis

In addition to price performance, on-chain data analysis can reveal the quality and conviction of the holder base. The following compares some on-chain metrics of top memecoins:

1. Token holder 90-day growth rate: reflects the recent popularity and spread speed of the Token.

2. Median and Average Holdings: Understanding the overall beliefs of Token holders. Some communities are more centralized in their management, which can lead to a lower median holding amount.

3. The proportion of wallets holding >$1000: reflects the interest and belief of medium-sized holders.

4. Proportion of wallets holding >$100k: Reflects the interest and confidence of large holders in the Token.

5. Whale Retention Rate: Analyzing wallets that once held >$100k Tokens and still retain more than 50%, measuring the belief of the largest holders.

6. Whale DEX Net Inflow/Outflow: Analyze whether large holders are increasing their holdings or exiting.

In addition, factors such as trading liquidity and open interest are also worth paying attention to. The open interest data mainly comes from certain major trading platforms.

Community and Faith Factors

In addition to quantitative analysis, community and belief factors also play an important role in memecoin investment. The following points need to be focused on:

1. Global audience potential
2. Engaging narratives and slogans
3. Strong belief and sense of belonging in the community
4. Leadership and Coordination Skills
5. Degree of Cultural Integration
6. Marketing promotion capabilities, such as attracting young users through short video platforms.

Value Assessment

Methods to assess the "fair value" of a memecoin include:

1. MVRV Ratio: The ratio of realized value to market value. An MVRV < 1 may indicate that it is close to a local bottom.

2. RSI Indicator: An RSI close to 30 indicates oversold conditions, while an RSI close to 70 indicates overbought conditions.

3. Moving Average: Analyze the relationship between price and key averages.

4. Search Trends: Analyze changes in search volume to determine buying and selling opportunities.

5. Liquidity Cycle: A favorable liquidity environment and risk appetite sentiment are crucial for memecoins.

Investment Framework Summary

1. Use beta coefficients as a small part of portfolio allocation
2. Identify fundamentally strong projects through on-chain data
3. Use metrics like MVRV to measure "fair value"
4. Combine macro and momentum indicators to seize buying opportunities
5. Determine the selling opportunity through indicators like RSI.

It is important to note that memecoins are high-risk assets, and there is no 100% reliable investment method. However, establishing a systematic framework can help achieve better investment outcomes in this uncertain market.