Meme Coin Investment Strategy: Analyzing High Beta Assets from a Data Perspective

Beta Strategy Value Analysis

The investment value of certain meme coins is largely due to their high beta characteristics in relation to the underlying blockchain (L1) assets. In simple terms, appropriately allocating meme coins like BONK can achieve amplified returns on the underlying blockchain without using leveraged trading, thus avoiding liquidation risks associated with (.

The signal we focus on is when the 30-day beta exceeds the 90-day rolling beta value, which last occurred on April 1, ). Historical data shows that when this happens, BONK’s average 30-day and 60-day return rates reach 124% and 413% respectively, with medians of 45% and 57% respectively, (.

Price performance data shows that shifts in market risk appetite often happen very quickly, and BONK tends to significantly outperform the underlying assets in a short period. This highlights the importance of accurately grasping market turning points for buying.

The explosive rise of BONK usually occurs simultaneously with SOL rising more than 5% within a week. In this case, the average return of BONK is as follows:

• 1-week average return 26%) median 14%(
• 30-day average return 141%) median 11%(
• 60-day average return 512%) median 27%(

However, it is important to note that in about one-third of the cases, BONK actually experienced a decline, indicating that the positive performance of the underlying public chain does not fully guarantee the excellent performance of meme coins. These exceptions mainly occurred before BONK’s significant rise at the end of 2023.

In terms of correlation, BONK is usually positively correlated with SOL. However, it is noteworthy that during the periods when BONK performs best, such as the fourth quarter of 2023, the first quarter of 2024, the fourth quarter, and this April ), this correlation often weakens.

Key Points

BONK exhibits high beta characteristics against SOL over rolling periods of 30 days, 60 days, and 90 days, with a higher beta value in terms of absolute returns. This means that BONK’s price volatility typically far exceeds that of SOL, making it a high-risk/high-reward asset.

We can see BONK as a leveraged bet on SOL, but without the liquidation risks associated with traditional leveraged trading.

Although we use BONK/SOL as an analysis case, the same investment logic applies to other “blue-chip” meme coins and their corresponding L1 asset relationships, such as PEPE/ETH.

On-chain Data Analysis

In addition to analyzing the performance of meme coins relative to their L1 counterparts, on-chain data analysis provides a more objective quantitative perspective.

These indicators help us understand the quality of the holder base and the strength of their beliefs. Below is a comparative analysis of some top “blue chip” meme coins:

( Holder Growth ) 90 Days (

The growth trend in the number of holders reflects the recent popularity and spread of the token.

) median and average holding amount

By comparing the median and average holdings, we can understand the distribution characteristics and belief levels of token holders. It is noteworthy that the governance of certain meme coin communities is more centralized. For these coins, the median holding amount is often lower, as a large number of small airdrop allocations are distributed to numerous wallets.

Large Holder Proportion Analysis

• The proportion of holders with a value >$1000: reflects the overall quality and belief of the community. A higher proportion indicates that more investors have strong confidence in the project.

• The proportion of holders with holdings valued at over $100,000: This reveals the relative interest and belief of large investors in the token, relative to the total number of holders.

( Large Holder Loyalty

By analyzing the wallets that once held tokens worth over $100,000 and still retain more than 50% of their peak unit count, we can measure the conviction strength of the largest holders. This metric filters out the noise caused by price fluctuations and more accurately reflects the loyalty of the funds.

) Capital Flow Analysis

Track all wallets that have held tokens worth over $100,000, analyzing the net inflow/outflow of these wallets to decentralized exchanges. This provides direct evidence of whether large holders are increasing their positions or exiting the project.

Other Considerations

Apart from on-chain data, we are only interested in meme coins that have sufficient trading liquidity and have experienced multiple pullbacks of over 50%.

It is important to note that our data analysis only includes on-chain activities and does not account for the tokens held by centralized exchanges. Approximately 20% of BONK exists on centralized exchanges.

For tokens traded on major exchanges, the open interest is another important reference indicator.

Community and Belief Analysis

In meme coin investing, more crypto-native intuition comes into play, including monitoring social media activity and market sentiment.

We focus on the “potential audience interest” of meme coins. For example, it must be a theme that is acceptable to a global audience, such as the “disrupting the stock market” concept of SPX6900—though it seems absurd, it has the potential to attract attention and form a social movement.

The elements we are looking for include:

• Resonant narratives and community slogans
• Evidence of community members’ strong belief and sense of belonging ### this can transform holders into project promoters ###
• Signs of community leadership and coordination skills
• Signs of cultural embedding ### such as the cultural foundation of Pepe Meme ###

It is worth noting that some communities are now promoting projects through short video platforms to reach younger potential crypto users. The most successful meme coin communities often have excellent marketing capabilities.

Value Assessment

To determine whether the current purchase is at “fair value”, the clearest method is to analyze the relationship between the proxy indicators of the cost basis of all circulating tokens at the realized value ( and the market value.

When the MVRV ratio of ) market value to realized value of ( is below 1, it indicates that holders are generally in an unrealized loss position, which typically suggests that we may be approaching a local bottom, assuming that the bullish market environment persists.

Taking BONK as an example, its implementation price is about $0.0002. At the time of writing, the trading price of the token is $0.0000145, which may indicate that this is a good entry price.

*It is important to note that the price calculation does not take into account the tokens held by the trading platform. It is estimated that about 20% of the BONK supply is on centralized exchanges.

Momentum Analysis

In the absence of traditional fundamentals, momentum indicators have become another method to assess “fair value”:

) Relative Strength Index ( RSI )

RSI helps us understand whether the recent momentum of the token is overbought or oversold:

• An RSI close to or below 30 indicates an “oversold” condition.
• RSI close to or above 70 indicates an “overbought” condition.

( Moving Average

Analyzing the position of the price relative to key moving averages is also an effective way to assess recent momentum. Investors typically want to buy strong assets when the price breaks through key support areas, provided they have sufficient confidence in the 3-6 month time frame.

) search trends

Analyzing search engine trends and other social sentiment indicators can help investors grasp changes in market sentiment, providing reference for buy/sell decisions.

Macroeconomic Considerations

It must be emphasized that meme coins are at the extreme end of the risk spectrum. It is well known that Bitcoin is sensitive to liquidity conditions, and meme coins are even more so. A favorable liquidity/economic environment, combined with a return of “risk appetite” sentiment and “animal spirits,” is the key prerequisite for allocating meme coins.

Investment Framework Summary

Based on the above analysis, we have developed a complete investment framework for meme币.

1. Why some meme coins ( with high beta characteristics ) can be a very small part of an investment portfolio.
2. How to identify meme coins with strong “fundamentals” ( through on-chain data )
3. How to measure “fair value” ### MVRV and other indicators (
4. When to buy ) market turning points/macroeconomic environment/momentum indicators ###
5. When to sell ### momentum/RSI indicator (

Of course, this does not mean that the framework is absolutely reliable. There are no easy excess returns in the investment field; higher returns inevitably come with higher risks.

Nevertheless, establishing a systematic investment framework can help investors better grasp opportunities and risks in the uncertain meme coin market.