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Memecoins Investment Strategy: A Comprehensive Analytical Framework from Beta Values to On-Chain Data
Memecoins Investment Analysis Framework
The Investment Value of Memecoins
Some memecoins have a high beta value against Layer 1 (L1) assets, which makes them an attractive investment choice. Taking BONK as an example, a small allocation can provide leverage to Solana without increasing leverage risk.
The signal we are focusing on is when the 30-day beta exceeds the 90-day rolling beta. When this happens, BONK's average 30-day and 60-day returns reach 124% and 413%, respectively.
The surge of BONK usually occurs simultaneously with SOL rising more than 5% within a week. In this case, the average return of BONK is as follows:
It is important to note that in about 1/3 of the cases, BONK actually declines, which indicates that the performance of SOL does not fully guarantee the excellent performance of BONK.
BONK is usually positively correlated with SOL, but during outstanding periods for BONK, such as Q4 2023 and Q1 2024, this correlation often weakens.
On-chain Data Analysis
In addition to price performance, we will also analyze on-chain data to assess the quality of memecoins. Here are some key metrics:
These indicators can help us understand the relative quality and belief of the holder base.
Other Considerations
Community and Faith Assessment
When evaluating the memecoin community, we focus on:
Fair Value Assessment
We primarily assess fair value by comparing value to market value using the ( MVRV ratio ). When the MVRV ratio is below 1, it may indicate that we are close to a local bottom.
Kinetic Analysis
In the absence of fundamentals, we will focus on:
Macroeconomic Environment
Memecoin investment heavily relies on favorable liquidity conditions and risk appetite sentiment. When considering an investment, it is essential to closely monitor the overall market environment.
Conclusion
This framework covers why to choose certain memecoins, how to identify strong projects, how to assess fair value, and when to buy and sell. While absolute success cannot be guaranteed, this systematic approach can help investors make more informed decisions in the risky memecoin market.