Meme Coin Investment Strategy Analysis

Why choose Meme coin?

Beta Effect

Some Meme coins are popular mainly because they have a high Beta coefficient against Layer 1(L1) assets. In short, a moderate allocation to certain Meme coins can achieve a leveraged effect on L1 assets without actually leveraging ( and avoiding liquidation risks ).

The signal we are focused on is when the 30-day Beta coefficient ( pink line ) exceeds the 90-day rolling Beta coefficient ( red line ). When this occurs, the average 30-day and 60-day return rates of a certain Meme coin are 124% and 413% respectively, with medians of 45% and 57% respectively (.

Price trend comparisons indicate that shifts in risk appetite patterns often occur rapidly, with Meme coins significantly outperforming the market in a short period. This highlights the importance of buying at the right inflection point.

The explosion of Meme coins usually occurs simultaneously with their corresponding L1 coins rising by more than 5% within a week. In this case, the average returns of Meme coins are as follows:

• Average weekly return of 26%, median 14%
• Average 30-day return 141%, median 11%
• Average return of 512% in 60 days, median 27%

In about 1/3 of the cases, Meme coin is actually declining, which indicates that the performance of L1 coins does not guarantee the excellent performance of Meme coins.

) Correlation Analysis

Meme coins are usually positively correlated with their corresponding L1 coins. However, during periods when Meme coins perform exceptionally well, this correlation often weakens.

Key Points

• Meme coin has a high Beta coefficient against L1 coins over a rolling period of 30 days, 60 days, and 90 days, indicating a higher Beta coefficient in terms of absolute returns. This means that the volatility of Meme coin typically far exceeds that of L1 coins, making it a high-risk/high-return asset.

• Meme coin can be seen as a leveraged bet on L1 coins, but without bearing the leveraged ### liquidation risk (.

• This analytical method is also applicable to other "blue-chip" Meme coins and their relationship with L1 assets.

On-chain Data Analysis

In addition to understanding the performance of Meme coins relative to their L1 counterparts, on-chain data analysis can also provide important insights.

) Token holders increase ###90 days (

The growth of token holders reflects the recent popularity and spread of the token.

) median and average holding amount

This helps to understand the median and average beliefs of Token holders. Some Meme coin communities are more centralized than others, and the median holding of these Tokens is lower because a large number of small airdrops are distributed to many wallets.

holders with holdings >$1000 ratio

This provides another perspective for holders. A higher proportion of wallets holding >$1000 can serve as an indicator of interest and belief.

The proportion of holders with holdings >$100k

This reflects the relative interest and belief of large holders in the Token, compared to the total number of holders.

Whale Retention Rate

Analyzing the wallets that once held >$100k Tokens and still hold more than 50% of their peak unit count helps to gauge the conviction of the largest holders.

Whale: DEX Net Inflow/Outflow

Analyzing the inflow/outflow situation of wallets that once held >$100k Tokens can provide insights into whether the largest holders are buying more Tokens or exiting the project.

Other Considerations

• Meme coins with sufficient trading liquidity and having experienced multiple pullbacks of over 50% are worth paying attention to.
• For tokens traded on major exchanges, the open interest is an important reference indicator.

Community/Faith Factors

• Resonant narratives and community slogans
• Signs of strong belief and sense of community belonging
• The embodiment of leadership and coordination skills
• Signs of cultural embedding
• Social media marketing capabilities, especially targeted at the young user demographic.

Fair Value Assessment

The ratio of realized value to market value ### MVRV ( is an important indicator for assessing "fair value". When the MVRV ratio is below 1, it indicates that holders are on average in an unrealized loss state and may be close to a local bottom.

Kinetic Analysis

) Relative Strength Index ### RSI (

• RSI approaching or below 30 indicates an "oversold" condition
• RSI approaching or exceeding 70 indicates "overbought" condition

) Moving Average

Analyzing the relationship between price and key moving averages helps to identify buying opportunities.

Google Search Trends

Analyzing Google Trends and other social sentiment indicators can help determine the timing for buying/selling.

Liquidity Cycle/Macroeconomic Environment

Meme coins are highly sensitive to liquidity conditions and risk appetite. A favorable liquidity/economic environment, combined with the return of "risk appetite" sentiment and "animal spirits," is key to allocating Meme coins.

Summary

Considering the above factors, an investment framework can be constructed that includes the following content:

• The reason for Meme coin being a very small part of the investment portfolio ### Beta effect (
• Identifying powerful "fundamental" Meme coins methods ) on-chain data (
• The way to measure "fair value" ) MVRV (
• Buying Opportunity ) Turning Point/Macro/Momentum (
• Selling Opportunity ) Momentum/RSI (

Although this framework cannot guarantee absolute certainty, it should help investors better grasp opportunities and control risks in the Meme coin market.