Zhao Changpeng (CZ)’s family office YZi Labs (formerly Binance Labs) head Ella Zhang stated in an exclusive interview this week that the trend of the market flocking to meme coins is slowing down, with funds gradually flowing back to non-meme tokens. She emphasized, “Projects with weak fundamentals will ultimately disappear.”
(Background: Comment on “Has Solana Cleaned Up, Is the Memecoin Game Over?”)
(Additional Context: Musk Warns: Meme Coins Are Like Gambling, Never Go All In! It’s Foolish to Rely on Memes for Wealth)
Since the beginning of 2024, the meme coin craze has swept through this market cycle, with market funds noticeably shifting from VC-supported tokens to community-driven memecoins. However, the recent heat of meme coins has significantly declined, and investors appear to be gradually returning to non-meme tokens.
In an interview published by BeInCrypto on the 14th, Ella Zhang pointed out, “Although the community-driven narrative provides investors with a fairer entry point, due to weak fundamentals, they (meme coins) have lost momentum over time.”
Starting from the end of the first quarter, interest in VC-supported tokens began to decline, while the popularity of meme coins surged, leading to the so-called meme coin frenzy. VC tokens have “fallen out of favor” in this cycle, exhibiting a marked decrease in the appeal of low circulation, high FDV VC tokens. According to Dune data, the benchmark for VC unrealized profits has dropped significantly to just 3 times, in stark contrast to previous cycles where venture capital returns were as high as 563 times.
Investors have turned to high circulation meme coins and altcoins for a fairer token distribution, refusing to act as the backers for VC sell-offs. The appeal of low circulation, high FDV VC tokens has noticeably diminished.
Funds are flowing back to non-meme coins. However, Ella Zhang stated that the trend of traders flocking to meme coins is currently slowing down, and they are returning to VC-supported altcoins.
“According to CoinMarketCap data, this trend is currently slowing down. The ratio of meme market cap to non-meme altcoin market cap has been declining, indicating that funds are gradually flowing back to non-meme coins. We believe this is a natural market cycle — although the community-driven narrative can generate momentum, long-term value ultimately comes from strong fundamentals.”
Without fundamentals, value cannot be sustained. For Ella Zhang, the success of meme coins is destined to be a temporary phenomenon, as most meme coins lack strong fundamentals.
Although 40,000-50,000 crypto tokens are created daily, the average lifespan of circulating meme coins is only 1.3 hours, and only about 5% of meme coins have a market cap exceeding $10 million. This is not to say that there are no good meme coins, but for any asset to have lasting/growing value, it generally requires one or more foundational services, businesses, products, technologies, or innovations to drive up the price.
Without fundamentals, value cannot be sustained.
VCs Must Adapt to a Fair Launch Web3 Landscape
While VC-supported altcoins are regaining ground, Ella Zhang believes these projects should learn from the meme coin frenzy and adapt to the principles of fair launches.
“Venture capital must adapt to the evolving Web3 landscape, which is increasingly driven by community-centered and fair launch principles. This has become a native culture in the cryptocurrency space. VCs that adapt to this shift by supporting projects with real utility and emphasizing fair and transparent practices will be better positioned to thrive as the market continues to evolve.”
Ella Zhang also stated that project teams should not completely abandon venture capital. In many ways, they can balance the advantages of VC funding with the desire for fair token distribution and community ownership.
CZ Calls for Projects to Build Slow-Release Token Economies
Regarding CZ’s proposal last month for what he believes constitutes sustainable token economics, he suggested that the initial 10% of tokens should be unlocked and sold on the market, with each subsequent unlock needing to meet all of the following conditions:
- At least 6 months after the last unlock.
- Only when the token price has maintained above twice the previous unlock price for a continuous period of 30 days before the unlock date.
- A maximum of 5% of the tokens can be unlocked each time.
Ella Zhang explained, “CZ calls for long-term builders to commit to slow-release token economies and achieve significant milestones — this refers to projects starting with low circulation and gradually increasing supply based on major milestones, ultimately becoming high circulation projects.”
In conclusion, she summarized, “Ultimately, everything must return to fundamentals. Projects with strong fundamentals will continue to grow, while those with weak fundamentals will ultimately disappear.”
