Valuation of Meme Coins: Beyond Emotion and Belief

Meme coins, as a unique subfield in the cryptocurrency market, are often seen as purely speculative tools. However, after a deep analysis, we find that certain Meme coins actually have measurable "fundamental" indicators. This article will explore how to evaluate the value of Meme coins and what factors should be considered in investment decisions.

Beta Characteristics of Meme Coin

Some Meme coins exhibit high Beta characteristics relative to the main chain assets in their ecosystem. Taking BONK from the Solana ecosystem as an example, it usually responds more drastically to changes in the price of SOL. This characteristic makes Meme coins a tool that can achieve leverage effects without the need for actual leverage.

Investors can pay attention to the moments when the 30-day rolling Beta exceeds the 90-day rolling Beta, which often indicates that BONK may experience significant excess returns. Data shows that in this case, BONK's average return rates over 30 days and 60 days reached 124% and 413%, respectively.

It is important to note that although BONK's performance is generally positively correlated with SOL, this correlation often weakens during periods when BONK performs particularly well. This phenomenon has been observed in the fourth quarter of 2023, the first and fourth quarters of 2024, and also in April of this year.

On-chain Data Analysis

In addition to price correlation, on-chain data also provides us with an important perspective for assessing the quality of Meme coins. Here are several key indicators:

1. Token holder growth rate: reflects the popularity and dissemination speed of the Token.
2. Median and Average Holdings: Reflects the intensity of holders' beliefs.
3. Proportion of large holders: The percentage of holders with over $1000 and over $100,000 reflects investor interest and confidence.
4. Whale Retention Rate: The proportion of wallets that once held over $100,000 in Tokens and still retain more than 50% of their initial holdings.
5. Whale Trading Behavior: The net inflow/outflow situation of large holders on decentralized exchanges.

These indicators help us understand the quality and level of belief of the Token holder base.

Liquidity and Volatility

The ideal investment target for Meme coins should have sufficient trading liquidity and have experienced multiple significant corrections. This indicates that the Token has a certain level of market depth and risk resistance.

For Meme coins listed on mainstream trading platforms, the open interest is also an indicator worth paying attention to, as it reflects the activity level of market participants and their expectations for future price trends.

Community Factors

The success of a Meme币 largely depends on the activity and cohesion of its community. When evaluating a Meme币 project, the following factors should be considered:

• The appeal of the project narrative and the attractiveness of the community slogan
• The strength of community members' beliefs and sense of belonging
• The leadership and community coordination capabilities of the project team
• The degree of integration with specific cultural elements
• The innovation of social media promotion strategies, such as using TikTok to attract young users.

Valuation Methods

1. MVRV Ratio: The ratio of realized value to market value. When MVRV is below 1, it may indicate that it is close to a local bottom, representing a potential buying opportunity.

2. Momentum Indicator:

   • RSI (Relative Strength Index): Helps determine whether the Token is in an overbought or oversold state.
   • Moving Average: Analyze the position of the price relative to key moving averages to identify breakout opportunities.

3. Social Sentiment Indicators: Such as Google search trends, which can reflect the changes in public interest towards the Meme coin.

Macroeconomic Considerations

Meme coin is a high-risk asset, and its performance is heavily dependent on the overall market liquidity conditions and risk appetite. Therefore, when considering investing in Meme coin, it is also important to closely monitor the overall sentiment of the cryptocurrency market and the macroeconomic environment.

Conclusion

Investing in meme coins, although high in risk, can still uncover potential investment opportunities in this market full of opportunities and challenges by systematically analyzing various indicators. However, investors should always keep in mind that high returns are inevitably accompanied by high risks, and they should allocate assets reasonably according to their individual risk tolerance.