Is the ‘memecoin supercycle’ over already? Analysts weigh in

Memecoins: Supercycle Fading or Flourishing?

Memecoins have witnessed a remarkable surge in the past year, with tokens like Pepe (PEPE), Dogwifhat (WIF), and Popcat (POPCAT) skyrocketing over 30,000% since their inception. However, the expected influx of retail investors bidding memecoins to record highs has yet to materialize.

"Dino Coins" Take Center Stage

Instead, older altcoins deemed "dino coins," such as Ripple's XRP and Tron (TRX), have recently hit new highs. Meanwhile, major new-cycle memecoins, excluding Bonk (BONK) and Pepe (PEPE), have failed to surpass their all-time highs, raising concerns about a premature end to the "memecoin supercycle."

The "Memecoin Supercycle" Concept

The term "memecoin supercycle" was coined by Murad Mahmudov, an outspoken advocate for the asset class. He predicted that memecoins would continue to outperform legitimate projects amid a global retail investment frenzy.

Memecoins, despite having no inherent utility, have a unique characteristic that makes them susceptible to extreme price fluctuations. Mahmudov argues that their valuation cannot be determined using traditional quantitative techniques, making them susceptible to speculative behavior.

Memecoins: A Leveraged Play on Global Markets

Mahmudov emphasizes that the key to assessing the longevity of the memecoin supercycle lies in global macro conditions. As long as global liquidity and risk-on sentiment prevail in traditional markets, memecoins will continue to thrive. However, a potential recession could dampen their performance.

"Crypto as a whole is a 2x to 3x beta to traditional markets, and memecoins are like 7x to 8x beta," Mahmudov said.

Could the Supercycle be Over?

Analysts like Pav Hundal agree with Mahmudov's assessment, suggesting that memecoins are a highly leveraged play on the crypto market and global financial conditions. If broader markets trend up, memecoins will outperform, but if they decline, memecoin investors could face significant losses.

Hundal cautions against overexcitement and potential memecoin fatigue. However, he acknowledges that current liquidity conditions are favorable for the market.

Community and Tokenized Identity

Mahmudov goes beyond the financial implications of memecoins, asserting that they provide more than just monetary returns. He likens memecoin communities to religious cults, offering a sense of meaning, identity, and belonging. This, in turn, strengthens the belief in the coin and its price targets.

Mahmudov attributes the recent outperformance of older altcoins like XRP, Cardano (ADA), and Chainlink (LINK) to the cult-like devotion of their communities.

Concerns about Pump.fun

The rise of Solana-based memecoin deployer Pump.fun has raised concerns about its impact on the industry. Critics argue that the protocol promotes excessive token creation and dilutes attention from established memecoins.

Mahmudov believes that the ability to launch memecoins with ease is an inevitable result of technological progress. He views Pump.fun as a "natural evolution" and suggests that it splits the market into gambling and long-term community building.

Mahmudov advises investors to analyze the two market segments separately, taking into account the distinct characteristics of each.