Memecoin explodes on Solana, are there any tricks to capture the 100-fold meme?

Original title: The Solana Memecoin Crash Course

Original author: HYPHIN, THOR

Original translation: Luffy, Foresight News

Due to convenience and low barriers to entry, trading and creating custom tokens are easier than ever before. Coupled with social media and a growing community of retail investors, the expansion of tokens that do not provide any utility has greatly accelerated, relying solely on loyal communities and aggressive marketing to sustain their growth.

Introduction

Internet culture and Meme have long occupied an important position in the cryptocurrency space. This is evidenced by the huge market value of Memecoin, which, as of the time of writing, has a total market value of approximately $66.65 billion. Dogecoin accounts for approximately 43.81% of the entire category, with a valuation higher than some well-known companies (such as Vodafone, Pinterest, and Logitech).

The central hub for Memecoin has long been Ethereum, with some competitors emerging only recently. Activity associated with these tokens has shifted, with Solana becoming an active venue for projects and speculators entering the market.

A large contributor to Solana’s expansion and surge in trading volume is its vibrant on-chain Memecoin ecosystem, which has gained a lot of attention this year, with names like “dog wif hat” and “Bonk” becoming popular and prices soaring.

While we don’t endorse Memecoin trading, it’s still instructive to understand what’s going on in this market that’s finding its footing and rising in prominence.

At first glance, it may be difficult to discern the reasoning behind seemingly absurd price action, but a closer look may reveal some clues. Therefore, in this article, we will give a broad overview of the entire Memecoin space, looking at every corner and trying to figure out what is going on.

Overview

Before we proceed with our analysis, it is best to set the scene and get familiar with the environment and its characteristics, as there is little rationality behind the whole thing and it needs to be viewed with an open mind.

Every space develops its own unique culture, and Solana is no exception. Stories of missed life-changing fortunes and overnight success have been repeated on Twitter since the start of the Solana season. Sensing the potential for huge opportunities, many people from all backgrounds have entered the space in search of good fortune.

A key feature of Memecoin on Solana is the sheer number of tokens created every day.

Due to the extremely low cost of launching a Memecoin, a large number of new trading pairs are listed on decentralized exchanges every day. This makes it a fast-paced space. Most new trading pairs have low liquidity, resulting in high price volatility. The average lifespan of a project is often 24 hours or even less, mainly because bad actors try to take advantage of the frenzy and deceive ambitious and unsuspecting investors with elaborate scams and marketing.

If you spend enough time in Telegram groups, and look and sift through hashtags on Twitter, you can map most of the participants to specific roles that are critical to the space.

Developers: Developers are hailed as gods, and they are seen as shepherds who can lead the community toward financial freedom. Their decisions often influence early price action and determine the longevity of a project, because as creators, they have full control over Memecoin fundamentals, and they often hold a significant amount of the token supply.

Influencers: Influencers use their influence on social media to share their personal investments to raise awareness of projects with varying motivations. Some of them hope to strengthen the community by increasing social proof, and some simply seek to exit liquidity to profit.

Community Members: Extremely loyal, and willing to do whatever it takes. These individuals frequently appear in chat groups, interact with others, and tirelessly promote their investments under the posts of popular figures whose attention can determine the success or failure of a project.

Snipers: By automating on-chain interactions and indiscriminately buying tokens as soon as a liquidity pool is created and opened for trading, holders of these wallets hope to take advantage of the upward momentum generated by regular traders buying after them. In most cases, they do not hold for the long term, but sell early to take profits because there are many such opportunities.

Remember, this all happens in a brutal and ruthless player gaming environment. To stay competitive, we have developed a large number of trading tools with useful analytical features to speed up decision making and execution. Services such as Photon and BonkBot are favored by most traders.

Characteristics of Successful Memecoins

In the vast ocean of tokens, only a few have been able to sustain high valuations for long periods of time and have close-knit communities. This means that there must be some quantifiable factors that contributed to their success.

Having a solid due diligence framework will make the process of screening your watchlist much easier and save time. This begs the question: what valuable information can we use to effectively analyze these unpredictable tokens?

Using historical data, we can try to identify common patterns and indicators to gauge the potential of a project to a certain extent. For example, by analyzing the top 50 memecoins, we can get a general idea of what attributes the outperformers have.

Trends

Since the entire memecoin track is mainly trend- and narrative-driven, it is necessary to pay attention to which categories or themes are currently popular to avoid boarding a sinking ship.

By visualizing the hot topics with a vocabulary graph, it is easy to see the current hot trends.

As you can see, animal-themed tokens are the hottest, with cats being the most popular sub-topic. The second largest sub-topic in the graph is "Internet culture", which usually includes crypto Twitter and mainstream memes.

An interesting detail about the above graph is the keyword "copy", which includes projects that have been derived from the original concept and have their own unique features. They keep appearing, providing a second chance for those who missed the previous project.

Indicators

After narrowing down the potential categories, it is time to evaluate some technical details.

Percentage of projects that disable Mint authorization: 100%

Each project should prohibit minting additional tokens to avoid unlimited selling pressure. In our observation group, all projects have disabled this setting.

LP Burn Percentage: Mean — 78.7%, Median — 98.0%

LP tokens received by deployers when adding initial liquidity are destroyed, which reduces the risk of creators withdrawing liquidity. The median percentage here shows that usually most of the initial LPs are destroyed.

Percentage of tokens held by top 10 wallets: Mean — 27.51%, Median — 21.79%

In most cases, the top token holders hold around 20% and vary by project. The lower the percentage, the lower the likelihood that a few individuals can cause damage through a large sell-off.

Days since trading started: Mean — 23.52, Median — 6.66

As most memecoins have a lifespan of just a few days, an age of over 100 hours is usually a good indicator. The fact that the average age of the top 50 memecoins is just under a week is an indication of how fast the market can change. However, the top memecoins tend to remain relatively stable and hold their own in terms of leaderboard rankings.

Community

The hardest but most critical aspect is probably the cornerstone of every Memecoin - the community. An active, outspoken community with its own unique culture is essential to spread the message and attract new members to drive its growth in an extremely saturated market.

In order to first promote discussions and market themselves in the early stages, projects need to be present on media platforms such as websites, Twitter, Telegram and Discord to gain verifiable credibility and maximum influence.

Number of media platforms per project:

· 1 platform — 2%

· 2 platforms — 10%

· 3 platforms — 78%

· 4 platforms — 10%

We observed that more than two-thirds of Memecoins had at least 3 marketing channels, so the lack of Telegram and Twitter chats should immediately raise red flags.

Using these channels, we can survey the community to look for positive indicators, which are usually (but not limited to):

Don’t fight: People constantly bickering in group chats or on Twitter is not good for the project’s image and may put investors off. Positive sentiment and healthy discussions are more attractive to investors.

Strong Twitter presence: Having a well-known brand on Twitter with distinguishable characteristics (such as inside jokes) is necessary to maximize the chances of the brand being memorable, recognizable, and going viral, thereby attracting as much attention as possible.

Respected Influencers: Having support from reputable social media figures is a huge plus, while being associated with notorious influencers with a tendency to pump and dump should be avoided.

Final Evaluation

The final stage of the analysis will bring together all of our thoughts and observations using an evaluation matrix to draw conclusions. Each person should form their own approach based on personal parameters and risk tolerance. In this section, we will use an in-house solution provided to us by the quantitative analysts at On Chain Times.

If you’re wondering why the “Red Flags” axis starts at 4, the answer is: Memecoins on Solana that don’t have red flags simply don’t exist. By building a ratio between the community rank and the number of negatives present, we can loosely assign each coin to a category.

The goal should always be to identify and interact with Memecoins with high community ratings and minimal warning signs, as they have a greater chance of success.

However, there are some common phenomena that should be considered when trying to categorize projects:

Community Takeover: In some cases, the developers of a promising and popular concept decide to exit the project by selling all of their tokens, and in response, the community creates new communication channels, essentially restarting the project without the risk of developer shenanigans.

Influencer Revival: This is difficult to predict, but there are extreme cases where a dead project gets a second chance and receives widespread attention due to the involvement of a popular creator.

Sniper Exits: Early exits by snipers often leave a stain on the leaderboard for a project, and they can increase their chances of marketing on social media, as they are less likely to offset community efforts through huge selling pressure, which can easily scare people away.

Finding gems is a difficult task, but as history has proven, they do exist and occasionally appear on our radar.

Conclusion

Memecoin has reached a point of importance that is impossible to ignore, and despite its somewhat ridiculous nature, it is here to stay for a long time. Even with no intention of getting involved, it would be a cardinal sin for any informed cryptocurrency investor to ignore an important area of the market. With the knowledge gained from this article, hopefully you won’t feel like you’re stumbling in the dark and grasping at straws as you navigate the world of tradable memes.

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