The “Memecoin Supercycle” thesis: why should we care?

About Memecoins

Memecoins occupy a truly unique position in the cryptocurrency ecosystem. What began as a joke in 2013 with Dogecoin (DOGE)—a way to poke fun at projects that took themselves too seriously—has now become an undeniable market phenomenon.

Memecoins embody the essence of Internet culture. In an era where most people spend hours online daily, memes have become cultural markers. Given their massive popularity, there’s no reason they shouldn’t thrive in our ecosystem as well.

For several months now, memecoins have established themselves as the dominant asset class, overshadowing Web3 technological innovations that were supposed to define the next big trends. This has led to the emergence of a compelling thesis: the “Memecoin Supercycle.”

But what does this term really mean? Is it a passing fad, or are there concrete arguments to support it? Is the memecoin explosion a lasting trend or merely a speculative bubble?

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Cryptocurrency Market Context

Since the beginning of 2024, Bitcoin (BTC) has delivered a return of 120.8%. The approval of Bitcoin spot ETFs in January catalyzed a bullish recovery across the market, allowing Bitcoin to reclaim its previous all-time highs (around $69,000).

However, the market wasn’t ready to skyrocket this early. The Bitcoin halving had yet to occur, U.S. elections were still far off, and macroeconomic conditions weren’t fully favorable. As a result, Bitcoin entered a consolidation phase by late October (ranging between $50,000 and $70,000), while altcoins plunged in a bloodbath.

Yet, if we analyze the performance of the top 100 cryptocurrencies as of November 15, some have managed to outperform Bitcoin. Below is the list of assets that have outperformed Bitcoin since the beginning of 2024:

Among these 22 cryptocurrencies, exactly 50% are memecoins. DOGE, of course, but also SHIBA, PEPE, WIF, BONK, FLOKI, and POPCAT have shown spectacular gains. Beyond outperforming Bitcoin, they’ve also outperformed “utility coins,” which are cryptocurrencies designed to provide real technological solutions.

Moreover, certain cryptocurrencies have also benefited from the memecoin trend: Raydium (RAY), a decentralized exchange on Solana widely used for memecoin trading, and Aerodrome (AERO) on Base are prime examples.

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The Memecoin Supercycle Thesis

The “Memecoin Supercycle” thesis was popularized by Murad Mahmudov (@MustStopMurad on X), a former Bitcoiner and entrepreneur turned influencer. During the Token2049 conference in Singapore, Murad delivered a keynote presenting his vision for the ecosystem and the reasons why he believes in a memecoin supercycle.

The Market Is No Longer the Same as in 2021

Murad begins by explaining that the cryptocurrency market has significantly evolved since the previous bullish cycle of 2020–2021. According to him, the sheer number of cryptocurrency projects has multiplied to the point where the next cycle cannot resemble the previous ones, where nearly all cryptocurrencies rose in unison.

In 2021, there were relatively few blockchains, and most of decentralized finance (DeFi) was being developed on Ethereum. Competitors were beginning to emerge (BNB Chain, Avalanche, Fantom, and Solana), and Layer 2 solutions were almost non-existent (limited to Polygon, Arbitrum, and Optimism).

It was also during this time that the term “Web3” was coined, paving the way for numerous sectors where blockchain was expected to revolutionize industries. Whether it was Gaming, Decentralized Cloud, Artificial Intelligence, or DePIN, it took several years for these sectors to spawn the dozens of projects we know today.

Fast forward to 2024, and the number of existing crypto projects has exploded compared to 2021. Yet, the liquidity available in the market hasn’t grown proportionally, resulting in a situation where there’s much more supply (crypto projects) than demand (capital from investors).

Key takeaways:

• The market has significantly changed between 2021 and 2024. Now, there’s much more supply (cryptocurrencies) than demand (investor capital).
• Not all cryptocurrency categories can benefit from the next bull cycle, as liquidity will flow toward where investor attention is focused.
• For now, memecoins have proven to be the primary center of investor attention and have addressed this challenge effectively.

The “High FDV, Low Float” Problem

Today, the leading projects in the crypto ecosystem are trending because they’ve conducted massive private fundraising rounds, raising tens or even hundreds of millions of dollars. However, despite enticing promises of technological innovation, actual adoption often lags, and these projects often end up being more about marketing than substance.

For Murad, the problem runs deeper. These projects’ tokenomics are almost always skewed in favor of private investors, the team, or influencer partners, leaving the community and retail investors at a disadvantage. When these tokens are launched, retail investors pay excessively high prices and often end up losing money.

Additionally, projects are forced to launch with an enormous Fully Diluted Value (FDV) to satisfy private investors. However, they only release a small portion of tokens (usually between 10% and 25%) to maintain a manageable market cap. Consequently, the significant token emissions in the early years limit upward price movement.

This phenomenon was eloquently explained by Cobie, a pioneer in the ecosystem, in a blog post where he described the issues associated with this model, which he termed “Low Float, High FDV” (i.e., low circulating token supply, high total valuation).

Key takeaways:

• Most trending crypto projects are overvalued at launch, leaving limited upside opportunities for retail investors.
• Their tokenomics favor private investors, with high FDV and only a small percentage of tokens in circulation.
• Conversely, memecoins benefit from having their entire supply already in circulation and don’t suffer from token emission issues.
• As a result, memecoin price action is healthier, as there are no private investors buying at low prices to sell to retail investors later.

All Cryptos Are Memecoins

One of Murad’s most provocative ideas is that, fundamentally, all cryptocurrencies are memecoins. According to him, investors aren’t genuinely here for the technological revolution but rather for three main reasons:

1. To make money (70%).
2. To have fun (20%).
3. To belong to a community (10%).

He further explains that every cryptocurrency grows around an idea or concept that enables it to build a community. Whether it’s a technological innovation or a green frog meme, the principle is the same: the community follows because it’s captivated by the idea.

Memecoins are inherently the cryptocurrencies best suited to building communities. By nature, they represent Internet culture—a world where people naturally rally around things that are sometimes inexplicable. Memecoins are true symbols of community belonging.

Key takeaways:

• The goal of a cryptocurrency project is to build a community around an idea. Whether it’s a technological use case or a viral joke, the outcome is the same. In this sense, Murad believes that every crypto is a memecoin.
• Since a cryptocurrency’s success depends on its community, memecoins have the best chance of succeeding. By definition, they thrive on the strength of their community.

For more on the Memecoin Supercycle thesis, we highly recommend this excellent interview conducted by CryptoPicsou (co-founder of Coinacademy), featuring Murad Mahmudov.

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Are Memecoins the Only Path?

The “Memecoin Supercycle” thesis provides a fascinating and relevant way to examine the current state of the cryptocurrency market. The challenges highlighted by Murad Mahmudov are legitimate and must be addressed for the industry to evolve in the best direction.

However, must this necessarily involve a memecoin supercycle? What can such a phenomenon bring to the ecosystem besides amplifying speculation? Or could the memecoin supercycle simply be a transitional phase in a maturing ecosystem?

The Cost of the Memecoin Frenzy

The memecoin sector remains highly volatile, in an already turbulent market. While the promise of gains is enormous, the chances of achieving them are inversely proportional.

According to recent data from Pump.fun, about 65% of traders lose money on the platform, while only 3% manage to make significant profits. Moreover, just 0.0028% of wallets have achieved gains exceeding a million dollars.

This raises a fundamental criticism: for every investor who reaches the moon, thousands serve as exit liquidity, fueling a cycle in which the majority of participants incur losses.

Rejecting VC Tokens, but at What Cost?

The fundamental idea behind memecoin success is often the rejection of VC-backed cryptocurrency projects (VC tokens) that fail to reward their communities adequately.

However, is that reason enough to abandon all projects offering real technological innovations in favor of memecoins? While the failures of recent years have been significant, they’ve also provided valuable lessons on building a better, more sustainable ecosystem.

Moreover, a memecoin supercycle might reveal that the cryptocurrency industry primarily caters to a need for speculation and gambling, far removed from its original goals of revolutionizing financial systems and empowering individuals.

Note: In his interview with CryptoPicsou, Murad argues that memecoins are the best way to transfer value from “wealthy” portfolios to the younger generation, for whom financial freedom will become increasingly difficult to attain.

Still, the gap between the ideal of cryptocurrencies and the reality of memecoin success may hinder the long-term development of the industry, bolstering critics who label it as an open-air casino.