How does the whale analyze the evolution of meme coins? What is the best strategy for trading meme coins? How can SocialFi create a win-win situation for creators, platforms, and fans or supporters?
Title: How does the whale analyze the evolution of meme coins? What is the best strategy for trading meme coins? How can SocialFi create a win-win situation for creators, platforms, and fans or supporters?
Index:
The evolution of meme coins in the crypto race
Online exchanges losing the spotlight
No need to rely on big players to trade meme coins
The key to creating a win-win situation in SocialFi
Meme coin trading strategy: Concentration and patience
Controversial whales unite! The Motion Zone held a Space event last night titled “Zero-Sum Game: How Controversial Whales Profit from Meme Coins and SocialFi”. The event featured heavyweight guests, well-known figures in the cryptocurrency industry, Mr. Bobaoppa and Zhu Su, co-founder of Three Arrows Capital, discussing meme coins and the market trends of SocialFi.
From the early days of PoW-based $DOGE to last year’s community-driven $Pepe, and the recent influx of meme coins such as $Bonk on Solana and Pump.Fun, the meme coin race has undergone various changes. As veterans in the market, what are your views on the meme coin race and how does it differ from the past?
Su: I believe there isn’t much difference compared to the past. It’s just that now it’s easier for people to create their own meme coins. Back in 2014 and 2015, there were many people creating meme coins based on Bitcoin, such as Litecoin. At that time, you needed to publish a tweet on Twitter, stating that the coin has the same supply as Bitcoin but with some differences.
Later on, meme coins started appearing more in the DeFi space, like Shiba Inu and others. Now, with the easier process of creating meme coins, there are a lot of them in the market. Occasionally, there are stories of people making millions from just a $100 investment, which attracts many retail investors who think they can “get in early.”
Another point is that when investors buy Bitcoin, Ethereum, or Solana, they no longer feel like they’re getting in early. But when they buy meme coins, they get the feeling of being “still early.” That’s why platforms like Pump.Fun are earning millions of dollars daily, as people believe they are the early adopters.
Many times, investors see meme coins as a game, something fun to play with, where it’s okay to lose. That’s why meme coins are so active on Solana. If meme coins are considered bad, it will also affect the ecosystem of many other coins.
Machi: Previously, in 2017, we tried SocialFi meme coins, and during the DeFi period, we created the lending protocol $Cream. Recently, meme coins on Solana have been gaining popularity. I used to be an ETH-maxi and didn’t participate in other chains, but later I thought about trying meme coins on Solana.
From researching to actually doing it, my idea is that many people are tired. Early investors and VCs bought in at low prices, while regular investors end up buying at high prices. This is what Su mentioned earlier about being “early.” If you’re not an early adopter, you’ll end up being trapped at high prices, especially when unlock periods come and people start selling their coins on the market.
What’s even scarier is that locked coins are also being dumped on the market, and you don’t know where these coins are coming from. These are some of the unethical behaviors I’ve seen in the crypto industry.
If the project has well-written rules and follows them, and if their performance and character are good, I will fully support and invest in them. But if I see unethical behavior, I won’t consider investing.
Motion Zone: The relationship between meme coins and exchanges is very close. When an exchange prepares to list a meme coin, the price often surges. Or when an exchange sees high trading volume, they are forced to cater to the demand. Mr. Bobaoppa, what do you think needs to be done if $Bobaoppa wants to be listed on exchanges like Binance? What will the relationship be like between $Bobaoppa and exchanges?
Machi: Binance is very strict. I have only listed two coins on Binance, so it’s a difficult task, whether it’s a small or large exchange. Each exchange has its own game rules. My view is that the power dynamics have changed significantly compared to the past. Now, there are decentralized exchanges (DeX) like UniSwap, Pump.fund, OX.fun, and Friend.tech, which feel like they are becoming exchanges themselves.
These DeXs, such as UniSwap, SushiSwap, and Curve, are gradually weakening the influence of centralized exchanges. Although centralized exchanges still serve as fiat gateways, their power is gradually diminishing. As you just mentioned, one key aspect of meme coins is that they often burn liquidity pools (LP) to ensure there is some liquidity available, which prevents attacks from different wallets.
There is a project called Baseline that I think is remarkable. These young people are very creative, and what they are doing is similar to a new ERC-20. You can create coins on their platform, like OX, Pump, and Friend.tech. They are also part of the ecosystem. These coins can leverage automatically, and it’s worth checking out Baseline.
Su: This wave of meme coins is different from the previous one. In the previous DeFi period, it was easy for projects to get listed on exchanges because people were using those projects, and exchanges were afraid that users would shift to DeFi and leave centralized exchanges. That’s why many DeFi projects, like Binance and FTX, listed the coins immediately. Additionally, there was fierce competition between centralized exchanges.
But this wave has less competition. Exchanges are mainly concerned about regulatory issues, so trading volume doesn’t really matter when it comes to listing a coin. For example, if there are coins on Ethereum, such as $Trump, with a daily trading volume of $10 million, they still don’t get listed because many teams don’t have coins to give to exchanges. These are fair launch projects, and liquidity pools are locked.
For example, $Pepe is like that too. They didn’t give coins to exchanges, but they got listed because of their high trading volume. $Bonk was listed quickly, but I’m not sure about the specific reasons. Most meme coins haven’t been listed on exchanges yet, although Bybit recently started listing some, but still not many.
Motion Zone: So, both of you OGs believe that exchanges have less influence now compared to before?
Su: Yes, their influence has indeed diminished. A lot of funds are now on-chain, like $WIF mainly coming from on-chain sources. Moreover, wallets and payment services like MoonPay make it even easier to buy Solana and then purchase meme coins, even easier and safer than centralized exchanges.
For example, in the previous wave, projects like Olympus or Wonderland raised around $1 billion within a month. The on-chain funds are now larger than those on centralized exchanges, and the narrative of exchanges has disappeared.
Motion Zone: Moving on, let’s talk about meme coin communities. When selecting meme coins, the community is often the most important factor. Mr. Machi, you mentioned that there are often big players supporting these communities, although retail investors may not be aware of it. How can we choose a fun meme coin community? How do we analyze it?
Su: I think you can observe the trends of smart money and see if the project has a compelling story. You don’t necessarily need to consider which big player is promoting which coin. Sometimes that can be a strategy, but what’s more important is whether you find the project interesting and if the community is appealing to you. Do you want to chat with them every day, or do you find it boring?
Many coins can have unexpected performances. For example, $Slerf is one such coin, with no founder or promoter. $Pepe is also very clever; they started building their story early on, and the actions of the project team are minimal. The key is whether the meme coin can grow from a $100 million market cap to $1 billion, which requires a process and not just one person or a group driving it. The best case scenario is when the value of the coin is realized by everyone, rather than being pumped by a big player.
Motion Zone: I’d like to ask Mr. Bobaoppa. I’ve noticed that you’ve been accumulating $Friend recently, even though you may have incurred losses. But you seem to have a strong belief in this sector. What are your thoughts on SocialFi and Friend.tech?
Machi: SocialFi is related to my previous business experience. I used to run a live streaming platform where both the platform and the creators made money, with fans donating or subscribing. The most exciting part of Web3 in SocialFi is that all three parties can win: creators, platforms, and fans or supporters can all earn money. Although no team has fully solved this problem yet, it feels like a second chance for Web2.
In the early days of Web2, creators on platforms like YouTube or TikTok didn’t make much money, but later on, we saw the rise of superstars like Mr. Beast and popular Twitch streamers. Now, many people are trying SocialFi, but haven’t succeeded yet. I think Friend.tech has great potential in this field because I like the founder and his vision.
Friend.tech initially had a 5% fee, but they recently adjusted it to 1.5% and distributed all the coins to users. I appreciate this fair distribution method, so I’ve been buying Friend.tech coins. I believe that for SocialFi to succeed, it needs to find a balance where all three parties can win. This way, it has a chance to challenge the big platforms of Web2.
Motion Zone: Then why don’t you consider starting your own venture in Web3’s SocialFi sector?
Machi: Entrepreneurship is like making music. You might create a super popular song, but creating another one that’s equally successful is not guaranteed. It’s about timing and luck. I’ve tried creating an NFT exchange, but it didn’t take off because it lacked a spark.
We also tried creating a new project, which took us three weeks to develop, with a team and dynamic features. I’ll keep looking for opportunities, and if it feels right, I’ll invest in it.
Motion Zone: Today is a significant day for market trends. Some say that when the market is not doing well, meme coins become a hotspot. But with the development of ETFs, will it affect the performance of meme coins? Mr. Machi, what are your thoughts?
Machi: In the many bull and bear markets we’ve experienced, Bitcoin always takes the lead, followed by Ethereum, and finally, other cryptocurrencies. So, if you want to play the timing game, you can buy Bitcoin first, then convert it to Ethereum, and then to other coins. But it’s difficult to master.
My own strategy is to choose coins I trust and concentrate my funds on three to five coins instead of spreading them across dozens of coins. I don’t trade every day; I just choose a few coins I trust and hold onto them. This way, I avoid the influence of “hype” and unfortunate events.
Motion Zone: Suzhu, what are your thoughts on the future performance of meme coins and Ethereum’s altcoins?
Su: Meme coins may not outperform Ethereum initially, but in the later stages, the volatility of these coins is significant. When Ethereum rises to a certain level, many people start buying meme coins, and that’s a normal phenomenon.
For example, when Ethereum rises by 20%, meme coins like Pepe will also rise at the same speed or even faster. This is especially true for Ethereum-related meme coins. When Ethereum reaches new highs, many people will randomly buy meme coins.
The rise of meme coins mainly comes from community promotion and the speculative nature of gambling. Solana is also a good example. When Solana rises, people feel richer and start playing with more meme coins, which increases the trading volume and drives the price of Solana.
Motion Zone: I understand. So, you believe there is a positive feedback loop between meme coins and the blockchain. If the blockchain performs well, meme coins also perform well, and vice versa?
Su: Yes, the performance of meme coins is related to the performance of the blockchain. Even for Bitcoin enthusiasts, meme coins have a strong appeal. For example, Pepe remained quiet for six or seven months and then suddenly surged 20 times. Dogecoin surged 100 times in 90 days in 2021. So, if you believe in meme coins, buy some and hold onto them, instead of trading every day.
If a meme coin increases by 10 times, sell a portion, but don’t sell just because it increased by 20% or buy when it drops by 10%. This trading strategy will make you lose money. Meme coins need time to mature, so be patient and wait for the opportunity to make money.
(End of translation)