According to a report by CoinGecko, meme coins registered an average return of 1,300% during the first quarter. This made meme coins the most profitable narrative during that period and made the number of tokens issued on Solana, the hottest blockchain for meme coin trading, reach an all-time high of 14,648 tokens launched.
In this landscape, new investors might be tempted to spray their funds over different meme coins and hope for stellar growth. Jupiter Zhang, head of liquid funds at investment firm HashKey Capital, highlights that “for every success story, there are dozens more failures.”
Recently, HashKey Capital published a 217-page book titled “Digital Asset Valuation Framework”, a guide to fundamental analysis in crypto. Zhang is the lead author, and he says that by understanding fundamental analysis, investors can identify assets with real potential and longevity, reducing risk and fostering a more sustainable investment strategy.
Meme Coin Investing
As the name suggests, meme coins rise by backpacking on a famous meme. Because of this, most of them have short lifespans. Investors might not be inclined to learn how to do proper research since spreading money might be more profitable.
According to Crypto Briefing, fundamental analysis can be useful for identifying what meme coins have a strong enough narrative to sustain longer-term interest from those likely to fizzle out with the fading of initial hype.
Zhang adds that while fundamental analysis aims for long-term growth against the market’s often emotional and speculative waves, narrative-driven investments are useful to ride the waves of market enthusiasm and investor psychology, potentially reaping quick rewards.
However, narrative-driven investing often leads to the fear of missing out (FOMO), which usually ends in bad investments. In other words, narrative-driven demands an effort to time the market and move swiftly before the narrative shifts, while fundamental analysis delves into the intrinsic value of an investment, looking to identify assets with strong fundamentals that suggest a higher intrinsic value than the market price.
Source: CoinGecko
More VCs into Meme Coins
The meme coin market was always a way for investors to bet without generating returns for VCs. That is because when a token from a protocol is made available to the public, VCs already have their hands on it for a significantly smaller price. Consequently, VCs are the true winners if this token gets popular and its price jumps. Meanwhile, since the community issues meme coins, this is one sector VCs can’t profit from or couldn’t profit from until recently. Shiba Inu closed a $12 million funding round with the participation of Mechanism Capital, Big Brain Holdings, Cypher Capital, and Shima Capital, among others, and this may turn the tide in the meme coin market.
Therefore, that’s where fundamental analysis shows its weight. Zhang believes that as more people get equipped with fundamental analysis tools, the number of serious investments directed at selected meme coins will show sustained growth over time.
The Future of Meme Coins
The trajectory of meme coins appears uncertain yet intriguing, influenced by market trends, regulatory shifts, and investor sentiment. As cryptocurrencies gain mainstream traction, meme coins benefit from heightened interest but face challenges due to their speculative nature. FBS analysts underscore that community strength and ecosystem development are pivotal in determining a meme coin’s longevity while evolving regulatory landscapes pose potential obstacles. Despite uncertainties, meme coins remain attractive to high-risk investors.
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