Are Memecoins a Springboard to Gains This Bull Run?
Many have dubbed this year as the "Year of Memecoins." In this publication, I offer my perspective on the current memecoin market, its key drivers, and unexpected risks.
During the last few weeks, memecoins have overshadowed all other Web3 narratives, making it seem to regular users that the meme train is the only way to achieve good returns.
After the run of $PNUT, $PEPE, $BONK, $BRETT, and a few others, and with memecoins achieving the largest daily volumes alongside the growing popularity of the "meme" category, it's no wonder they're gaining attention.
But is the risk worth the gains?
And how overhyped is the memecoin market?
The State of Memecoins
Are memes really the narrative of the year?
If you approach someone who has been part of the Web3 market for at least five years and ask them to define 2024 as "The year of," they'll likely say it's the year of memecoins.
Many hail memecoins as the year's top performer, backed by charts and rankings. But does this really reflect reality?
If you analyze sector performance year-to-date, the data may tell a different story. For example, on Artemis, the RWA index (Ondo, Mantra, Clearpool, and Maple) leads with 1,900% growth, compared to 258% for memecoins and 104% for Bitcoin.
Furthermore, it's also crucial to understand which memecoins are being considered. On Artemis, the memecoin index currently tracks only 19 of the largest memecoins.
Category rankings on CoinGecko face another issue: many memes belong to multiple categories, so a few strong gainers can significantly inflate the 7-day performance of several categories simultaneously.
Consider the Pump.fun ecosystem, which tracks 520 coins, to understand why I view this as an issue. It appears very bullish as the second-best gainer of the week, generating significant FOMO.
However, when you examine the rankings, you find that fewer than 20 tokens have a 7-day gain above 110% (the category's average), translating to just 3.8%. Additionally, fewer than 60 tokens (11.5%) had a positive weekly gain.
This no longer a WAGMI, right?
The main problem with memecoins from a performance tracking perspective is that their sector performance is often gauged by the largest or most popular assets in the category.
This creates the illusion that memecoins outperform all other Web3 sectors. However, it's more accurate to say that the leading memecoins outperform other categories.
This leads us to an important point: distinguishing between established memecoins and new ones, as they represent two entirely different markets.
New memecoins
CoinGecko is currently tracking 520 memecoins on their Pump.fun dashboard. Since Pump's launch, 3 million tokens have been created.
This means 99.982% of all tokens are not tracked on CoinGecko, leaving us without information on their performance.
Meanwhile, Pump is attracting 50,000 to 70,000 new users daily, with the total number of active users now exceeding 150,000.
Here’s additional context from the research I conducted in late August:
Most top PNL addresses are token deployers
Only 3% of all Pumpdotfun traders earned more than $1K
0.8% have made over $10K
More than 60% lost money
These are new memecoins. Not a healthy bet, right?
The main issue for an average new memecoin trader is the inability to distinguish between "new" and "established" memecoins. Most new traders chase early-stage protocols, hoping to replicate the success stories of the 0.001% that managed to achieve mass adoption—similar to $PEPE or $BONK.
I don't want to frustrate you, but there's a higher chance of dying after being struck by a lightning bolt: 0.011%.
Established memecoins
For established memecoins, the outlook is much brighter. They didn't score a certain market cap due to VC backing or specific valuation factors. Instead, they succeeded due to their community, a bit of luck, and strategic market management.
This might sound like a conspiracy theory, but I believe most memecoins with a solid market share were not launched by random developers. There are teams of professional memecoin developers, equipped with significant resources for market making and marketing, that are often behind these successes.
To clarify, I'm not suggesting that all popular memecoins are the result of flawlessly executed plans, but this likely applies to the majority of them.
Several logical factors contribute to the outperformance of established memecoins compared to many other Web3 segments:
100% of supply in circulation (no low float or high FDV)
No VC backing (eliminates additional sell pressure)
Organic and active holder community
No product risks (no exploits, poor execution, or poor user acquisition)
Memecoin rotation pattern (gains from one memecoin pump flow to others)
Strong correlation with general market cycles
Low dependency on marketing
Memecoin trading is pure speculation and has become more predictable this year, forming behavior patterns that divert volumes and liquidity from “classic” coins, especially considering that Web3 currently has no dominant or fresh narrative.
On a side note, meme token liquidity, as measured by the 1% market depth on U.S. exchanges, reached an all-time high of $110 million last week. Large-cap meme tokens like SHIB and DOGE continue to dominate, holding over 70% of the total market depth.
However, their share has been gradually declining, indicating growing interest in smaller tokens.
Where are we now?
Currently, over 50% of all trading volume on Solana is attributed to memecoins. On BNB, it's nearly 45%, and on Base, it's about 25%.
That's a lot.
However, history shows that when the market is busy promoting a narrative after a price move, it's usually too late.
In my opinion, the memecoin market has already responded to the Bitcoin rally.
As long as we remain near $90K, I doubt we'll see new surges for established memecoins—let's call them cult coins to avoid confusion with the 3 million tokens created on Pump.fun this year.
However, retail, always lagging behind on trendy topics, is still boarding the train, expecting a ride to Valhalla.
The main issue isn't just that most recent boarders are late; that’s a classic thing with all narratives.
The real problem is that a significant portion of retail is jumping on the new memecoins train, which typically heads to Hel rather than Valhalla.
As a result, new users get rekt and further onboarding does not take place. For a Web2 normie, the difference between memecoins and classic coins is minimal; they are all just tickers. So this bad experience is expanded to all verticals of Web3.
Just to clarify, I have nothing against cult coins – memecoins with an established market share. They have lots of advantages. However, I think that we really need to stop using the same word for both great things and poorly designed lotteries on Pump.fun. Let's fix that.
So here’s my final thoughts
If you're an experienced meme coin trader, continue your strategy but be aware the market might already be overheated.
If you're new to meme coins and feeling a strong FOMO, consider allocating a small, manageable portion of your portfolio to experiment, focusing on established cult coins.
Avoid new launches unless you know how to win. There’s a very important rule: If you don’t know how to win a game, don’t play it.