Is the ‘Memcoin Supercycle’ over? Analysts are weighing in

Memecoin has experienced a huge upswing in the past year, with many tokens entering the new cycle, such as Pepe (PEPE), Dogwifhat (WIF), and Popcat (POPCAT), posting returns of over 30,000% since inception.

Many memecoin advocates expected a new wave of retail investors to emerge and immediately start bidding memecoin to absurd new highs. So far, they appear to be more interested in what cryptocurrency natives colloquially refer to as “dino coins.”

“Dino coins” are older altcoins like Ripple’s XRP and Tron (TRX) that have recently hit new local and all-time highs.

Meanwhile, with the exception of BONK and PEPE, several major new cycle memecoins failed to break record highs amid the recent market frenzy, raising concerns that a ‘memecoin supercycle’ may be coming. Early termination.

Memecoin evangelist Murad Mahmudov etched the term “memecoin supercycle” into the cryptocurrency’s collective consciousness during his bullish keynote speech on the asset class at the Token2049 conference in Singapore last September.

He looked at the tremendous performance of memecoins compared to legitimate projects last year and estimated that this trend will continue amid retail mania.

Memecoin is a notorious subclass of highly speculative cryptocurrency assets. They provide no utility, do not speed up payments, do not bring new financial innovations, and do not provide any benefits.

Nonetheless, this lack of fundamentals is poised to soar outrageous valuations and is one of the main reasons why Mahmudov said the memecoin super cycle is just beginning.

Mahmudov told Cointelegraph that unlike mainstream projects in the realm of decentralized finance (DeFi) and infrastructure, the real-world value of memecoins cannot be calculated using quantitative techniques available in the world of advanced finance.

“If DeFi protocols actually start paying dividends to token holders, they will have a 500-year history of how to value cash flow-based assets. Then the investment banker types will come in and say, ‘Well, why would I pay 200 price-to-earnings for this?’”

“So if you are an asset that will trade and act in a memetic style, who knows how you will value it?”

Memecoin is just a play on the global market.

He said the key to finding out if the memecoin supercycle is already over can be found in ‘global macro’, which refers to interest rates, central bank behavior and general financial conditions.

“As long as there is global liquidity and risk-taking behavior in traditional markets, MEMCOIN will perform much better. But if there is a recession, Memcoin probably won’t.”

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“The way I look at it is that cryptocurrencies as a whole are 2-3x beta compared to traditional markets, and memecoins are like 7-8x beta in the grand scheme of things.”

Can memes really ever end?

Swyftx analyst Pav Hundal agreed with Mahmudov, saying memes are nothing more than a riskier and more leveraged play for the rest of the cryptocurrency industry and broader global financial markets.

As broader market conditions improve, memecoin will likely perform better. However, if the scale tips the other way, memecoin investors could be in for a carnage.

“What you need to understand about this cycle right now is that global liquidity is higher, regulatory risk is lower, and the U.S. dollar is expected to weaken.”

“It’s like going to Monte Carlo. There’s money everywhere and it’s turning to risk. The trend is technically upward. “When the market goes up, so does MEMCOIN,” he added.

While Hundal cautioned that investors should consider the recent upswing and brace for shocks, he also warned of meme fatigue.

“Maybe the market is a little bit ahead of the curve, but when we’ve just had a rally of over 150%, it’s reasonable to expect some sort of cooling off,” he said.

“It’s not impossible to imagine a future world where censorship, meme fatigue, or cancel culture are risks to memecoins. We just saw CZ describe memecoins as strange,” Hundal added, a nod to former Binance CEO Changpeng Zhao’s November 26 tweet.

OKX Chief Commercial Officer Lennix Lai said that while the term “memecoin supercycle” may be somewhat unfamiliar, current market conditions point to an “extension” rather than the end of the cycle for memecoins and crypto assets.

Nonetheless, Rai cautioned that the rapid emergence of the Solana ecosystem as the primary blockchain for new memecoins, combined with the ephemeral nature of the asset, could make the asset highly volatile in the future.

“Traders should keep in mind that while Bitcoin is likely to experience a 10-15% retracement in the coming weeks, memecoins could see much more dramatic price movements, so cryptocurrency markets will continue to be volatile in the near term. “It has to be done,” he said.

Memecoin is a ‘tokenized community’.

Despite the “weirdness” surrounding Memecoin, Mahmudov says it’s not all about massive valuations and outrageous price targets.

Mahmudov, who often refers to memecoins as a profitable “cult” and invokes religious themes when describing them, said the tokens offer more than just the hope of financial returns.

“It may sound a little profane, but if you actually look at religion as a product, as a service, well, what does religion give people?”

“It gives people meaning.”

“Memecoin gives people a family. They provide people with identity, community and friendship. Um, and it gives people a sense of belonging, a sense of purpose, a sense of mission.” For Mahmuov, this mentality among holders creates a symbiotic feedback loop for memecoin holders and price targets in return.

Mahmudov tracks the recent performance of older altcoins like XRP, Cardano (ADA), and Chainlink (LINK) to track the “cult” status of their communities.

“You have to understand how members of these communities are members of notorious cults. That’s the biggest underlying force here.”

‘The most optimistic thing you can have about tokens is that people will literally become full-time unpaid evangelists for the project. We have already seen this a lot with Ripple, Chainlink, Cardano and Dogecoin,” he added.

Nonetheless, pseudonym trader 0x_kun took issue with the claim that all price performance can be traced back to the community’s cult status, saying that whether justified or not, the underlying belief in the token’s utility is what really matters in the end. That day.

“The difference is that XRP holders truly believe in the fundamentals and are not buying it as a social cult.”

“Tell XRP holders this is a meme that supports the fundamentals and they will shred you,” he said in a post on X on December 3.

Is Pump.fun bad for memecoins?

The meteoric rise of Solana-based memecoin distributor Pump.fun has already created quite a stir in the cryptocurrency industry. Some commentators have criticized the protocol as being the “most extractive” product in history and viewed it as an inevitable net negative for the industry.

Other critics argue that the memecoin launchpad has significantly diluted user interest across hundreds of thousands of memecoins, essentially ruining the potential upward trajectory of Solana’s larger “blue chip” memecoins.

On November 25, Pump.fun suspended its live streaming feature in response to reports of users streaming harmful content to draw attention to its newly launched token.

Putting the live-streaming debate aside, Mahmudov said the ability to launch memecoins with the click of a button is an inevitable step in technological advancement and is not worth worrying too much about.

“It’s no use getting angry at Pump.fun. One-click memecoin creation will always happen automatically,” he said. “This is essentially the natural evolution of techno-capitalism, where everything is tokenized, memes are coined, everything is turned into coins.”

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Ultimately, Mahmudov said Pump.fun, or the single-click token launch platform, divides the industry into two parts.

“One part is the gambling aspect, it’s all fast-paced spins. It’s a hyper gamble. It’s all a ‘taste of the day’ type of thing.”

“But the second is long-term community building. It’s brand building. It is a cult building. It’s kind of like trying to build the next $100 billion movement, the next Dogecoin, for lack of a better example, and that second part is what I’m interested in,” he said.

“You have to analyze the two markets separately.”