EH21_Bitby

[Flash Insight - How Strong is the Memecoin Frenzy?] Lately, a strong narrative has been brewing within the retail community: tired of the overwhelming influx of low-float, high-FDV projects and pushed new tech trends that crash in price post-listing, retail investors are abandoning these “utility” projects and reverting to trading only memecoins. At least that is (perceived as) a fair playing field. We will attempt to verify the following two claims: Q1) How strong is the current memecoin frenzy? Was it unprecedented? Q2) If the above narrative is true, will the “awakened” retail investors ever rotate back to trading “utility” projects, potentially triggering an altcoin season (beyond just memecoins)? 1. The poor performance of recently launched projects is evident Regardless of the exchanges they are listed on, HODLing new tokens in 2024 would have resulted in a 60% to 70% drawdown. In contrast, investors would have roughly broken even or gained up to 50% by HODLing $BTC, $ETH, or $SOL in 2024, highlighting the underperformance of new projects. 2. The 2024 memecoin frenzy is (somewhat) ambiguous Among the top 400 cryptocurrencies by market cap, memecoins in 2024 are surpassing the levels of trading volume seen during the 2021 bull run, suggesting the onset of a memecoin season. However, in terms of market cap dominance, memecoins in 2024 remain slightly below 2021 levels. An increase in trading volume and a decrease in market cap may not be enough to definitively classify the current market as purely meme-driven, as the stagnant market cap suggests that capital has also flowed into other sectors. However still, when considering the sheer number of memecoins in the top 400, the growth is striking. Most memecoins have (relatively) low liquidity, requiring less capital inflow to experience extreme price movements. Hence, the continuous emergence of 100x memecoins led investors to perceive the current market as a memecoin frenzy. Nonetheless, compared to the 2021 bull run, the heavily concentrated volume and market cap in $DOGE and $SHIBA are simply now more dispersed across multiple memecoins, rather than indicating a broad market shift toward the meme sector as a whole. 3. The “awakened” investors are likely to rotate to altcoins During both the 2021 bull run and the 2023 mini-bull run, the volume and market cap of memecoins initially surged compared to other sectors. However, as attention shifted to newer projects (such as $ARB and $APT in 2023), memecoin dominance gradually declined. Of course, it is reasonable to consider that the wounded investors would neglect newer tokens as after learning their lessons the hard way. However, since investors returned in both 2021 and 2023 to trade new tokens, it is rational to expect them to come back in the next bull run as well.