Understanding the Cultural and Market Forces Behind Memecoin Mania

"The Memecoin Supercycle is not just a prediction of the future; it is happening right now." This is the message of Murad Mahmudov during his talk at TOKEN2049 held in Singapore last year.

As he evaluated the cryptospace, he noted that despite the disappointments and underperformance of many tokens, memecoins are currently dominating. And then I learned one new term—WAGMI! The term stands for "we all gonna make it." He said that such a day that all cryptocurrencies move in unison is dead. Checking the top 300 tokens listed on cryptomarketcap.com, only 43 have outperformed BTC in 2024, and the category that stands out is memecoins. He then asked, Why is the memecoin cycle happening? He enumerated a list of internal and external reasons.

Internal reasons include the massive production of tokens, extremely inflated altcoin valuations at the time of TGE/CEX listing, the speculative nature of the vast majority of crypto dApps, a focus on hype rather than revenue, the gigantic amount of unlocks in tech alts, and the performance of proven memecoins.

It surprised me to hear that the number of crypto grew five times from 0.4M in 2021 to 2.5M in 2024. In 2024 alone, 600,000 new tokens were launched, and 5,500 tokens are being added daily. Such a number is alarming.

Source

The above pyramid illustrates the extremely inflated altcoin valuations. It is described as "sophisticated wealth extraction," where the token founders, VCs, and angel investors had an unfair advantage over retailers exploited to provide exit liquidity.

The third internal reason is taking revenue for granted and concentrating on hype. Except for BANANA and AERO, the majority of tokens launched in 2024 suffered huge declines.

The next figure is about the gigantic number of unlocks over the next five years. For Mahmudov, the reason why VCs cannot publicly embrace the memecoin mania is that it would pose a huge risk to the valuations of tech alts that are yet to be unlocked in the coming years.

The fourth internal reason is the impressive track record of old memes. DOGE, SHIB, PEPE, WIF, and the like have already proven to the crypto market that they could reach valuations in billions of US dollars.

To conclude the internal reasons for the memecoin supercycle, Murad shared the diagram below to illustrate that token distribution is broken. Such a scheme doesn't build the most important factor in the success of a crypto project, which is the community.

Before shifting to external reasons, Murad asked, "What does retail care about?"

He said that retailers don't care about the efficiency and privacy that can be provided by blockchain technology. They don't care about cryptography or even the latest upgrade in fintech. What they do care about is making money regardless of the crypto project, having fun, and the sense of becoming part of a community.

I will conclude Mahmudov's presentation with the chart below. It enumerates the external reasons for the rise of memecoins. I find two of these reasons particularly interesting—accelerating loneliness, sexlessness, mental health issues, and the crisis of meaning. The good thing is that he is confident that all the above external reasons are bullish for crypto in general, but especially for meme tokens.

I am aware that many on Hive don't like memecoins. They consider these tokens a distraction from the real value that tech tokens provide. I still have to watch this video that debunks Mahmudov's thesis. In the mind of this video content creator, the memecoin supercycle is fake and is bound to collapse.

Watching the first nine minutes of Mahmudov's video, I cannot avoid asking what the Hive blockchain network can learn from this trend.

Is our emphasis on utility and decentralization enough to increase awareness and adoption of the Hive blockchain network? How can we make our community/ies stronger? How can the Hive network stay relevant in a market driven increasingly by emotion, entertainment, and identity? I think these are some of the ideas we can learn, whether this memecoin supercycle is true or not.

Grace and peace!

Posted Using INLEO