Is The 'Memecoin Supercycle' Over? Mad Crypto Alpha With Ivan

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I’m Ivan and welcome to my weekly column Mad Crypto Alpha.

Some people want to build the “future of finance,” but I just want to help you make money in crypto.

Each Sunday, you get weekly insights the news does not cover but you need to know about.

So you’re not just entertained by crypto but get the alpha behind the story.

In this week’s issue:

• Why do VCs hate meme coins?
• Is no one left to buy our meme coin bags?
• Memecoin Supercycle: It’s so over or we’re so back?

Why Do VCs Hate Meme Coins?

Bitcoin BTC/USD continued in crab market mode last week.

Every time that happens, Crypto Twitter turns into “The Jerry Springer Show.” This week’s topic: crypto VCs hatin’ on meme coins.

Exhibit A: Jack Niewold, angel investor.

Exhibit B: Eddy Lazarin, chief technological officer at a16zcrypto, a major venture capital firm.

If you’re not well-versed in the industry, you won’t know that what you see is not what you get.

What VCs say: Meme coins are bad for crypto because they make the industry look like a casino, distract from, *checks quotes*, “projects that appeal to the masses” and alienate regulators.

What VCs mean: Nobody is buying our VC coins because meme coins are the most profitable narrative. Can devs do something?

What’s actually happening: VCs and the entire industry have brought this on themselves. Retail, that is you, dear reader, has given up trying to understand zero-knowledge, restaking, real-world, [insert latest crypto buzzwords].

VCs have no issue with meme coins when they’re in on it. See a16z booking profits on Apecoin APE/USD. But, as Hsaka, one of the most proficient cryptocurrency traders, puts it: VCs created the monster they complain about with their coins’ predatory tokenomics.

“They bit the hand that fed them, now the same hand has dropped them off at the shelter, and taken in a more friendly dog.”

Where VCs do have a point: The meme coin market is diluted and maturing.

Dogecoin used to be a “F-U to crypto bros shouting have fun staying poor.” New-gen meme coins are, as Qiao Wang puts it, more like white-collar sports betting, where you cheer on your favorite narrative. And unlike with sports, have at least a theoretic chance at asymmetric upside.

But unlike sports betting, there’s no ref checking the insider allocation of any given hot new meme coins.

Also, a lot of meme coin wealth is imaginary and can only be cashed out if you’re skilled at doing so:

A lot of people won’t have that skill. That means a lot of people will get hurt. And that means, the government will get involved (even more).

So, if there are ever more meme coins and it’s becoming ever more difficult to turn a profit, is there even anyone left to buy at this point?

Read Also: Bitcoin’s Rally Sparks Renewed Interest In Cryptocurrencies — Should You Invest In It Now?

Is No One Left To Buy Our Meme Coin Bags?

It’s been a rough month for meme coins. Just look at the 30-day performance of the top five by market capitalization.

Ouch.

As Kyle, a pseudonymous researcher, correctly points out, memes are the consensus trade. And when everyone has bought, who is left to buy?

Meme coins are not the most egalitarian thing crypto has ever seen. As a trader, you have to pick your dilution poison:

• Dilution of valuation: classic altcoins that come with massive token unlocks to pay the venture capitalists funding them. Price gets depressed by token sales.
• Dilution of supply: meme coins that have no barrier of entry to being created. Price gets depressed by endless competition.

Mert, CEO of Helius Labs, says — and he is right — that memes are not the reason VCs don’t fund stuff people actually want. Their risk aversion and wrong incentives are the real reason. It’s easier to justify investing in the 100th blockchain over a new ambitious project.

But that doesn’t change that, quoting Kyle again, “you can’t just ape with half a brain anymore.” We are (probably) not early but also (probably) not late in this cycle.

The medium to long-term macro outlook is still positive for crypto because we’re in a situation last seen in the 1940s — the economy is trapped between accelerating public debt and re-accelerating inflation.

So, what’s it gonna be with meme coin investing then — so over or about to be so back?

Read Also: Crypto Analyst Predicts This Altcoin Will Explode 260% In 2024, And Its Not Dogecoin Or Shiba Inu

Memecoin Supercycle: It’s So Over Or We’re So Back?

Ansem, the Solana SOL/USD influencer you may remember for his market-moving audience size, thinks there will be a “consolidation into proven winners.”

I tend to agree with that. As I pointed out on not-Twitter, a lot of crypto bros throw around sky-high meme coin valuations. But is there enough money to go around for all these coins to reach multi-billion-dollar valuations?

What kind of situation does the market have to be in for someone to look at a meme coin valued tens or hundreds of billions and go,“Yup, that checks out, I think this is going a lot higher, let me buy here”.

But I do think Bitcoin is structurally set up for another leg up in this run:

Long-term, I see the combination of (geo)political instability, fragmentation, loss of trust, digitalization and demographic change pushing Bitcoin up and to the right. And meme coins as white-collar online sports betting alternative with it.

TLDR: It’s not over, we’re about to be back, bear with us.

Wrapping It Up

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Shoot me a DM or Benzinga a mail if you have topic requests, and I'll see you back for next week's Mad Crypto Alpha.

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Image created using artificial intelligence with Midjourney.