Meme coins have been popular among retail investors this year, without the need for a roadmap, complex technical ideals, or support from prominent venture capitalists (VCs). Even institutions have started to promote meme coins.
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Meme coins have better liquidity than stable coins
What is Volume / Mcap?
1. Liquidity Level:
2. Market Sentiment:
3. Price Stability:
4. Investment Decisions:
What does the Meme Generation show?
On May 16th, as Bitcoin returned to $66,000, among the top 100 coins ranked by market capitalization, the top ten coins based on Volume / Mcap (the ratio of trading volume to market capitalization) were all meme coins, except for stable coins. This demonstrates that meme coins have better liquidity than all other coins.
BOME even has better Volume / Mcap than the leading stable coin USDT, indicating a high level of liquidity comparable to its market capitalization.
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Looking at the historical data of Volume / Mcap in January this year, the topics at that time seemed to revolve around parallel execution blockchains like Sei and Sui, the Bitcoin ecosystem, L2, etc. Liquidity was still distributed among various narratives. However, the Meme Generation is completely focused on meme narratives.
Volume / Mcap is an important indicator for evaluating the liquidity of financial assets such as stocks, cryptocurrencies, etc. This ratio provides information on the following aspects:
A high Volume / Mcap ratio indicates active trading and high liquidity of the asset in the market. This means that investors can easily buy and sell the asset without being greatly affected by price fluctuations.
A low Volume / Mcap ratio indicates lower liquidity of the asset, which may result in larger price fluctuations and higher transaction costs for investors.
A high ratio may reflect strong market interest and attention in the asset, whether due to high market sentiment, upcoming major events, or increased investor confidence in the asset.
A low ratio may indicate lower market interest in the asset or a wait-and-see attitude in the market.
When an asset has a high Volume / Mcap ratio, the price is usually more stable because there are more market participants buying and selling the asset, resulting in smoother price movements.
On the contrary, assets with a low ratio may be more susceptible to large trades, leading to greater volatility.
For investors, assets with high Volume / Mcap ratios are usually more attractive as it means it is easier to find buyers and sellers in the market, making trading more convenient.
Assets with low Volume / Mcap ratios may require more careful analysis and cautious trading strategies to avoid risks due to insufficient liquidity.
Volume / Mcap is a useful indicator that helps investors understand market liquidity, sentiment, and price stability, enabling them to make wiser investment decisions.
The author believes that the Meme Generation represents a comprehensive performance in the cryptocurrency market of being “tired of technology,” lacking breakout topics, disliking VC involvement, and having a preference for low capital and high leverage.
Most meme coins are fully circulated from the beginning, reducing the presence of visible market manipulators and avoiding the influence of locked tokens on future prices. With no technical barriers and no need to understand the meaning and planning of memes, retail investors can obtain early rewards by seizing opportunities. This aligns well with the demand of retail investors to use small amounts of money to pursue larger gains and reflects the psychological state of the cryptocurrency community’s desire for “sudden wealth.”
From a positive perspective, this phenomenon can be seen as a way for meme coins to gather communities first and gradually develop other practical applications or as a transitional period in the long-term development of technology, where there is a lack of topics in the new market. Additionally, it is also a way to evade regulation.
From a negative perspective, since liquidity is concentrated in meme coins, it may accelerate the demise of other unpopular coins and encourage more crypto startups to issue useless tokens in meme form.
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a16z states that the current regulatory situation favors meme coin speculation rather than innovative projects: SEC’s goals for each role not achieved
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Vitalik comments on the chaos of meme coins: Respecting meme coin hype while also hoping to witness higher-quality projects
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Volume / Mcap
Stable coins
Meme coins
Further reading
Solana meme coin platform Pump Fun suffers private key theft and flash loan attacks
Even VanEck understands meme coins! Introducing the meme coin index “MEMECOIN”