Analyzing Investment Strategies for Memecoins

For certain memecoins, we believe they have a high beta value relative to Layer 1 (L1) assets, which is an interesting feature. Taking a well-known cultural coin as an example, a moderate allocation can create a leverage effect on L1 assets without actually using leverage, while avoiding liquidation risk.

The signal we are focusing on is when the 30-day beta value exceeds the 90-day rolling beta value. When this situation occurs, the average 30-day and 60-day return rates of that cultural coin perform excellently.

Through price comparison analysis, we found that changes in risk preference patterns are often swift, and cultural coins can significantly outperform underlying assets in a short period of time. This highlights the importance of buying at the right moment.

The explosion of cultural coins usually occurs simultaneously with their corresponding L1 assets rising by more than 5% within a week. In this case, the average return of cultural coins is quite substantial. However, in about one-third of cases, cultural coins actually decline, indicating that the performance of L1 assets does not fully guarantee the excellent performance of cultural coins.

Through correlation analysis, we found that cultural coins are usually related to their L1 assets. However, during periods when cultural coins perform well, this correlation often weakens.

On-chain Data Analysis

In addition to understanding the performance of memecoins relative to their L1 counterparts, on-chain data analysis can also provide valuable insights. We compared some top "blue chip" memecoins to identify outliers.

Key indicators include:

• Token holder growth (90 days )
• Median and Average Holding Amount
• The proportion of holders with large amounts of Tokens
• Whale Retention Rate
• Analysis of Whale Trading Behavior

These indicators help us understand the quality and beliefs of the holder base.

Other Considerations

Apart from on-chain data, we are more concerned with memecoins that have sufficient trading liquidity and have experienced multiple significant pullbacks. For tokens traded on major exchanges, the open interest is also an important reference indicator.

Community and Faith Factors

When evaluating memecoins, community factors are crucial. We focus on:

• Resonant narratives and community slogans
• Strong community beliefs and sense of belonging
• Leadership and Coordination
• Cultural Integration Level
• The innovativeness of marketing strategies

Value Assessment

Assessing the "fair value" of a memecoin can be done through the following methods:

• Achieving a comparison between value and market value ( MVRV ratio )
• Momentum Indicator Analysis ( such as RSI and Moving Averages )
• Social media and search trend analysis

Macroeconomic Considerations

Memecoins are highly sensitive to liquidity conditions. Favorable liquidity and economic environment, combined with the return of "risk appetite" sentiment, are key considerations for allocating memecoins.

Conclusion

This article provides a framework for investing in memecoins, covering aspects such as selection reasons, fundamental analysis, value assessment, and market timing. However, it is important to emphasize that investing in memecoins still carries high risks, and excess returns are often accompanied by higher risks. Investors should act with caution and make decisions based on their own risk tolerance.