The Memecoin Thesis
How the memecoin and fair-lauch market change the paradigm of crypto in the future
Crypto is the New Asset Class for the Retail Market
Cryptocurrency has reached $100k at the end of 2024 from zero since 2011, when the first Bitcoin was born. In every bull cycle, we have witnessed the pattern of influx of capital rushing into the crypto market. The flow of capital is usually infused into the descending order of fully diluted valuation (FDV), starting from Bitcoin, Ethereum, major coins, “altcoins“, and all the way to “meme coins.” In every cycle, different narratives in the market affect retail market sentiment. The causes of these narratives vary, some of which are led by visionary products and investors with invested marketing efforts (“top-down”), and some are led by retail sentiment or social phenom (“bottom-up”). As each narrative appears, we can see the rush of capital flowing into certain assets, which are not necessarily tied to the fundamentals, contrary to the fundamental investment thesis in the traditional stock markets. This pattern reflects the same retail psychology seen in the formation period of
Stock markets when the “penny stocks” surged in the 1800s, when retail investors rushed into low-cap targets with the emotions of gambling (trying out the luck when multiples are common in the market), fear of missing out (chasing the hot topic), and even curiosity (wanting to get exposure to a new capital market). In the case of cryptocurrency, which has been proven as the next major asset class in human history after the stock capital market, more of the world’s largest institutions and governments are endorsing the new paradigm.
Another critical factor is the increasingly completed DeFi infrastructure since 2020. The rise of decentralized exchanges (DEX) changed the capital market mechanism in both supply and demand. On the supply side, DeFi offers crypto startups the opportunity to launch a token without going through centralized exchanges, leading to an exponential increase in tokens. On the demand side, investors have more options for lending and investment decisions. However, we must use a new perspective to understand tokens in the new asset class. That is, tokens are not stocks, meaning not all tokens are backed by real products and user bases or even with utility, which is the usual understanding of the previous types of tokens where many companies issue tokens to raise from retail or venture capital firms to do their startups.
The New Era of Crypto Assets: the New Global Lottery Market
We view the potential of memecoin and the low-cap market as analogous to the global lottery market but with an even higher upside because each token has more diverse factors (product, marketing, community)
The difference between this crypto-formed capital market and the stock market lies in the features of blockchain technology that lead to unique investor behaviors and asset-listing dynamics in crypto assets. The related features include
Compared to fiat currencies, which have a legacy banking and regulation requirement that prevents people from joining a global finance network efficiently
Permissionless
Crypto offers a global arena for people to participate in the same capital market quickly and with a lower hurdle to enter.
Blockchain openly records transactions, and its unchangeable nature creates use cases in the supply chain and donation flow.
Fair Launch Project
The billions of capital pouring into the memecoin cycle this year and the success of Pump.Fun, a major memecoin launchpad, has proved that tokens can also represent a collective social behavior to reflect a certain cultural attitude or social stance (the incident of the death of a squirrel named Peanut before the US election led to the pump of PNUT token), or even endorsement of certain spirit/individual (Dogecoin rose as Elon Musk openly supported it and later make an organization with the same acronym). Although we have to admit the sentiment and pricing behavior are also primarily affected by key capital controllers (big “whale” and market makers) as in the traditional stock market, the retail behavior towards memecoin represents the nature of tokens is beyond investment decisions tied to fundamentals in products.
The Need to Transferring Crypto Capital Back to Real-World Impact
The above optimistic outlook is the basis of Pump For Good as we think in a new era, the world needs more tools to transfer the crypto-induced capital back to real-world scenarios. Crypto adoption has been a major rhyme for the cryptocurrency industry lately as it moved from the “fat protocol” era (value accrual happening on the protocol and infrastructure level) to the application era (user-friendly applications capturing real revenues generated by sales and fees), which is exemplified by layer1/2 blockchains pouring millions of ecosystem grants/ support towards applications, especially in DePIN, DeFi and gaming. Same for AI & Web3 projects where we have seen founders exploring AI agents solving different real-world problems. Specifically, the rise of DeSci (Decentralized Science) transferred capital generated by the crypto “bubble” towards the funding of science research budget makes us more confident that more stakeholders in the industry retail market, and even crowds outside of crypto market are becoming more open towards the mission of Pump For Good, which is to transferring crypto capital towards real-world solution that has a good social impact.
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