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By: Tanay Ved & Matías Andrade
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The total market capitalization of meme coins currently stands at $60 billion, with a growing presence on layer 1 networks like Ethereum, Solana and layer 2 networks like Base.
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In March, meme coins recorded $13 billion in spot trading volumes (7-day average) on exchanges, eclipsing major blue-chip crypto assets like Ethereum (ETH) and Solana (SOL).
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The high concentration of assets among meme coin holders highlights a significant concentration of assets among a few holders, posing risks such as potential market manipulation and liquidity issues.
Memes are an integral part of human culture, morphing and adapting across various mediums over the years. The term “even” was coined by British evolutionist Richard Dawkins in his seminal 1976 book “The Selfish Gene”, describing a meme as a unit of cultural transmission – including “tunes, ideas and slogans” – emphasizing their similarity to genes in biological evolution.
The spread of memes has evolved significantly throughout history, influenced by social, cultural and technological changes. In ancient times, folktales and religious symbols were early forms of memes, shared orally or through manuscripts. During World War II, the graffiti memeKilroy was here» became popular, symbolizing the presence of American soldiers. In the digital age, memes have found new mediums in the form of viral videos and image macros like “Doge”, spreading rapidly across the Internet and social media platforms, allowing cultural ideas to spread more widely than ever.
Recently, memes have expanded to phenomena such as meme stocks, exemplified by the dramatic rise in GameStop's value thanks to collective efforts on online forums like Reddit's /r/wallstreetbets. Likewise, meme coins like Dogecoin and Pepe have gained a huge mindshare in the crypto-asset world, leveraging blockchains and on-chain communities to create forms of digital value. Memes are inherent to human nature, reflecting our desire for connection and our sense of belonging through shared ideas.
In this week's issue of Coin Metrics Network status, Our goal is to provide context for the rise of meme coin activity on networks like Ethereum and Solana, highlighting key market trends driven by the meme coin sector.
Since the introduction of Dogecoin in 2013, the meme coin industry has grown significantly, reaching a total market capitalization of $60 billion as of June 2024. The industry is characterized by cryptoassets depicting pets, characters and, more recently, political figures with elements. humor to attract attention and stimulate community engagement. Their growth stems from a highly speculative nature, driven largely by market sentiment rather than intrinsic value.
Source: Coin Metrics Network Data Pro & Parts Metrics Labs
(Note: Solana meme coins and other SPL tokens will soon be released as an extension of Solana Network Data.)
The most valuable meme coins today include Dogecoin (DOGE), which functions as a standalone proof-of-work blockchain, and ERC-20 tokens like Shiba Inu (SHIB) and Pepe (PEPE), whose market value reaches more than of $100 billion in 2021. Recently, Solana has been a hotbed of meme coins with several Solana Program Library (SPL) tokens deployed due to low transaction fees, a growing ecosystem, and ease of tokenization through platforms like pump.fun, fueling the rise of coins like dogwifhat (WIF) and Jeo Boden (BODEN).
Source: Coin Metrics data™ and parts metrics laboratories
The meme coin sector has seen notable outperformance compared to other sectors in the cryptoasset ecosystem, as shown by Coin Metrics. datanomy™ classification. Meme coins have shown strength against major blue-chip crypto assets and have also outpaced the information technology sector, which has gained ground thanks to developments at the intersection of decentralized computing and artificial intelligence (AI).
This is especially evident from October 2023 to 2024, with an average return of 740% in June. This has also fueled the growth of meme coin indices, such as the GMCI Meme Index, reflecting efforts to quantify the sector's performance. Although associated with the speculative phases of market cycles, this performance reflects the recent growth in awareness of this sector, both among retailers and traders. institutional investors.
Growing attention to the meme coin sector has further boosted activity in digital asset markets. While trading volumes have generally moved in tandem with the broader market, in March, meme coins saw $13 billion in spot trading volumes (7-day average) on centralized exchanges, eclipsing even major assets like Ethereum (ETH) and Solana (SOL). Decentralized exchanges (DEXs) also play a crucial role in the coin ecosystem, providing essential infrastructure for pool creation and asset trading, promoting liquidity and accessibility for a wide range of users.
Source: Coin Metrics Market Data Feed
Viewed through the prism of relative trading volumes, the influence of legacy coins like DOGE and SHIB appears to be diminishing, while PEPE and a suite of newer Solana coins have grown in popularity, collectively accounting for over 50%. of the volume of trade. This reflects recent investor preference for newer memecoins, stemming from the growth of communities, blockchain ecosystems and the potential for higher returns. Despite this, the liquidity and longer history of existing meme coins remains an important factor for potential investors.
Source: Coin Metrics Market Data Feed
Likewise, high open interest in futures contracts highlights their significant presence in the market and indicates increased speculative trading activity. DOGE open interest recently hit an all-time high of $1.8 billion, while PEPE open interest soared nearly 50% to $850 million in May. This increase in open interest, collectively reaching over $3 billion, indicates increased price volatility and highlights that investors are gradually leveraging futures positions to hedge their exposure to meme coins. Monitoring open interest remains one of the fundamental tools for understanding speculative capital flows, particularly in volatile instruments that can be indicative of a change in market interest or a harbinger of liquidations.
Source: Coin Metrics Market Data Feed
Although the market presence and user growth of meme coins have increased in tandem, it is important to note the risks associated with the sector. The Gini coefficient is a measure of the distribution of income or wealth within a population, ranging from 0 (perfect equality) to 1 (maximum inequality). In the context of meme coins, the Gini coefficient can be used to assess the distribution of token holdings across different addresses.
High concentration of token ownership increases the risk of market manipulation. Large holders, often referred to as “whales,” can significantly influence the price of the token by buying or selling large quantities at once, creating bout of volatility. Additionally, if a few addresses hold most tokens, this can lead to liquidity issues, which can be exacerbated by the concentration of liquidity provision by addresses controlled by a few entities on decentralized exchanges.
Source: Coin Metrics Network Data Pro & CM Laboratories
The high Gini coefficient of around 0.8 for these meme coins highlights substantial centralization of token holdings. This centralization presents various risks, including potential market manipulation, liquidity issues, and investor caution, all of which should be carefully considered when evaluating these tokens. Before considering any investment in the memecoin sector, understanding these dynamics is crucial to assessing the stability and potential risks associated with these digital assets.
The meme coin sector has demonstrated significant growth and influence in the cryptocurrency market, finding a strong foothold on blockchains due to the viral nature of memes and their ease of propagation. The sector's strong performance, alongside Bitcoin since the launch of spot ETFs, highlights its growing appeal among retail and institutional investors. However, the high Gini coefficient of around 0.8 indicates substantial centralization of token holdings, posing risks such as market manipulation and liquidity problems, in addition to an intolerable degree of volatility for most investors. . As the industry continues to evolve, understanding these dynamics is crucial to assessing the evolution and potential risks associated with meme coins.
Source: Coin Metrics Network Data Pro
The (adjusted) transfer value on the Bitcoin network decreased by 28% and decreased by 21% on the Ethereum network over the past week. Active addresses on Bitcoin increased by 6%, as did active addresses on Ethereum, which increased by 3%.
This week's updates from the Coin Metrics team:
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