Memecoins: High-risk, high-return investment choice

Memecoins are favored by investors for their high beta coefficient to Layer 1 (L1) assets. For example, a moderate allocation to memecoins like BONK can provide leverage on L1 assets without increasing liquidation risk.

The data shows that when BONK's 30-day beta exceeds the 90-day rolling beta, its average 30-day and 60-day returns reach 124% and 413% respectively. This change in risk preference typically occurs quickly, allowing BONK to significantly outperform the market in a short period of time.

There is a certain correlation between BONK and SOL, but this correlation tends to weaken when BONK performs well. Overall, BONK can be seen as a high-risk leveraged bet on SOL.

On-chain data analysis is crucial for assessing the quality and beliefs of memecoin holders. We compare several top 'blue-chip' memecoins' metrics, including token holder growth, median and average holdings, proportion of large holders, and whale behavior.

In addition to on-chain data, we also pay attention to factors such as trading liquidity, price pullback history, open interest volume, etc. Community activity and beliefs are also important considerations, including social media activities, narrative appeal, community cohesion, etc.

The assessment of the "fair value" of memecoin can be achieved by comparing the realized value with the market value (MVRV ratio). When MVRV is below 1, it may indicate proximity to a local bottom. In addition, momentum indicators such as RSI and moving averages also help determine the timing of buying.

It is worth noting that memecoins are high-risk assets, and their performance highly depends on liquidity conditions and market sentiment. Investors should consider allocation in a favorable macro environment, combined with the return of "risk preference" sentiment.

In short, although there is no absolutely safe investment method, investors can better seize opportunities in the memecoin market by comprehensively considering factors such as beta coefficient, on-chain data, fair value assessment, and market momentum.