Reflections on the Meme Coin Craze
From "joking talk" to a market sensation, what has made Meme coins stand out in the wave? This article will comprehensively analyze the origin, rise path, and driving factors behind Meme coins, revealing the core essence of this phenomenon.Introduction
In the current bull market atmosphere, the sentiment in the cryptocurrency market is high, with various mainstream coins and altcoins experiencing explosive growth. Bitcoin ($BTC) continues to set new historical highs, Solana ($SOL) has surpassed a market capitalization of $100 billion, and even Ethereum ($ETH), which was once heavily questioned, is seeing a strong upward trend. Amid this frenzy, Memecoins have become the focus of investors, with Dogecoin ($DOGE), as a representative of meme coins, doubling in value, and various long-dormant meme coins also experiencing a resurgence.
The rise of meme coins is not only a natural extension of market demand but also a significant strategic adjustment by exchanges shifting from high-valuation, low-circulation traditional VC tokens to fully circulating, narrative-driven tokens. As more and more meme coins are listed on centralized exchanges, retail investors' enthusiasm for participation continues to rise, leading exchanges to reap substantial traffic and fee income. However, alongside this prosperity comes the inherent high risk of meme coins. From low survival rates to market manipulation and a lack of technological innovation, the future of meme coins is fraught with uncertainty.
This article will analyze the causes, processes, and risks of the meme coin craze, exploring the background, logic, and future potential of this phenomenon, and discussing how to find truly valuable investment projects amid this frenzy.
- Causes
1.1 The Trap of Overvalued VC Tokens
The continuous listing of new meme coins by exchanges can be traced back to a report released by Binance Research in May this year titled "Overvalued Low Initial Liquidity Tokens." The report pointed out that VC tokens launched in 2024 generally exhibit characteristics of "overvaluation but low initial circulation," while also emphasizing the selling pressure risk posed by token unlocks. The report specifically mentioned the unique advantages of meme coins: most meme coins achieve a fully circulating state, and the ratio of market capitalization (MC) to fully diluted valuation (FDV) is 1. This means that holders of meme coins do not face the issue of value dilution due to token issuance. Although meme coins lack practicality, these characteristics have attracted considerable attention and interest from retail investors.
- (Related Reading: "In-Depth Analysis: Binance's Announcement on Recruiting Small and Medium Market Cap Projects") *
Source: Twitter (@Coin98Analytics) Figure 1.1
The release of this report sparked widespread market reactions, suggesting that Binance had long recognized the potential of meme coins and acknowledged their appeal to users. Subsequently, Binance co-founder He Yi published an article on Binance Square in June, clarifying community concerns and explicitly stating that Binance does not control pricing; on the other hand, she reflected on the industry's development history and pointed out that the ICOs of 2017, IEOs of 2021, and the "haircut" strategies of 2023 may no longer be applicable to the current market environment. More importantly, she subtly posed a thought-provoking question: Would the market be healthier if there were no VC investments or project party interventions?
Source: Binance Square Figure 1.2
These signals not only reveal the unique appeal of meme coins in the current market but also reflect the exchanges' profound insights into market conditions and investor behavior.
1.2 User Conversion Advantages of Meme Coins
For leading exchanges like Binance, there may be deeper reasons behind the listing of meme coins. Binance Research's report "Understanding the Rise of Memecoins," published on November 4, pointed out that compared to most altcoins currently supported by VCs, meme coins are widely regarded as not only fairer but also providing ordinary investors with narratives that are easier to understand and more appealing. For ordinary retail investors who are not familiar with technology, they can often grasp the logic behind meme coins driven by cute images or engaging stories more quickly, whereas technically complex Layer 2 solutions or DeFi primitives seem to have a higher barrier to entry and are harder to digest quickly. In other words, the user conversion time for meme coins is significantly faster than that for technology-driven altcoins.
More importantly, this rapid conversion characteristic allows the narratives of meme coins to spread to potential buyer groups at an extremely fast pace, quickly forming communities and stimulating speculative enthusiasm. Compared to traditional altcoins, meme coins can more easily leverage their high dissemination characteristics to drive market sentiment, directly leading to extremely rapid market dynamics and efficient user adoption rates.
This phenomenon is also evidenced by the speed at which capital flows into emerging meme coins. For example, $WIF grew from a market cap of $0 to $1 billion in just 104 days, while $SHIB achieved the same goal in 279 days. Even the earliest $DOGE took 8 years to reach this milestone. Today, the creation speed of emerging meme coins and the influx of capital far exceed previous levels, thanks to their simple and understandable nature, allowing meme coins to be generated and spread faster than any earlier token category. As shown in Figure 1.3, over 75% of meme coins were created in the past year.
Source: Binance Research Figure 1.3
This trend not only indicates that meme coins are reshaping market rules but also showcases their unique growth momentum and appeal in the current crypto ecosystem.
1.3 The Breakout Effect of Meme Coins
Additionally, the potential of meme coins to "break out" is also significant. Compared to traditional altcoins, meme coins are more adept at building communities and attracting users' speculative interest, quickly converting potential users into actual investors. For those looking to enter the market, the purchasing experience on exchanges is more convenient and direct compared to on-chain operations, making this advantage a crucial tool for exchanges to attract new users and capital during a bull market.
- Process
In September of this year, Binance officially kicked off its entry into the meme coin sector by synchronously listing the meme coin Neiro, marking Binance's recognition of meme coins and initiating a new strategic direction in the market.
Source: Binance Announcement Figure 2.1
Although Binance's listing of Neiro and several subsequent meme coins sparked some controversy, compared to the widespread criticism faced when listing VC-supported altcoins, the introduction of meme coins has clearly garnered more understanding and support from users. According to statistics from on-chain analyst @ai_9684xtpa, Binance has listed 18 meme coins in 2024, covering both spot and futures markets. Each meme coin's market performance varies, with some experiencing market caps doubling or even increasing several times, such as the meme coins $PNUT and $ACT. Among them, $PNUT gained popularity due to the "animal protection + election politics + Musk" concept, surpassing a market cap of $400 million shortly after its launch; while $ACT saw an increase of over 2500% within less than half a day after the announcement. This frequent listing of meme coins indicates that Binance is actively responding to the heightened market sentiment, attracting more user attention, and enhancing platform trading activity through a diverse selection of meme coins. This strategy not only meets the market's demand for emerging tokens but also demonstrates the exchange's flexibility in the current competitive environment.
Source: Twitter (@ai_9684xtpa) Figure 2.2
It is worth noting that Binance co-founder He Yi stated on social media that the listing fees for ACT and PNUT were zero, further reinforcing the centralized exchanges' supportive stance towards meme coins. This approach indicates that centralized exchanges, represented by Binance, aim to attract more popular meme projects by reducing listing costs, thereby maintaining platform activity and user stickiness, while also encouraging more project parties and investors to participate in the meme coin market.
Source: Twitter (@heyibinance) Figure 2.3
From the listing of Neiro to the surge of ACT, Binance's strategic deployment of meme coins has not only attracted a large number of users but also seized the development opportunities brought by the bull market. This process not only showcases the exchange's flexibility in responding to market changes but also provides valuable experience for future market layouts.
- Risks
Despite the significant interest from investors due to the simple narratives and easy dissemination of meme coins, the risks behind them cannot be overlooked. The following explores the potential issues of meme coins from three aspects: low survival rates, malicious manipulation under PVP characteristics, and a lack of technological innovation and progress.
3.1 Low Survival Rates
Most meme coins born in 2023 and 2024 are "flash in the pan." 97% of meme coins have "died," meaning their trading volume is close to $0. While representative meme coins like $DOGE and $SHIB have survived for 10 years and 4 years respectively and successfully established themselves in the market, the overall survival rate of meme coins remains extremely low. Rapid growth and speculation make meme coins a high-risk, high-reward asset class, but they are heavily reliant on market sentiment, with almost no fundamental valuation support. This means that investors face a very high risk of capital loss when participating in the meme coin market.
Source: CoinMarketCap Figure 3.1
3.2 "Conspiracy Groups" in the PVP Market
The high speculative nature of the meme coin market attracts some groups attempting to manipulate the market. Some so-called "conspiracy groups" profit from retail investors' exit liquidity through carefully designed pump-and-dump schemes. These groups often mislead the market in the following ways:
Creating multiple new addresses to concentrate token holdings, disguising themselves as widely distributed token holders.
Using the transparency of blockchain to attract investors, while making it difficult to identify the actual controllers behind the token holders.
Compensating key opinion leaders (KOLs) to create false hype on social media, prompting retail investors to chase after.
These manipulative behaviors turn retail investors into victims in a high-risk speculative market. Although blockchain technology brings transparency, information asymmetry remains prevalent in the meme coin market. Investors should remain highly vigilant against such market behaviors.
3.3 Lack of Technological Innovation and Progress
The core appeal of meme coins lies in their narratives rather than technological value. Unlike technology-driven projects such as DeFi or Layer 2, meme coins rely more on emotions and hype. Many meme coins lack practical application scenarios and contribute almost nothing to the technological advancement of the crypto industry. This phenomenon not only leads to market saturation but also diminishes the industry's ability to attract talented developers and innovative projects.
3.4 Future Concerns
In addition to the potential exploitation of retail traders, the popularity of meme coins may lead to inefficiencies in the crypto industry's resources. If the industry's time, capital, and human resources are overly concentrated on non-innovative meme coins, technological development may stagnate. A large influx of funds into such tokens will also weaken support for projects that truly have technological breakthroughs and practical application scenarios.
- Conclusion
As a narrative-driven asset class, meme coins have sparked widespread discussion and participation in the cryptocurrency market. With their simple logic, rapid dissemination ability, and low-threshold investment characteristics, they have successfully attracted a large number of retail investors and become an important tool for exchanges to expand their user base. However, meme coins also exhibit high risks, including low survival rates, market manipulation, and a lack of technological innovation.
Nevertheless, the potential of meme coins remains worthy of attention. In a reasonable market environment, they can not only bring short-term wealth effects to investors but may also provide new community participation models for the crypto industry. However, investors and industry participants need to remain cautious, avoiding blind chases of trends and focusing resources on truly innovative and long-term valuable projects. Only through rational investment and effective resource allocation can the entire industry achieve sustained healthy development.
Disclaimer: Readers are advised to strictly comply with the laws and regulations of their location; this article does not constitute any investment advice.
