- Memecoins have surged 130% in November.
- Retail investors are piling into market.
- Will institutional investors take the plunge?
They have very little utility.
They don’t speed along payments or fund important new projects.
They’re certainly not a store of value given their volatility.
And yet memecoins have seized centre stage in crypto’s three-ring carnival this year with soaring prices and a demonstration of the power of internet culture.
Fuelled by memes, mania, and a motley crew of risk-tolerant investors, memecoins are now worth $127 billion, according to CoinGecko.
‘Memecoin supercycle’
No surprise, this market has skyrocketed 130% since Donald Trump won the US presidential election on November 5.
Clearly, investors expect the crypto-friendly chief executive to be a boon for an industry that’s been enduring a regulatory crackdown for the last four years.
And analysts are now eyeing the advent of a “memecoin supercycle.”
During the last bull market in 2021 and 2022, DeFi and NFTs dominated the space. Now it may be memecoins’ turn, at least when it comes to retail investors.
“Since late September, retail activity has predominantly centred on memecoins,” said 10x Research, digital asset analysis platform, in a recent report.
During the NFT super cycle of the last bull market, growing projects attempted to leverage their retail appeal via branding and merchandising.
Memecoin teams may be treading the same path.
“Our focus is growing brand awareness, building new partnerships, and expanding our holder base,” a spokesperson for Ponke told DL News.
Ponke is a $429 million Solana-based memecoin.
Structured products
While the hype is running thick and fast, it may be only a matter of time before professional investors pile into the market.
Ponke’s spokesperson told DL News there is growing interest from institutional players and even venture capital investors in memecoins.
GMCI, an index provider, offers the GMCI meme index that contains the biggest memecoins by market value including Dogecoin, Shiba Inu, and Pepe. Revolut also offers traders a meme token collection.
“We’re seeing structured products start to take shape [and] as the market matures, expect more investment from VCs and even more institutional-backed products to emerge,” the Ponke representative told DL News.
Dumping utility tokens
Retail investors, however, might not be excited at the prospects of tangling with big money players in the memecoin space.
Market analysts have previously said the absence of VC control over memecoins is part of the appeal for retail investors.
That appeal has made the retail crowd dump so-called utility tokens in favour of memecoins.
VCs have been blamed for propping up utility tokens, and the projects behind them, with a low float, high FDV, or fully diluted value, venture model.
The model enables projects launch with a small initial supply that becomes diluted over time as vested tokens held by VCs and other insiders begin to unlock.
Utility tokens have taken a hammering this year.
Utility tokens are so named because they are cryptocurrencies that purportedly have use cases and solve specific problems. Holders of these tokens can access the networks of their respective projects to participate in the ecosystem.
DeFi tokens, once the darling of the retail crowd, plummeted this year.
Meteoric rise
According to CoinGecko data, the market value of the top DeFi tokens has declined 7%, which pales in comparison to Bitcoin’s 120% surge and of course, the meteoric rise in memecoins.
Other utility tokens including those of projects such as Celestia and Arbitrum have also been dampened by massive token unlocks. These token unlocks release previously vested tokens which when sold in massive amounts can cause the price to decline.
Memecoins, meanwhile, are launched with all of their tokens released to the market, an arrangement deemed fairer by retail traders.
“Memecoins make crypto more approachable and open the door for more people to get involved,” the Ponke spokesperson said.
‘Everything is justified’
Peter Kris, CEO of cross-chain decentralised exchange Gasp, told DL News that retail traders cannot be blamed for loving memecoins.
“There is no single ‘correct’ way to allocate capital, everything is justified,” Kris said. “People seen to be making huge profits on memecoins may attract new investors to crypto markets as a whole.”
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.
