Analysis of Memes Coin Investment Strategies

For some meme coins, the reason investors favor them is due to their high beta coefficient relative to the underlying blockchain assets. In short, a moderate allocation to meme coins like BONK can achieve a leveraged effect on the underlying assets without actually using leverage, while avoiding liquidation risks.

The signal we are focusing on is when the 30-day beta coefficient exceeds the 90-day rolling beta. When this occurs, the average 30-day and 60-day returns of BONK reach 124% and 413% respectively (with medians of 45% and 57% respectively).

The shift in risk appetite usually comes quickly, and BONK has significantly outperformed the market in a short period. This highlights the importance of buying at the right time. The surge of BONK typically occurs simultaneously with SOL rising over 5% within a week. In this case, the average return of BONK is as follows:

• 1 week average return 26%, median 14%
• 30-day average return 141%, median 11%
• 60 days average return 512%, median 27%

It is worth noting that in about 1/3 of the cases, BONK actually shows a downward trend, indicating that the performance of SOL does not fully guarantee the excellent performance of BONK.

BONK is usually correlated with SOL. However, during periods when BONK performs well, this correlation often weakens.

BONK has a high beta coefficient against SOL over different time periods, indicating a higher beta coefficient from an absolute return perspective. This means that the fluctuations in BONK's price typically far exceed those of SOL, making it a high-risk, high-reward asset.

We view BONK as a leveraged bet on SOL without the liquidation risks associated with leverage. This principle also applies to other "blue chip" meme coins and their relationships with underlying blockchain assets, such as PEPE/ETH.

On-chain data analysis can help us understand the relative quality and beliefs of the holder base. By comparing some top "blue-chip" meme coins, we can identify some outliers.

The growth of Token holders provides a perspective on the recent popularity and spread of the Token. The median and average holding amounts help us understand the beliefs of the median and average Token holders. The proportion of holders with more than $1000 and $100k offers us insights into the holder base.

Whale retention rate measures the belief of the largest holders, while the net inflow/outflow of whales to decentralized exchanges reflects whether large holders are increasing their positions or exiting the project.

Apart from on-chain data, we only focus on meme coins that have sufficient trading liquidity and have experienced multiple significant corrections. For tokens traded on major exchanges, we will pay attention to the open interest.

In terms of community and belief, we look for projects with global appeal, focusing on the impact of their narratives and community slogans, signs of community belonging, leadership, and coordination, as well as whether the project has integrated into the culture. The best meme coin communities often possess excellent marketing capabilities.

To assess "fair value," we focus on the relationship between realized value and market value. When the MVRV ratio is below 1, it may indicate a proximity to a local bottom. Additionally, momentum indicators such as the Relative Strength Index (RSI) and moving averages also help in determining the timing for buying.

Finally, meme coin, as a high-risk asset, its performance is highly dependent on favorable liquidity and economic conditions, as well as the return of "risk appetite" sentiment.

In summary, investing in meme coins requires consideration of multiple factors, including their relationship with underlying assets, on-chain data, value assessment, market momentum, and the macroeconomic environment. Nevertheless, there are still no absolutely safe returns in investing, and excess returns are often accompanied by higher risks.