Meme craze, a new battlefield for VCs: opportunity or trap?

TL;DR

1. Meme experienced a slow germination stage from 2013 to 2019, followed by a chaotic period of rapid change from 2020 to 2022, and finally ushered in a period of rapid development from 2023 to 2024, and officially gained wide recognition and audience base as a single track.

2. The average daily turnover rate of Meme is about 11%. In comparison, DeFi is 5%, Layer2 is 7%, and Layer1 is 4%. This ratio not only highlights the high liquidity of Meme, but also shows that users are interested in Meme and have a high frequency of transactions.

3. As of the end of the third quarter of 2024, the market value of Meme in the entire crypto market has increased from 0.87% two years ago to 2.58% today, and there is still a growing trend. If a simple linear regression simulation is done, this proportion will reach 3.54% in 2025 and 7.81% in 2030.

4. Meme is a leveraged Layer1, which means that when the market conditions improve, there will be a 5 to 10 times increase in Layer1.

5. Animal Meme and Cult Culture Meme are suitable for long-term attention. In contrast, other categories of Meme are often related to short-term hot spots, and their attention and popularity may rise rapidly and then fall back.

In 2024, the industry and the market are undergoing a dramatic reshuffle. Against the backdrop of poor performance of many VC-invested and supported projects, Meme has gone against the tide and become a new force that cannot be ignored. The rise of the PvP model, the wealth effect brought by single-coin crit, and Solana, which is extremely friendly to Meme, have all shown their unique brilliance this year. Murad, a representative of the new generation of Meme, has quickly become a popular figure in the Meme world through his speech at Supercycle. However, behind this Meme craze, what changes has Meme undergone? From the perspective of VC, how can we participate in it? These issues are worth our in-depth discussion.

 Meme Market Panorama: Origin, Evolution and Market Data Analysis

Origin and Influence

As a cultural communication phenomenon, the emergence of Meme is closely linked to human history. Originated from the language, beliefs and customs of early society, it spreads among groups through imitation and learning. The emergence of the Internet has greatly accelerated the spread of Meme, which spreads rapidly among users in the form of pictures, videos, texts, emoticons, etc. due to humor, irony or resonance. Meme meets people's needs to express emotions, share opinions and establish resonance in social interactions. It is a cultural phenomenon that reflects social trends, group psychology and cultural changes. Its spread and popularity are affected by many factors such as content attractiveness, communication environment, community acceptance and KOL influence.

In Web2, Meme culture was born and developed mainly on two platforms, 4chan and Reddit. 4chan is the birthplace of the popular meme Pepe the Frog, where a large number of Pepe Memes and their derivative culture are gathered. At the same time, 4chan is also the hotbed of Boy's Club comics, providing us with an important perspective to deeply understand Meme culture. Reddit gave birth to classic Memes such as Dogecoin and Success Kid. Thanks to the active community atmosphere and solid user base of these two platforms, they are still the birthplace of many new Memes to this day. In addition to these two platforms, other social media platforms with a large number of users (such as Twitter X and Telegram) have also spawned some popular Memes. For example, dogwifhat, a dog wearing a pink woolen hat, has formed a "hat" totem culture in the community with its unique image since the early days. Many users and celebrities who like it have forwarded related hat dog pictures.

Evolution and Development

Started with Web2 and became crazy about Web3. In this article, we will refer to Meme and its related currencies as "Meme" and no longer make specific distinctions. Looking back on the development of Meme, we noticed that it was not prominent in the early days and did not receive enough attention. Referring to the bull-bear cyclical changes in the industry, we can divide the development of Meme into three stages: germination period (2013 to 2019), chaos period (2020 to 2022), rapid development period (2023 to 2024). By consulting the historical snapshot data statistics of CoinMarketCap, the single currency data of Coingecko, the historical information of search engines and social media content, we can have a more comprehensive understanding of the evolution of Meme.

Chart: The evolution and development of Meme

As of December 31, 2019, in the embryonic stage, in the top 100 list of cryptocurrency market capitalization, Dogecoin was the only Meme-type currency, ranking 34th. Looking back to 2013 to 2019, Meme-type currencies did not occupy a prominent position in the market. During this period, the industry was in a stage of rapid infrastructure construction, and everyone was exploring various new concepts. The mainstream new currencies are usually those payment-type public chains with more efficient transaction processing capabilities and faster confirmation times, or new public chains equipped with powerful smart contract functions. For Meme-type currencies, the challenge is that they not only require higher costs to establish dependent carriers, but also because the construction of liquidity is more difficult, which leads to small trading volumes and difficulty in obtaining widespread support from centralized exchanges. Therefore, in the embryonic stage of Meme currencies, except for currencies such as Dogecoin that feature the "Doge" emoticon package and have a significant dissemination effect, there are not many other Meme currencies in the market that can survive.

The chaotic period that began in 2020, or more precisely in August 2020, with the IDO wave triggered by DeFi Summer, enabled people to build liquidity on the chain at a low cost, provide transactions, and quickly build trading scenarios. This allows tokens to be issued at a low cost and circulated directly in the secondary market without being listed on an exchange, which has spawned a lot of on-chain Memes. During this period, the surviving Meme currencies include SHIB, FLOKI, and PEOPLE. Despite this, these early Meme coins were not taken seriously by the market, and their popularity was mainly based on the concept of hype. In addition, the popularity of Memes during the chaotic period is often generated against the background of excess liquidity in the industry. They usually appear as the last baton after multiple sectors have risen in turn. It is worth mentioning that Meme also gained widespread attention during this period due to its association with celebrities, especially Elon Musk's continued voice on Dogecoin in 2021, which not only made the price fluctuation of Dogecoin extremely significant, but also generally pushed Dogecoin to a new level in terms of market value, and the community was significantly expanded.

With the arrival of 2023, the craze for Meme coins continued to heat up, and a variety of Meme coins emerged, such as BONK, PEPE, CHEEMS, Cult culture-related BITCOIN (HarryPotterObamaSonic10Inc) and SPX (SPX6900), WIF and MOG. During this period, the types of Meme coins began to be refined, and other public chains such as Solana also emerged. By 2024, the development of Meme coin has directly entered an accelerated stage, with new coins such as BOME, lowercase NEIRO and GOAT emerging, each with its own characteristics. Meme has officially gained widespread recognition and audience base as a single track.

Chart: Some Meme data indicators

After sorting out the data indicators such as the market value share and market performance of Meme in the top 600 cryptocurrency markets from 2013 to 2024, we can clearly see the growth of Meme's market value and the expansion of its categories and quantities. During this period, not only has the market value of Meme achieved significant growth, but its types and quantity have also increased. By the end of the third quarter of 2024, Meme's market value share in the entire crypto market has increased from 0.87% two years ago to 2.58% today, and there is still a growing trend. If a simple linear regression simulation is done, this share will reach 3.54% in 2025 and 7.81% in 2030.

Perhaps, we once doubted whether Meme was just a short-lived phenomenon, and it would quickly return to silence after the craze. However, with the research and understanding of Meme, I believe our views have changed. Meme will not only not disappear, but will continue to innovate, and new leading Meme may appear in every era cycle. However, behind these dazzling leading Memes, there is a cruel reality, which reminds us that we must always keep a calm and clear mind.

Market Data Analysis

By analyzing the development and historical data of Meme, we can get a general idea of ​​its development trend. Then, studying the current market structure can provide us with an intuitive perspective to observe the changes in market hotspots and the flow of funds. Below, we further explored the macro indicators of the Meme sector, including core indicators such as market value, trading activity, and average daily trading volume. These analyses not only reveal the latest developments in the Meme sector, but also show its future development trajectory.

Market value and quantity changes:The changes in the market value and circulation quantity of Meme can reflect the market's demand and acceptance of it. Although some Meme tokens have a low market value, the number of new Memes shows that the community's interest in the entire sector is growing. Compared with other sectors (Layer1/Layer2/DeFi), Meme is far ahead in terms of total market value and new quantity in the sector in the past two years.

Trading activity:Meme's trading activity and turnover rate are generally higher than other tracks. According to CoinMarketCap data, the overall market value of Meme tokens is approximately US$50 billion, and the daily trading volume is approximately US$5 billion, which is much more active than other tracks. On average, the daily turnover rate of Meme tokens is about 11%, compared with about 5% for DeFi, 7% for Layer2, and 4% for Layer1. This ratio not only highlights the high liquidity of Meme, but also shows that users are interested in Meme and have a high frequency of transactions. Meme tokens above the sector level, especially those with larger trading volumes, often become the target of market funds.

New Meme Coins Rise and Low Success Rate: New coins continue to emerge in the Meme market, and their growth sometimes even exceeds that of mainstream cryptocurrencies such as BTC. This shows that the Meme token field has high volatility and speculative opportunities. However, among many new memes, taking Pump Fun data as an example, only less than 2% of memes have been successfully launched, and only 0.23% of the current market value is maintained above 1M, which means that the probability of being able to withstand the test of time and survive is extremely small.

Large trading volume and new users:Memes can bring huge trading volume and have a relatively loyal user base. Therefore, for CEX, listing Meme coins can be an important strategy to attract traffic and users. Taking Binance spot market as an example, 20% of the top 30 trading pairs in terms of trading volume are Meme.

Chart: CMC's Binance spot trading data

Blue-chip Memes Scarcity:Blue-chip Memes are relatively scarce. Faced with a huge number of hundreds of Meme tokens, less than 1% can truly be called blue chips. Take the memes recorded on the Coinmarketcap website as an example. Although new memes emerge in the market in an endless stream, only a few can stand the test of time and finally come to the fore. In addition, the market value distribution of the Meme sector also shows a significant 80/20 rule: the market value of the entire sector is mainly driven by less than 10% of the top Memes. This highly concentrated market value distribution undoubtedly increases the difficulty of finding real value investments in the Meme field. If you participate in Meme investment from the perspective of VC, this is consistent with the "2-8 rule" of experience in venture capital: about 10% of successful Meme investments can make up for the losses of other Meme investments.

Conclusion

Combined with the recent speech of Murad, who is highly respected in the Meme industry, he predicted that the market value of Meme will reach $1T in the future, which means there is a 25-fold increase space. It is expected that more than 25 Memes will enter the industry Top 100, and VC will buy blue-chip Memes, etc. Referring to our statistics, this prediction is too optimistic. The current Meme, whether in terms of quantity or market value, already belongs to a large sector in the industry. The future development is more about breaking through Layer1. However, Layer1 itself is also an important soil for the growth of Memes. The development of Memes will inevitably push Layer1 forward in reverse. Therefore, we tend to conservatively believe that Memes is a leveraged Layer1, that is, when the market conditions improve, there will be a 5 to 10-fold increase in Layer1. But in any case, we have to admit that Meme is a field worthy of long-term observation and research. To this end, establishing a systematic trading framework can help us better understand and participate in this market full of potential and challenges.

Explore and Research Meme

As the wave of Meme sweeps the market, combined with our aforementioned panoramic research on the Meme market and future trend forecasts, we believe that in-depth exploration and research of Meme is a very necessary research work. Through this, we found that the value of Meme does not come from technology or practical applications, but from the enthusiasm of the community and the recognition of Meme culture. This motivation makes Meme's performance in the market full of uncertainty and volatility, but it also brings unprecedented vitality. By summarizing these characteristics, we have constructed a clear analytical framework to understand and grasp the potential value and risks of Meme.

Basic Characteristics of the Sector

Although the analysis of a single Meme can provide in-depth insights, a broader perspective is needed to fully grasp the development trend of the entire Meme sector. Therefore, we first conducted a comprehensive study and analysis of the basic characteristics of the Meme sector. In the current market environment, the Meme sector has shown the following significant characteristics:

Low threshold to market entry:The issuance threshold of Meme is extremely low. As long as there is a social media account, a Telegram group, and some creative pictures, you can easily launch a new Meme. There is no need to make products and develop applications like traditional currency projects. The token is the product. The issuance threshold of Meme is significantly lower than that of traditional projects. As long as there is a social media account, a Telegram group, and some creative pictures, you can easily launch a new Meme. This process does not involve complex product development or application construction, making the token itself a core and direct-to-market "product".

Surge in number:Due to the extremely low threshold for creating a Meme, a large number of new Memes emerge every day. These new Memes quickly expand the token pool of the market, resulting in a sharp increase in supply. With the continuous addition of new Memes, everyone will face more choices, but also bring higher screening difficulties.

Significant wealth effect:Although the risks of the Meme market cannot be underestimated, it also provides huge potential returns for those who enter the market early. The wealth effect of single-coin crit and small-scale betting on big gains, like a magnet, not only attracts the attention of many users, but also inspires their high attention and active participation in the Meme market.

Market resilience:Meme has shown good resilience in the face of market fluctuations, and can quickly recover and rebound from shocks. This rapid recovery is mainly due to the driving value of community sentiment and the enthusiastic pursuit of Meme by funds.

Celebrity Effect:The participation of celebrities has significantly increased the hype and market attention of Meme, which in turn has exacerbated price fluctuations. This celebrity effect not only attracts more attention, but may also lead to a series of information arbitrage behaviors, in which some top players in the information chain may use their influence and information advantages to obtain improper benefits.

Low liquidity and limited capital capacity:In the early and middle stages of Meme, that is, the on-chain market period, Meme's liquidity was not high, which means that there is a considerable amount of water in its huge market value and trading volume. Due to insufficient liquidity, large funds will encounter higher slippage when buying or selling, which leads to increased transaction wear and tear costs. Therefore, the on-chain capital capacity of the Meme market is relatively limited, and it is difficult for institutions to enter and exit on a large scale without significantly affecting prices. This limitation not only increases the difficulty of trading, but also limits the depth and breadth of the market, making the Meme market more vulnerable to large-scale capital flows.

Extremely high trading risk:Due to the lack of practical application support and intrinsic value, the prices of many memes often rise rapidly and then fall sharply, just like a roller coaster. What is more worrying is that many memes eventually go to zero, that is, their market value and trading volume fall to almost zero. This high-risk trading environment requires us to be extremely cautious when getting involved in memes, and fully realize the possible risk of capital loss.

Active trading and easy manipulation:The frequent trading of memes and the huge trading volume also show that the market has great interest in it. But lurking behind the trading volume may be unknown manipulating funds. For this reason, unlike VC projects, the meme market is more like an open gambling speculative market where "willing to gamble and accept defeat".

After an in-depth analysis of the basic characteristics of the Meme sector, we can conclude that the Meme sector does have some distinctive qualities that make it unique in the crypto market. The low entry barrier, the surge in volume, the low liquidity and limited capital capacity, the extremely high trading risk, the significant wealth effect, the activeness and susceptibility to manipulation, the market resilience, and the celebrity effect together constitute the unique ecology of this sector. For this reason, the Meme sector is often regarded as a PvP arena, which is not without reason. In this highly competitive field, everyone needs to be like a gold digger, identifying the real blue-chip Memes and hidden Gems from the vast amount of Meme coins.

Characteristics and Categories

As the Meme sector matures, we should no longer be bound by outdated ideas. Standing on the periphery and ignoring it, it is impossible to gain insight into the deep laws of Meme. Today's Meme culture has long surpassed the simple meme pictures at the beginning. It has become an important carrier for diversified expression of market sentiment and dissemination to people outside the circle. To this end, it is necessary for us to have a basic understanding of its key characteristics and classification.

Meme has many characteristics, some of which can be quantified by data indicators, while some are relatively difficult to quantify and are more qualitative characteristics. So, the key characteristics here are roughly as follows:

1. Cultural uniqueness: It is the core of Meme. It usually originates from specific cultural phenomena or social trends, and uses this to establish its unique identity and appeal. Just like the light-hearted Dogecoin and the self-deprecating Pepe, before entering Web3, they have attracted many fans with this cultural characteristic, or use emoticons, or create related emoticons, etc.

2. Sustainability: It is the key to measure whether it can exist in the market for a long time. A successful Meme can often transcend short-term popularity and form a long-term cultural influence, similar to the concept of "diamonds are forever". Dogecoin, which has been around for more than a decade, has accompanied the growth of the cryptocurrency industry like a leader, and is already the origin of the entire Meme. For new Memes, we cannot demand that they can immediately go through the test of many years like Dogecoin, nor can we imagine that every BOME that is listed on Binance in three days will be completed. For this reason, we believe that Meme should be able to last for half a year to a year in terms of sustainability, which is also in line with the time period for centralized exchanges to investigate project launches.

3. Spreadability: is an important factor in whether Meme can spread rapidly and be widely accepted. A Meme that is easy to spread and has a good conversion effect can attract a lot of attention in a short period of time. Generally, by observing the discussion of related Memes on social media and the growth rate of the community size. For example, the number of followers of Meme Twitter, reaching tens of thousands is the most basic requirement, and a better standard is hundreds of thousands or even millions.

4. Stickiness or loyalty: refers to the loyalty and participation of members of the Meme community. A Meme community with high stickiness can maintain the long-term participation of members, and members will not easily withdraw even when the market fluctuates. This loyalty is crucial to the long-term success of Meme.

The original Dogecoin brought everyone Memes with cute cats, dogs and other animal images, but today, some new categories of Memes have emerged and merged into the past animal Memes, greatly including and expanding the categories of Memes. Below, we have simplified the classification of Memes, and different categories can be combined to a certain extent:

1. Animal Memes: Based on animal images, they express emotions or opinions through humorous texts and are widely loved for their cuteness and affinity. The most well-known ones are undoubtedly Dogecoin for dogs and Pepe for frogs.

2. Celebrity hype memes:By leveraging the influence of celebrities or public figures, focusing on and capturing their words and behaviors, and using imitation or jokes to creatively recreate them. Typical examples include a series of memes derived from elements such as Elon Musk's tweets, personal profiles, and avatars, such as "Troll".

3. Politician and event memes:Use humor or satire to allude to political figures or events. Representative memes include slogans generated around Trump's campaign and memes generated by emergencies, such as MAGA and FIGHT. In addition, there are related memes that misspell Trump and Biden's names.

4. Cult culture memes:Originally from the popular culture of a specific group, containing specific symbols or memes, which can only be understood by people who understand the background, and are loved by a specific group because of their uniqueness and exclusivity. This type of meme is somewhat similar to the concept of DAO in the past. The representative example is PEOPLE, which started with raising funds to bid for the purchase of the US Constitution and later became the code name of the people.

5. IP-derived memes:Token creation based on traditional animation IP or well-known NFTs, using their existing popularity to attract the corresponding target fan groups. For example, the associated meme launched by mfer, an NFT project that once featured mourning culture.

6. Mechanism-based memes:Early mechanisms have special settings, such as fair distribution, destruction, and buyback of trading taxes. At present, more refers to memes issued through association using emerging AI technologies. The most popular one is the first meme goat GOAT recently created by terminal of truths.

Dogecoin/Troll/Maga/People/mfer/GOAT

Memes show unique cultural characteristics and audience bases in different categories, which affects their sustainability, spread and stickiness to the community. Among these categories, animal memes and cult culture memes are suitable for long-term attention because of their deep cultural roots and loyal fan base. In contrast, other categories of memes are often associated with short-term hot spots, and their attention and popularity may rise quickly and then fall back. In order to quickly identify and understand the core characteristics of various memes, we provide the following evaluation framework.

Primary Market and Launch Platform

In-depth observation of the birth process of Meme's primary market is helpful for understanding Meme, especially those Memes based on public chains. Even after a few years, the initial liquidity establishment can still be seen. Taking SHIB as an example, we can see the amazing growth of its market value by looking at the initial transaction of SHIB adding liquidity pool. Initially, the market value of SHIB was only equivalent to 20 ETH, which was worth about 10K USD at that time. Converted to the current ETH market price, the initial market value of SHIB was only 50K USD. For Meme, whose market value has grown to billions within a year, its wealth growth effect is undoubtedly very attractive and has great publicity value.

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