A VC Perspective on the Memecoin Craze: A New Investment Battlefield or a Liquidity Exit Trap?

Meme experienced a slow budding phase from 2013 to 2019, followed by a chaotic period of rapid changes from 2020 to 2022, and finally welcomed a period of rapid development from 2023 to 2024, officially gaining wide recognition and a solid audience base as a single track.

The average daily turnover rate of Meme is about 11%, compared to 5% for DeFi, 7% for Layer2, and 4% for Layer1. This ratio not only highlights the high liquidity of Meme but also indicates that users have a strong interest in and trading frequency for Meme.

As of the end of the third quarter of 2024, the market capitalization share of Meme in the entire cryptocurrency market has increased from 0.87% two years ago to 2.58% today, and it continues to show a growing trend. If we perform a simple linear regression simulation, this share is expected to reach 3.54% in 2025 and 7.81% in 2030.

Meme is a leveraged Layer 1, which means that when the market conditions improve, there will be a price increase of about 5 to 10 times for Layer 1.

Animal-themed Memes and Cult culture Memes are types that are suitable for long-term attention. In contrast, other categories of Memes are often related to short-term trends, and their attention and popularity may rise quickly and then fall.

In 2024, the industry and market are undergoing a drastic reshuffling. Against the backdrop of many projects performing poorly upon launch, Meme has risen against the tide, becoming a new force that cannot be ignored. The rise of the PvP model, the wealth effect brought by single-token crits, and the Solana ecosystem, which is very friendly to Meme, have all showcased unique brilliance this year. The new generation of Meme representative, Murad, has quickly become a hot figure in the Meme world through his Supercycle speech. However, behind this Meme craze, what changes has Meme really undergone? From the perspective of VC, how should we participate in this? These questions are worth our in-depth discussion.

Meme Market Overview: Origins, Evolution, and Market Data Analysis

Origins and Impact

Meme, as a cultural dissemination phenomenon, is closely linked to human history. Originating from early societal language, beliefs, and customs, it spreads within groups through imitation and learning. The advent of the internet has greatly accelerated the dissemination of Memes, which are shared among users in the form of images, videos, text, and emoticons, quickly spreading due to humor, satire, or resonance. Memes satisfy the need for individuals to express emotions, share opinions, and establish resonance in social interactions; they reflect social trends, group psychology, and cultural changes. Their dissemination and popularity are influenced by various factors such as content attractiveness, dissemination environment, community acceptance, and KOL influence.

In Web2, meme culture primarily originated and developed on the platforms of 4chan and Reddit. 4chan is the birthplace of the popular meme Pepe the Frog, where a large number of Pepe memes and related cultural content are gathered. At the same time, 4chan is also a breeding ground for Boy's Club comics, providing us with an important perspective for understanding meme culture. Reddit, on the other hand, has nurtured classic memes such as Dogecoin and Success Kid. Thanks to the active community atmosphere and solid user base of these two platforms, they still serve as the birthplace of many new memes today. In addition to these two platforms, other popular social media platforms (such as Twitter X and Telegram) have also given rise to some popular memes. For example, the dogwifhat meme features a dog wearing a pink knit hat, which has formed a kind of "hat" totem culture in the community from early on due to its unique image, with many beloved users and celebrities sharing related dog hat images.

Evolution and Development

Starting from Web2, obsessed with Web3. In this article, we will collectively refer to Meme and its associated cryptocurrencies as "Meme" without making specific distinctions. Looking back at the development history of Meme, we notice that it was not prominent in its early days and did not receive enough attention. Referring to the cyclical changes of bull and bear markets in the industry, we can divide the development timeline of Meme into three stages: the budding period (2013 to 2019), the chaotic period (2020 to 2022), and the rapid development period (2023 to 2024). By reviewing historical snapshot data statistics from CoinMarketCap, individual cryptocurrency data from Coingecko, historical information from search engines, and content from social media, we can gain a more comprehensive understanding of the evolution of Meme.

As of December 31, 2019, in the early stage of its development, Dogecoin was the only meme coin ranked 34th among the top 100 cryptocurrencies by market capitalization. Looking back from 2013 to 2019, meme coins did not occupy a significant position in the market. During this period, the industry was in a rapid infrastructure development phase, with everyone exploring various new concepts. Mainstream new coins were usually those with more efficient transaction processing capabilities and faster confirmation times, or new public chains equipped with powerful smart contract functions. For meme coins, the challenge lies in the fact that they not only require a higher cost to establish their supporting platforms but also face difficulties in building liquidity, resulting in lower trading volumes and making it hard to gain widespread support from centralized exchanges. Therefore, during the early stage of meme coins, apart from Dogecoin, which is characterized by the 'Doge' meme and has significant dissemination effects, there were not many other meme coins that could survive in the market.

The chaotic period that began in 2020, more specifically starting in August 2020, was triggered by the wave of IDOs brought about by DeFi Summer. The IDOs led by DeFi Summer enabled people to build liquidity on-chain at a low cost, provide trading, and quickly construct trading scenarios. This allowed for low-cost token issuance and direct circulation in the secondary market without going public on exchanges, which gave rise to many on-chain Memes. During this period, the surviving Meme tokens included SHIB, FLOKI, and PEOPLE. However, these early Meme tokens did not receive much attention from the market, and their popularity was mainly based on speculative concepts. In addition, the popularity of Memes during the chaotic period often arose in the context of industry liquidity surplus; they typically emerged as the final relay after multiple sectors had taken turns rising. It is worth mentioning that Memes gained widespread attention during this period due to their association with celebrities, particularly Elon Musk's ongoing support for Dogecoin in 2021, which not only led to significant fluctuations in Dogecoin's price but also overall propelled Dogecoin to a new level in terms of market capitalization and significantly expanded its community.

With the arrival of 2023, the trend of Meme coins continues to heat up, giving rise to a variety of Meme coin types, such as BONK, PEPE, CHEEMS, and culture-related BITCOIN (HarryPotterObamaSonic10Inc) and SPX (SPX6900), as well as WIF and MOG. During this period, the types of Meme coins began to become more refined, with other public chains like Solana also emerging. By 2024, the development of Meme coins has entered an accelerated phase, with new coins like BOME, lowercase NEIRO, and GOAT continuously emerging, each with its own characteristics. Meme has officially gained widespread recognition and a substantial audience as a distinct track.

By analyzing the market capitalization proportion and performance indicators of Meme in the top 600 of the cryptocurrency market from 2013 to 2024, we can clearly see the growth of Meme's market capitalization as well as the expansion of its categories and quantities. During this period, Meme's market capitalization not only achieved significant growth but also saw an increase in its varieties and numbers. By the end of the third quarter of 2024, the market capitalization proportion of Meme in the entire crypto market has risen from 0.87% two years ago to 2.58% today, with a continuing upward trend. If we conduct a simple linear regression simulation, this proportion is expected to reach 3.54% in 2025 and 7.81% in 2030.

Perhaps we once doubted whether Memes were just a passing phenomenon that would quickly fade away after the hype. However, with further research and understanding of Memes, we believe our perspective has shifted. Memes not only will not disappear, but they will also continue to evolve, and new leading Memes may emerge in every era. However, behind these dazzling leading Memes lies a harsh reality that reminds us to always remain calm and clear-headed.

Market Data Analysis

By analyzing the development and historical data of Memes, we can roughly understand their development trends. Therefore, studying the current market landscape can provide us with an intuitive perspective to observe the changes in market hotspots and the flow of funds. Below, we further delve into the macro indicators of the Meme sector, including core indicators such as market capitalization, trading activity, and daily trading volume. These analyses not only reveal the latest dynamics of the Meme sector but also showcase its future development trajectory.

Market Capitalization and Quantity Changes: The changes in the market capitalization and circulating quantity of Meme can reflect the market's demand and acceptance level. Although some Meme tokens have low market capitalization, the increase in the number of new Memes indicates that the community's interest in the entire sector is growing. Compared to other sectors (Layer1/Layer2/DeFi), Meme has far outpaced in total market capitalization and new additions in the past two years.

Trading Activity: The trading activity and turnover rate of Meme are usually higher than those of other sectors. According to the data, the overall market capitalization of Meme tokens is about $50 billion, with a daily trading volume of approximately $5 billion, which is significantly higher than other sectors in terms of trading activity. On average, the daily turnover rate of Meme tokens is about 11%, while the average daily turnover rate of DeFi is about 5%, Layer2 is about 7%, and Layer1 is 4%. This ratio not only highlights the high Liquidity of Meme but also indicates a higher interest and trading frequency among users. For Meme tokens that are above the sector level, especially those with larger trading volumes, they often become targets pursued by market funds.

The Rise and Low Success Rate of New Meme Coins: New coins continue to emerge in the Meme market, with their price increases sometimes exceeding mainstream cryptocurrencies like BTC. This indicates a high level of volatility and speculative opportunities in the Meme token space. However, among the many new Memes, taking Pump fun data as an example, less than 2% of the Memes successfully launched, and only 0.23% maintain a market cap above 1M, meaning the probability of surviving the test of time is extremely small.

Massive trading volume and new users: Memes can bring huge trading volumes and have a relatively loyal user base. Therefore, for certain trading platforms, listing Meme coins can become an important strategy to attract traffic and users. For example, in the spot market of a certain trading platform, 20% of the top 30 trading pairs by trading volume are Memes.

Blue Chip Memes Scarcity: Blue chip-level Memes appear to be relatively scarce. Among the hundreds and thousands of Meme tokens, those that can truly be considered blue chips are less than 1%. Taking the Memes recorded on a certain website as an example, although new Memes are emerging endlessly in the market, there are very few that can withstand the test of time and eventually stand out. In addition, the market capitalization distribution of the Meme sector also shows a significant 80/20 rule: the market capitalization of the entire sector is primarily driven by less than 10% of the top Memes. This high degree of.