Navigating Market Cycles: The Value Origin and Investment Challenges of Meme Coins
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Navigating Market Cycles: The Value Origin and Investment Challenges of Meme Coins
Investing in memes is ultimately a sophisticated craft that values "short, fast, and quick returns."
Navigating Web3 tides with focused insightsAuthor: Alex Xu
This article is based on a recent discussion I had with other investors in a crypto community about meme coins. I have expanded my views here to fully articulate my perspective.
The following content reflects my current views as of publication and may contain factual inaccuracies, biases, or errors. It is intended solely for discussion purposes, and I welcome feedback and corrections from fellow researchers and investors.
Don't bottom-fish meme projects during bear markets.
That sounds like a tautology, doesn't it? Who would choose a "shitcoin" with a lifespan ranging from a few months down to just one day as a long-term investment?
However, the memes discussed in this article refer to large-cap, exchange-listed "blue-chip memecoins" such as Doge, Shiba, and Pepe.
Some believe that influential "next-generation small-cap memecoins" like Pepe could replicate Doge's trajectory in the next bull cycle and reach a billion-dollar market cap.
Yet, in my view, they may not be ideal candidates for bottom-fishing during a bear market when making cross-cycle allocations.
The Value Source of Meme Tokens
A meme is a phenomenon of cultural and informational self-replication, propagation, and evolution. A meme token is the cryptocurrency of a blockchain project imbued with meme characteristics. One key feature is that these tokens generally lack direct value accrual mechanisms. Instead, the projects are often parasitic or derived from meme IPs outside the crypto world—such as Doge’s Shiba Inu dog, Pepe’s frog, or recently viral tokens named Bitcoin tied to Harry Potter, Obama, and Sonic (stacking four layers of buffs). Beyond famous figures and pop culture, widely accepted ideas can also become meme sources. For example, LTC's positioning relative to BTC as "digital silver" versus BTC’s "digital gold" became a financial meme drawing strength from both precious metals and BTC's cultural dominance.
Unlike commercial crypto projects such as DeFi or web3 games, memes may appear to lack business models—but their business model and PMF (Product-Market Fit) are actually very clear: to serve as highly imaginative speculative vehicles for retail crypto investors.
"Serving retail investors" means meme concepts are simple, fresh, often bizarre or provocative—making them more likely to capture attention amid information overload.
"Highly imaginative" refers to the absence of real-world fundamentals anchoring price; valuations driven purely by "consensus" can soar into the stratosphere.
Even the most serious crypto practitioners cannot deny that "speculating to make money" is a primary—if not the main—driver in the crypto space, and the endless stream of meme projects perfectly fulfills this demand.
Crypto meme tokens also offer clear advantages over traditional speculative assets:
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Unprecedented accessibility: With just a crypto wallet and internet access, anyone, anywhere can participate without KYC, registration, censorship, identity barriers, and trade 24/7. In contrast, participating in events like the 2021 GameStop frenzy was extremely difficult for most people globally.
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Transparency: While still vulnerable to manipulation by issuers in code, funds, or rules, crypto memes offer far greater transparency in tokenomics, fund flows, and algorithms compared to traditional opaque Ponzi schemes—providing a fairer starting point for speculation.
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Variety and abundance: The cost of launching a meme project is minimal, leading to constant innovation and an endless supply of new opportunities.
Unlike conventional web3 business projects (e.g., DeFi), the intrinsic value growth of meme tokens comes solely from marginal inflows of attention and capital from future speculators. For traditional projects, we forecast business performance; for memes, we must predict shifts in market sentiment and where speculative attention will flow next.
This implies that meme operators' core task is to capture and manipulate public attention—steering narratives and aggressively fueling FOMO.
The problem is, this is not only extremely difficult but may also conflict with the long-term interests of next-gen meme creators.
Meme Tokens Lack Moats
Meme projects evolve through distinct phases:
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Concept and narrative design: Must challenge mainstream norms, provoke emotion, be absurd or surreal—yet remain relatable enough to resonate with the masses;
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Early promotion: Attract early speculators. Endorsement by influential figures at this stage often determines success or failure;
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FOMO amplification: Wealth stories of early adopters go viral, greed drives further adoption, and participants convince themselves they aren’t holding the bag;
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Mass adoption: Listing on major exchanges, shedding the "shitcoin" label, becoming a legitimate retail speculative asset;
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Sustaining appeal: Defending existing shares of attention and speculative capital.
Early-stage "shitcoins" are fragile. Given our focus on long-term allocation, this article primarily discusses "meme blue chips" that have reached stages 4 and 5.
As previously noted, meme projects essentially operate on public attention—but attention is inherently transient. Shifting attention is far easier than changing user habits, product usage, or brand loyalty.
More importantly, creating a new meme is incredibly cheap, meaning established memes face endless competition for speculators’ attention and resources.
Yet, existing memes have limited tools to defend their attention share against newer entrants. Take Shiba, for instance: it started as a meme and gained traction through a bold move—airdropping 50% of its supply to Vitalik Buterin, a move that was both novel and headline-grabbing. Riding Doge’s momentum, it secured its status as the “crown prince of dog coins.”
However, after listing on major CEXs, its ability to generate buzz and attract attention inevitably declined. Despite subsequent efforts—launching its own DEX, building an L2, issuing NFTs, venturing into metaverse and gaming—the transition from pure meme to operational project has disappointed. Its DEX, ShibaSwap, has only $21 million in TVL, and its token price has significantly underperformed the broader market over the past year.
Price comparison between SHIB and BTC over one year, source: CoinMarketCap
Transitioning from meme to operational project is difficult. Operational projects require meticulous planning and execution across strategy, product, and technology—challenging different dimensions of project management. More critically, earnest “working hard” appears unsexy and contradicts the original anti-establishment, edgy, subcultural, and high-status image of memes, further eroding their fading charm.
Unlike operational projects that can build competitive moats based on business models, meme projects often lack mechanisms to sustain intrinsic value. Attention decay among speculators is inevitable, and active development efforts often backfire.
Meme Teams Also Lack Long-Term Incentives
In today’s environment where speculative attention is scarce, the success of new memes is rarely accidental. Most are orchestrated by centralized groups combining capital, exchange partnerships, timely KOL endorsements, and strong business development—such as PEPE being integrated by OpenSea as a payment method within a month of launch.
However, once a meme succeeds, maintaining consensus and attention becomes increasingly costly. For meme teams, a smarter strategy is to reinvest profits from one successful meme (like Pepe) into launching multiple new “meme experiments” with different themes and narratives—hoping to create the next hit. These newly created “Pepe clones” then compete directly for attention with the original.
Since most meme project teams are anonymous, they face far less accountability than founders of traditional businesses. The ease with which core teams can exit worsens the decline of older meme projects.
Counterexample: Dogecoin and Bitcoin
At this point, you might raise a counterargument: “Doge revived in the last bull run despite being created in 2013—why couldn’t Pepe do the same?”
Ironically, Doge is actually a prime example of how most memes fade over cycles. Doge’s strong performance in the last bull market was largely due to Elon Musk’s massive influence. The idea that “the world’s richest man is backing Dogecoin” itself became a powerful new meme. Without Musk’s repeated, overt and subtle support since 2019, Doge’s original meme appeal would likely have faded in the rapidly evolving crypto narrative landscape.
So here’s the question: How many individuals in the world possess Musk-level influence and would actively endorse a meme coin in the next cycle, giving aging memes a second life? There are already vanishingly few people with Musk’s level of global influence—and adding the condition that they must publicly promote a meme coin leaves us with an empty list.
Litecoin, launched in 2011 and anchored by the powerful “Bitcoin is gold, Litecoin is silver” meme, has shown weakening performance cycle after cycle in the absence of new narrative or influential backing.
In fact, the best counterexample to “memecoins can’t survive cycles” isn’t Doge—it’s Bitcoin. As the original meme coin and the cornerstone of every crypto investor’s portfolio, Bitcoin remains the ultimate safe haven. However, Bitcoin’s meme power stems from its unique and irreplaceable "orthodoxy"—being the first and foundational project in all of crypto.
This “orthodoxy” is something no other meme coin possesses, leaving them all vulnerable to perpetual attention competition from successive generations of new memes.
Uncapturable attention, inevitable team departures, mass production of competing projects.
Ultimately, investing in memes remains a sophisticated art of “short, fast, and quick wins.”
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