Analysis of the Investment Value of Memes

Memecoins, as a high-risk high-reward asset class, have a unique appeal to certain investors. This article will analyze the investment logic and valuation methods of memecoins from multiple perspectives.

Beta and Leverage Effect

Memecoins usually have a higher beta coefficient relative to the main assets in their ecosystem. Taking BONK from the Solana ecosystem as an example, its 30-day rolling beta often exceeds the 90-day rolling beta. When this happens, BONK's short-term and medium-term returns tend to be quite substantial.

This high beta characteristic makes memecoins a tool for leveraged betting on underlying assets without the liquidation risks associated with traditional leveraged trading. However, it is important to note that an increase in the underlying asset does not guarantee that the memecoin will necessarily follow suit.

On-Chain Data Analysis

By analyzing on-chain data, we can evaluate the fundamental strength of a memecoin project:

1. Token Holder Growth Rate
2. Median and Average Holdings
3. Large holders ( > $1000 and > $100k ) account for
4. Whale Retention Rate
5. Net inflow/outflow of giant whales in decentralized exchanges

These indicators help us understand the composition of Token holders, the strength of their beliefs, and the behavioral tendencies of large holders.

Other Important Factors

In addition to on-chain data, we also need to pay attention to:

• Trading Liquidity
• Price Correction History
• Open Interest
• Community activity and cohesion
• The appeal of project narratives

Value Assessment

There are mainly two methods to assess the “fair value” of a memecoin:

1. MVRV Ratio: The ratio of realized value to market value. MVRV < 1 may indicate a proximity to a local bottom.

2. Momentum Indicator:

   • RSI( Relative Strength Index )
   • The position of the price relative to the key moving average lines
   • Google Search Trends

Macroeconomic Environment

Memecoins, as extremely high-risk assets, are highly dependent on the overall market liquidity conditions and risk appetite. Therefore, when considering investing in memecoins, it is crucial to closely monitor the macroeconomic environment.

Conclusion

Investing in memecoins requires considering multiple factors, including their relationship with underlying assets, on-chain data metrics, valuation levels, technical momentum, and macroeconomic environment. Nevertheless, memecoins remain a high-risk investment area, and investors should exercise caution and manage their positions carefully.