introduction
In the current bull market, the crypto market sentiment is high, and all kinds of mainstream coins and altcoins have experienced a surge. The price of Bitcoin ($BTC) continues to refresh historical highs, the market value of Solana ($SOL) has exceeded 100 billion US dollars, and even the once questioned Ethereum ($ETH) has also seen a gratifying rise. In this frenzy, Memecoin has become the focus of investors, among which Dogecoin ($DOGE), the representative of Meme coins, has doubled, and various long-dormant Meme coins have also exploded one after another.
The rise of Meme coins is not only a natural extension of market demand, but also an important strategic adjustment for exchanges to shift from traditional VC tokens with high valuations and low circulation to fully circulated, narrative-driven tokens. As more and more Meme coins are listed on centralized exchanges, retail investors are increasingly enthusiastic about participating, and exchanges have gained huge traffic and fee income. However, along with the prosperity comes the inherent high risk of Meme coins. From low survival rates to market manipulation to the lack of technological innovation, the future of Meme coins is full of uncertainty.
This article will take the causes, processes and risks of the Meme coin craze as the starting point, analyze the background, logic and future potential of this phenomenon, and explore how to find projects that are truly worth investing in this craze.
1. Cause
1.1 The trap of high valuation of VC coins
The reason why exchanges continue to list new Meme coins can be traced back to a report released by Binance Research in May this year, "Tokens with High Valuations and Low Initial Liquidity". The report pointed out that VC tokens launched in 2024 generally showed the characteristics of "overvaluation but low initial circulation", and also emphasized the risk of selling pressure caused by token unlocking on the market. The report specifically mentioned the unique advantages of Meme coins: most Meme coins have achieved full circulation status, and the MC (market value) to FDV (fully diluted valuation) ratio is 1. This means that Meme coin holders will not face value dilution problems due to token issuance. Despite the lack of practicality of Meme coins, these characteristics have attracted the attention and interest of many retail investors.
(Related reading: "In-depth Analysis: Binance's Announcement on Recruiting Small and Medium-sized Market Capitalization Projects to List on the Exchange")
Source:Twitter(@Coin98Analytics) Figure 1.1
This report caused a wide response in the market when it was released, suggesting that Binance has long noticed the potential of Meme Coin and recognized its appeal to users. After that, Binance co-founder He Yi published an article on Binance Square in June. On the one hand, she clarified the concerns of the community and made it clear that Binance does not have the pricing power; on the other hand, she reflected on the development of the industry and pointed out that the ICO in 2017, the IEO in 2021, and the "wool-pulling" strategy in 2023 may no longer be applicable to the current market environment. What is more noteworthy is that she implicitly raised a thought-provoking question: If there is no VC investment or project party intervention in the market, will it become healthier?
Figure 1.2 Source: Binance Square
These signals not only reveal the unique appeal of Meme Coin in the current market, but also reflect the exchange’s deep insight into the market environment and investor behavior.
1.2 Meme Coin’s User Conversion Advantages
For the top exchanges represented by Binance, there may be deeper reasons behind the listing of Meme coins. In its report "Understanding the Rise of Memecoins" on November 4, Binance Research Institute pointed out that compared with most of the current VC-backed altcoins, Meme coins are widely believed to be not only more fair, but also provide ordinary investors with a more understandable and attractive narrative. For ordinary retail investors who are not familiar with technology, they tend to be able to grasp the logic behind Meme coins driven by cute images or attractive stories more quickly, while in contrast, technically complex Layer 2 solutions or DeFi primitives appear to have a higher threshold and are difficult to digest quickly. In other words, the user conversion time of Meme coins is significantly faster than that of technology-driven altcoins.
More importantly, this fast-transforming feature allows the narrative of Meme coins to spread to potential buyers at an extremely fast speed, thereby quickly forming a community and stimulating speculative enthusiasm. Compared with traditional altcoins, Meme coins are more likely to use their high spreadability to drive market sentiment, which directly leads to extremely fast market dynamics and efficient user adoption rates.
This phenomenon is also confirmed by the speed at which capital flows to emerging meme coins. For example, $WIF grew from a market value of 0 to $1 billion in just 104 days, while $SHIB took 279 days to achieve the same goal. Even the earliest $DOGE took 8 years to achieve this achievement. Today, the speed of creation of emerging meme coins and the pace of capital influx are far faster than before. Thanks to their simple and easy-to-understand properties, the generation and diffusion of meme coins are faster than any early token type. As shown in the data in Figure 1.3, more than 75% of meme coins were created in the past year.
Source: Binance Research Figure 1.3
This trend not only shows that Meme Coin is reshaping market rules, but also demonstrates its unique growth momentum and appeal in the current crypto ecosystem.
1.3 The Breakthrough Effect of Meme Coin
In addition, Meme coin has significant potential in "breaking the circle". Compared with traditional altcoins, Meme coin is easier to build a community and attract users' speculative interest, quickly converting potential users into actual investors. For those who want to enter the market, the purchase experience of the exchange is more convenient and direct than on-chain operations. This advantage has become an important tool for exchanges to attract incremental users and funds in the bull market.
2. Process
In September this year, Binance officially kicked off its entry into the Meme coin track by simultaneously launching the uppercase and lowercase Meme coins Neiro. This move marks Binance's recognition of Meme coins and also opens up its new strategic direction in the market.
Source: Binance Announcement Figure 2.1
Although Binance's listing of Neiro and subsequent Meme coins has caused some controversy, compared with the widespread criticism it suffered when it launched VC-backed altcoins, the introduction of Meme coins has obviously won Binance more understanding and support from users. According to the statistical chart of on-chain analyst @ai_9684xtpa, Binance has launched 18 Meme coins in 2024, covering spot and futures markets. The market performance of each Meme coin varies, and some have doubled or even increased several times in market value, such as the two Meme coins $PNUT and $ACT. Among them, $PNUT has become popular with the concept of "animal protection + election politics + Musk", and its market value has exceeded US$400 million after its launch; and $ACT has risen by more than 2,500% in less than half a day after the announcement of the news. This phenomenon of frequently launching Meme coins shows that Binance is actively responding to the high sentiment of the market, attracting more user attention, and increasing the trading activity of the platform through a variety of Meme coin options. This strategy not only meets the market demand for emerging currencies, but also demonstrates the flexibility of exchanges in the current competitive environment.
Source:Twitter(@ai_9684xtpa) Figure 2.2
It is worth noting that Binance co-founder He Yi said on social media that the listing fees for ACT and PNUT are zero, which further strengthened the support of centralized exchanges represented by Binance for Meme coins. This practice shows that centralized exchanges represented by Binance hope to attract more popular Meme projects by reducing listing costs, thereby maintaining the platform's activity and user stickiness, and also encouraging more project parties and investors to participate in the Meme coin market.
Source:Twitter(@heyibinance) Figure 2.3
From the launch of Neiro to the craze of ACT, Binance has not only attracted a large number of users through the strategic deployment of Meme coins, but also seized the development opportunities brought by the bull market. This process not only demonstrates the flexibility of the exchange in responding to market changes, but also provides valuable experience for future market layout.
3. Risks
Although Meme coin has attracted a large number of investors with its simple narrative and easy spread, the risks behind it cannot be ignored. The following is an in-depth discussion of the potential problems of Meme coin from three aspects: low survival rate, malicious manipulation under PVP attributes, and lack of technological innovation and progress.
3.1 Low survival rate
Most of the meme coins born in 2023 and 2024 are "flash in the pan". 97% of meme coins are "dead", that is, their trading volume is close to $0. Although representative meme coins such as $DOGE and $SHIB have survived for 10 and 4 years respectively and have successfully established themselves in the market, the survival rate of meme coins is still extremely low overall. Rapid growth and speculation make meme coins a high-risk, high-return asset class, but they are heavily dependent on market sentiment and have almost no fundamental valuation support. This means that investors face a very high risk of losing money when participating in the meme coin market.
Source: CoinMarketCap Figure 3.1
3.2 “Conspiracy Groups” in the PVP Market
The highly speculative nature of the meme coin market has attracted some groups that attempt to manipulate the market. Some so-called "cabal groups" have used elaborate pump-and-dump schemes to take advantage of retail investors' exit liquidity. These groups often mislead the market by:
1. Create multiple new addresses to hold tokens in a centralized manner, creating the illusion that tokens are widely held.
2. Using the transparency of blockchain to attract investors, it is difficult to determine the actual controller behind the token holders.
3. Compensate key opinion leaders (KOLs) by creating false hype through social media to encourage retail investors to follow suit.
These manipulative behaviors make retail investors victims of high-risk speculative markets. Despite the transparency brought by blockchain technology, information asymmetry is still prevalent in the Meme coin market. Investors should be highly vigilant about such market behavior.
3.3 Lack of technological innovation and progress
The core appeal of Meme coins lies in narrative rather than technical 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 have made little contribution to promoting technological progress in the crypto industry. This phenomenon not only leads to market saturation, but also reduces the ability of the entire industry to attract outstanding 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 inefficiency of crypto industry resources. If too much of the industry's time, capital, and human resources are concentrated on meme coins that lack innovation, technological development may stagnate. Large amounts of funds flowing into such tokens will also weaken the industry's support for projects that truly have technological breakthroughs and practical application scenarios.
4. Summary
As a narrative-driven asset class, Meme coins have sparked widespread discussion and participation in the crypto market. With its simple logic, rapid dissemination capabilities, and low-threshold investment characteristics, it has successfully attracted a large number of retail investors and has become an important tool for exchanges to expand their user base. However, Meme coins also show high risks, including low survival rates, market manipulation, and lack of technological innovation.
Nevertheless, the potential of Meme Coin is still worth paying attention to. Under a reasonable market environment, it can not only bring short-term wealth effects to investors, but also provide a new community participation model for the crypto industry. However, investors and industry participants need to be cautious, avoid blindly chasing hot spots, and focus resources on projects that are truly innovative and have long-term value. Only through rational investment and effective resource allocation can the entire industry achieve sustained and healthy development.
Disclaimer: Please strictly abide by the laws and regulations of your location. This article does not represent any investment advice.
