Mint Ventures Buying the bottom of the bear market, don’t choose Meme

Mint Ventures advises against choosing Meme during the bear market

Author: Alex Xu, Research Partner at Mint Ventures

This issue of Clips is based on a discussion I had with other investors in a crypto community about the topic of memes. In this article, I will elaborate on my own viewpoints to fully express my perspective.

The following content represents my views at the time of publication and may contain factual errors and biases. It is intended for discussion purposes only, and I welcome corrections from other industry peers.

Buy the dip in a bear market, but don’t choose meme projects.

That sounds like a no-brainer, doesn’t it? Who would choose to invest in meme projects with lifecycles ranging from a few months to just one day for long-term allocation?

However, the memes discussed in this article are “blue-chip memes” such as Doge, Shiba, and Pepe, which have already gained a significant market value and entered the mainstream.

Some opinions suggest that “new-generation low market value memes” like Pepe will replicate Doge’s trajectory in the next bull market cycle, reaching a market value of billions.

But in my opinion, when making cross-cycle allocations, it may not be a good choice to buy in a bear market.

The value proposition of meme tokens

A meme is a cultural and information phenomenon of self-replication, duplication, and dissemination. Meme tokens are tokens of crypto projects that possess meme attributes. One of their characteristics is that the tokens themselves generally do not have direct value capture, and the projects often parasitize or derive from memes outside the crypto world, such as the Shiba Inu for Doge, the Pepe frog for Pepe, or the recent popular meme token named Bitcoin, which features Harry Potter, Obama, and Sonic the Hedgehog (with four layers of Buff). In addition to well-known figures and popular culture, some widely accepted beliefs can also become sources of memes. For example, LTC’s positioning as “digital silver” relative to BTC, which is considered “digital gold,” inherits the dual cultural power from precious metal silver and BTC as a financial meme.

Unlike other business-oriented crypto projects such as DeFi and web 3 Game, memes seemingly lack a business model. However, their business model and PMF (Product Market Fit) are very clear, that is: providing a speculative medium with great imagination for mass crypto investors.

When we say “providing for mass investors,” it means that memes have simple and fresh concepts, which are either weird or conflicting, making them easier to capture the attention of the masses among massive amounts of information.

When we say “great imagination,” it means that they do not have actual business operations as the gravitational force of token price. Their valuation is solely based on the consensus that can skyrocket.

Even the most serious crypto practitioners cannot deny that “speculative profit-making” is a crucial, if not the primary, driving force in the crypto world. And the endless array of meme projects is the PMF that caters to this demand.

And the superiority of encrypted Meme tokens compared to other traditional speculative targets is also very obvious:

  • Unprecedented “accessibility”. As long as you have a cryptographic wallet and network, anyone from anywhere in the world can participate in its speculation without KYC, registration, or review, without identity barriers, and the trading time is 7 × 24. In the traditional financial world, it is difficult for you to participate in the speculation frenzy of Gamestop in 2020-2021.

  • Information transparency. Although it is still possible to be manipulated and influenced by the Meme issuer in terms of code, funds, and rules, the transparency of Meme token information, fund flow, and algorithm has greatly increased. Compared with traditional black-box Ponzi schemes, the “information starting point” for people to speculate is more fair.

  • A wide variety of varieties, never lacking targets. It is very low-cost to initiate and create a Meme project, and there are endless projects. “Opportunities are always many.”

Unlike conventional web 3 commercial projects (such as DeFi), the intrinsic value growth of Meme tokens comes purely from the marginal inflow of attention and funds from future speculators (without derogation). For the former, we mainly predict the increase or decrease of its business, and for the latter, we need to speculate on the attention and funds of future speculators in the market.

This also means that the main task of the operators of Meme projects will be to gather and provoke the attention of the public, guide attention in the right narrative direction, and vigorously promote the spread of Fomo emotions.

The problem is that this is not only difficult, but may also not be in the long-term interests of the new generation of Meme project operators.

Meme tokens lack moats

The development of Meme projects has obvious stages:

  1. Conceptualization and design narrative: to challenge the mainstream, to inspire fighting spirit, to break conventions in a bizarre way, but not to be too far away from the masses

  2. Early promotion: attract the attention of early speculators, whether to obtain recommendations from influential figures at this stage is a turning point for success or failure

  3. Shaping and expanding Fomo: The wealth stories of early participants are widely spread, greed attracts more people to enter, and people believe that what they are currently participating in is not the last straw

  4. Larger-scale adoption: Log in to a large exchange, get rid of the label of being a small-time speculator, and become a true popular speculative target

  5. Maintaining attractiveness: Defend the market share of existing attention and speculative funds

Meme-like projects in the early stage have fragile vitality. Under the premise of large-cycle allocation, this article mainly discusses the “Meme blue chips” in the 4th and 5th stages.

As mentioned earlier, the operation of the Meme project actually relies on the attention of the public, and the transfer of attention is inevitable. The migration of attention is much easier than the transfer of user funds, usage habits of products, and preferences for specific brands.

What’s more important is that the cost of attempting to establish a Meme is so low, which means that existing Memes face endless competition for the attention and resources of speculators.

However, the means for existing Memes to maintain their existing share of attention in the face of attention competition from newcomers are quite limited. Take Shiba as an example. It gained market attention as a Meme-born project during the bull market by conducting “sensational operations” that were both novel and controversial, such as airdropping 50% of its tokens to Vitalik. It took advantage of the rising popularity of Doge and secured its position as the “prince of the dog world”.

However, after being listed on major centralized exchanges (CEX), its ability to attract attention and gather attention gradually decreased. Although the Shiba project team has taken frequent actions, including building its own Dex, L2, issuing NFTs, creating a metaverse, and developing games, in an attempt to transform from a pure Meme into a business-oriented project, both its business performance and token price have been disappointing. Its DEX Shibaswap only has a TVL of 21 million USD, and its token price has significantly underperformed the market over the course of a year.

Comparison of the price trends of Shib and BTC over the course of a year, source: coinmarketcap

The transition from a Meme-like project to a business-oriented project is not easy. On the one hand, business-oriented projects require more detailed planning and execution of strategies, products, and technology, posing challenges to different dimensions of project operation capabilities. What’s more important is that the clumsiness of “working hard” appears unattractive, contradicting the initial anti-mainstream, rebellious, subcultural, and high-profile nature of Meme projects, further eroding the gradually dissipating charm of Memes.

Unlike business-oriented projects, which can build certain competitive barriers based on their business models, Meme projects often lack the means to maintain their intrinsic value, and the dissipation of attention from speculators is inevitable, while working hard often has a counterproductive effect.

The team behind Meme also lacks the motivation to maintain it in the long term

In this era of scarce speculative attention, the success of the new generation of Memes is rarely a coincidence. Most of them are planned and promoted by centralized clusters of power. This power often comes from the conspiracy of multiple forces, including not only funds and exchange resources, but also the timely promotion by KOLs and access to powerful business resources (PEPE, for example, was integrated into opensea as a payment method less than a month after its launch).

However, the cost of maintaining consensus and attention for a successful Meme is increasingly high. It is smarter for the Meme team to use the horse racing method to create more “meme experiments” with different styles and narratives, hoping for the birth of the next Pepe. These newly created and market-driven new “Pepes” also compete for the attention of the “old Pepe”.

Since the core team of the Meme project is mostly anonymous, their departure from a project is much less burdensome than the founders of other business projects. The core team’s “disappearance” further worsens the situation of the old Meme project.

Counterexample: Dogecoin and Bitcoin

At this point, you may want to bring up a counterexample. “Doge, born in 2013, can revive in the last bull market. Why can’t Pepe, as the new generation of meme?”

Doge is precisely a positive example of most memes’ vitality declining with the cycle. Because of Doge’s outstanding performance in the last bull market, it is the result of Musk’s personal influence injection. “The project manipulated by the world’s richest man” is the new meme that propelled Doge. If we exclude Musk’s support for Dogecoin, whether overt or covert, since 2019, the meme elements of Dogecoin itself have already faded in the ever-changing narrative of cryptocurrencies.

So, the question arises, how many people in the world have the same level of influence as Musk and will inject their influence into the next cycle to revive the old memes? There are very few people in the world who have the same level of influence as Musk. Moreover, the list of people who meet the criteria of “standing up to support a meme” is empty.

Litecoin, born in 2011, occupies a strong meme position as “silver to Bitcoin’s gold”. However, without the injection of other new memes and influence, its performance in each cycle is gradually weakening.

In fact, the best counterexample to “meme coins cannot survive cycles” is not Doge, but Bitcoin. As the originator of meme coins, Bitcoin is still the favorite of both new and old cryptocurrency investors and the cornerstone of asset allocation. However, Bitcoin, as the first meme in the history of cryptocurrency investments and the starting point for the birth of all cryptocurrency projects, derives its meme power from its unique and scarce “orthodoxy”.

This “orthodoxy” is something that no other meme possesses, so they are destined to face the competition for attention from generations of new memes.

The difficulty of capturing attention, the inevitable departure of launching teams, and the mass production of competing projects.

Investing in memes is ultimately a skill that emphasizes “quick returns”.