Introduction and let's talk about memecoins.

Three cycles to evolve my thinking and why snobby investors should also.

Hello Reader.

This platform is an outlet for me to share ideas, thesis's and stress test real time moments of learning with you.. the brave and bold participant, hopefully with a similar passion for venture investing and Web3 investing.

To manage expectations this will be a sporadic publication due to trying to maintain a quality of content and using real life examples of problems and opportunities I encounter on my daily path.

There's a few bits I want to share with you all over the next 12 months..

1. One of my new thesis's called the “ETF Domino Effect”.

2. Different styles of investing theories based on exposure to numerous funds and friends across different hedge funds and venture funds.

But what sparked the urge to write this evening (currently 2am GMT at the time of writing) was a recent experience with a meme coin.

I really wanted the first one of these to be super high brow.. but you are going to have to settle for profitable over professional for this one.

Let's talk Memecoins.

Firstly Memecoins are the biggest frustration of the perceived “intelligent investor” and I truly think it takes two cycles to understand how to approach Memecoin investing.

I like most, felt mildly angry towards zero utility dog / cat coins that scale to +billion of market cap. This feeling lasted for years and I felt a great sense of superiority when my well researched utility token projects slowly grinded towards a fraction of the gains of a meme.

This actual meme that represents a bell curve is still the greatest visual of the journey someone goes on to finally make money within the memecoin space.

The person crying on the middle is everyone from the traditional world when you first explain what Dogecoin or Pepe is.. I was this person and if you weren't on your first encounter then congratulations.. you are either a complete degen or a highly evolved degen.. a crypto giga brain. :)

In your first cycle you see no logic to a Memecoin.. but over time as you in bed in to the real communities and psychology of the players and communities you being to see the tribalism and cultural triggers that accrues these projects market cap.

Buying a Memecoin Guide:

In marketing, the “Rule of Seven” suggests that a person needs to encounter a message about a product at least seven times before being ready to buy. Some experts even propose ten touches as the magic number.

These touchpoints can include various forms of communication, such as videos, calls, advertisements and friends suggestion.

Similarly, when buying a crypto token, investors go through multiple touchpoints, including research, investigation, decision-making, and execution.

These touch points for the normal person can last week's, the motivated days maybe.. but days in terms of Memecoins is like years.

You have to train yourself to identify investment triggers and act immediately.

Marry this with an extreme view on risk management and acceptance of being zero’d in days with the wrong project.

So what are we looking for:

1. Team

2. Effort

3. Art

4. Humour

5. Early investors

6. Rebellion

7. Ease of contributing to the art

8. Socials

9. Longevity

In the wonderful film “The Founder” that follows the story of Ray Croc on the road to building McDonald's Global Corporation. There's a now famous scene where Harry J Sonnenborn tells Ray:

“You don’t seem to realise what business you’re in. You’re not in the burger business, you’re in the real estate business.”

The same applies to Memecoins, “you aren't in a Blockchain business, you are in the attention and culture business.”

This leads to the equation where:

Attention (A) + Culture (C) = Hope (H)

And HOPE is what creates communities taking on their own narratives and price predictions and this is a compounding effect.

The extra ingredient that Memecoins have over HOPE is ACCEPTANCE.

Acceptance is where the investor is usually 100% at ease of a possible terrible outcome and see the investment as “for of the culture”, “for the fun” or just to be part of a movement / club for a potentially small or hopefully long time. It's like a membership to a club of seemingly sensible people allowing themselves to be part of something non logical.. and it's wonderful… especially when it's going up and sometimes when it's going down.

Attention (A) + Culture (C) = Hope (H)

Hope (H) + Acceptance (AC) = Momentum (M)

Returning to the nine points highlighted earlier, I believe you need at least 5 of the nine to be a reasonable successful project but ANY of the nine you uncover that leads to negative research avoid.

Let's break this down:

Team:

Assess the project’s team members. Look for transparency, experience, and their commitment to the project.

Consider their track record in the crypto space and whether they have successfully launched and managed other projects.

Effort:

Examine the level of effort put into the project. Is there active development, regular updates, and community engagement?

Projects that demonstrate consistent effort are more likely to succeed.

Art:

While memecoins may not always have a serious use case, art and branding matter. A well-designed logo, website, and overall aesthetic can attract attention.

Memecoins often rely on memes and visual appeal to create a community.

Humor:

Memecoins thrive on humor and relatability. Look for projects that embrace this aspect.

Memes, witty social media posts, and playful communication can contribute to a coin’s success.

Failure also falls into this catergory. I.E Failed project NFT or project execution. Look at the back story on $SLURF for example. My personal favourite story of 2024. (I’ll let you research this one.. crazy.)

Early Investors:

Investigate who invested early. Were there influential backers or supporters?

Early adopters can significantly impact a coin’s trajectory.

Rebellion:

Memecoins often challenge traditional norms. Consider whether the project has a rebellious or counterculture vibe.

This rebellious spirit can resonate with certain audiences.

Ease of Contributing to the Art:

Can community members easily participate in creating content or contributing to the project’s narrative?

Memecoins thrive when the community actively participates.

Socials:

Analyze the project’s social media presence. Are they active on platforms like Twitter, Reddit, or Discord?

Engaged communities drive memecoin success.

Longevity:

Consider the project’s long-term viability. Is it a short-lived trend or does it have staying power?

Memecoins that adapt and evolve tend to survive longer.

Remember, these criteria provide a starting point, but each memecoin may have unique aspects.

Memecoins are PvP (Player Vs Player) or the ultimate Ponzi (to start with), over time this evolves and takes shape in different ways.

Greed is the biggest killer of memecoins within the first 7 days.. hence the focus on early investors being prepared to take a long term view and support price. One bad / greedy actor and it's a house of cards. The evolution from investor lead projects to fully adopted by external community members can be swift but you have to have benefited others before yourself.

There are projects that have recently shown qualities listed above:

$PONKE - amazing animations and content output. Relentless output.

$BONK - total Degen to now changing the world better for dogs.

$NEKO - driving community content creation and rewarding community.

$ MAGA - Trump driven news token with a decent run up for the election, again be cautios on news driven tokens.

Try and access each project by the narrative.. lots of Memecoins appear based on news. Take SBF being found guilty that saw to a whole bunch of Memecoins… but news cycles are short and so is the average life of these projects.. pure fun projects that quickly turn to pump and dumps.

Generic Memecoins with no basis or link to news stories however do have legs and the possibility of the possible.

Taking recent example, Real Vision’s Raoul Pal described the next year in crypto as a growth zone and gave it the name “Banana Zone”. This lead to two types of responses in the meme world:

1. Banana Zone Meme Coin Variants

Or

2. Existing Memecoins showing a sense of humour to leverage a short term trend.

The latter gains more eyeballs. To use a recent example of this it's worth looking at the coin $PUPPA that took a cheeky swipe at the Banana Zone.. made people laugh and gained a new audience.

https://x.com/PuppaCoin/status/1791163815243001964?t=P3AXZWHbBNTW8EYdPyC-EQ&s=19

What is so fleeting about memecoins is the second this article is published its already outdated.

The guide above can help you quickly access and move quickly on memecoins.

Social proof and twitter enagement.. who’s pushing the project and whats the volumes of influencer to retail adoption is good to look at quickly to ensure you aren’t the exit liquidity.

Revisiting old memecoins is often over looked bt these are hyper powerful as you have fully formed communties with an army of artwork and memes already in the locker from the last cycle. $FLOKI price drives for example evidences the benefit of the projects that kept producing content through the bear. Also rember these projects have some serious “underwater bagholders” who are workign hard to get back to their intital entry. Turning an L to a W is a big driver.

Recently having a selection of higher probabilty memecoins has greatly saved your portfolio with the recent pull back in utility tokens.

To highlight the possible impact of adding memecoins to a portfolio i’ve run a basic historical example and for the basis of the experiment the test portfolio include Cardano.. probably the only time I’ll ever mention Cardano. :)

Here comes the science.

Example Portfolio Example:

Portfolio A (Without Memecoins)

1. **Bitcoin (BTC)**: 30%

2. **Ethereum (ETH)**: 20%

3. **Binance Coin (BNB)**: 10%

4. **Cardano (ADA)**: 10%

5. **Polkadot (DOT)**: 10%

6. **Solana (SOL)**: 10%

7. **Chainlink (LINK)**: 10%

Portfolio B (With Memecoins)

1. **Bitcoin (BTC)**: 30%

2. **Ethereum (ETH)**: 20%

3. **Binance Coin (BNB)**: 10%

4. **Cardano (ADA)**: 10%

5. **Dogecoin (DOGE)**: 10%

6. **Shiba Inu (SHIB)**: 10%

7. **Chainlink (LINK)**: 10%

Historical Performance

To analyze the performance, we will look at the period from January 1, 2021, to December 31, 2023.

Performance Metrics

- **Bitcoin (BTC)**: Started 2021 at around $29,000, peaked at $68,000 in November 2021, and was around $28,000 by the end of 2023.

- **Ethereum (ETH)**: Started 2021 at around $730, peaked at $4,800 in November 2021, and was around $1,800 by the end of 2023.

- **Binance Coin (BNB)**: Started 2021 at around $37, peaked at $690 in May 2021, and was around $240 by the end of 2023.

- **Cardano (ADA)**: Started 2021 at around $0.18, peaked at $3.10 in September 2021, and was around $0.40 by the end of 2023.

- **Polkadot (DOT)**: Started 2021 at around $9, peaked at $55 in November 2021, and was around $6 by the end of 2023.

- **Solana (SOL)**: Started 2021 at around $1.52, peaked at $258 in November 2021, and was around $20 by the end of 2023.

- **Chainlink (LINK)**: Started 2021 at around $11, peaked at $52 in May 2021, and was around $6 by the end of 2023.

- **Dogecoin (DOGE)**: Started 2021 at around $0.004, peaked at $0.74 in May 2021, and was around $0.07 by the end of 2023.

- **Shiba Inu (SHIB)**: Launched in August 2020, gained significant attention in May 2021 reaching $0.0000388, and was around $0.000008 by the end of 2023.

Calculating Returns:

Portfolio A:

- **BTC**: (28,000−29,000)/29,000≈−3.45

- **ETH**: (1,800−730)/730≈146.58

- **BNB**: (240−37)/37≈548.65

- **ADA**: (0.40−0.18)/0.18≈122.22

- **DOT**: (6−9)/9≈−33.33

- **SOL**: (20−1.52)/1.52≈1215.79

- **LINK**: (6−11)/11≈−45.45

Portfolio B:

- **BTC**: (28,000−29,000)/29,000≈−3.45

- **ETH**: (1,800−730)/730≈146.58

- **BNB**: (240−37)/37≈548.65

- **ADA**: (0.40−0.18)/0.18≈122.22

- **DOGE**: (0.07−0.004)/0.004≈1650

- **SHIB**: (0.000008−0.00000006)/0.00000006≈13133.33

- **LINK**: (6−11)/11≈−45.45

Portfolio Performance:

Portfolio A (Without Memecoins):

- Weighted Return: Approx: 186%

((30\% \times -3.45\%) + (20\% \times 146.58\%) + (10\% \times 548.65\%) + (10\% \times 122.22\%) + (10\% \times -33.33\%) + (10\% \times 1215.79\%) + (10\% \times -45.45\%) \approx 186.71\%\)

Portfolio B (With Memecoins):

- Weighted Return: Approx: 1837%

((30\% \times -3.45\%) + (20\% \times 146.58\%) + (10\% \times 548.65\%) + (10\% \times 122.22\%) + (10\% \times 1650\%) + (10\% \times 13133.33\%) + (10\% \times -45.45\%) \approx 1837.23\%\)

These allocations are punchy but showcase the point.

Sensible, risk managed exposure to memecoins and a clear short term and long term strategy pays out.

So trust your gut, friend groups or sense of humour.. if you think something is funny then develop a process to qualify and act quickly.

But remember your downside risk is -99%.. no one made a lot of money in memecoins with picking up numerous battle scars or as the industry lovingly call it…. rugs.

Oh… and the memecoin I was reffering to at the start of the article was Ponke.. last cycle me won’t have touched that with a bargpole bt this cycle… :)

Now the challenge of when you sell… but that’s for another article.

Nick H

About the Author:

Founder & Web3 advisor, frustrated writer and luck enough to get daily exposure to how the good, great and ugly businesses are run and tries to share his learning whenever theres a free moment to write up. Big on tech but bigger on people.

If you found this semi interesting, follow on twitter: Nick Harrington