June 25, 2024
Ride the Memecoin Madness into the Next Rally
Dear Subscriber,
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| By Bruce Ng |
As my colleague Marija Matiฤ pointed out yesterday, memecoins are getting roasted. Currently, these leading memecoins are down pretty significantly from their respective all-time highs:
- Shiba Inu (SHIB, “C+”): -80%
- Pepe (PEPE, Not Yet Rated): -40%
- Bonk (BONK, “C+”): -33%
- dogwifhat (WIF, “E+”): -67%
In fact, all altcoins are dumping due to Bitcoin (BTC, “A”) retracing. But memecoins have suffered the most.
I have mentioned numerous times that this year is the year of memecoins. It has been a top performing sector of this rally up to now.
And I still believe that will continue after the sideways summer action concludes. In fact, despite all the downside memecoins have experienced recently, I foresee …
- This is a normal type of dump for memecoins
- They will recover strongly in Q4
To back up my analysis, let’s take a look at a few cases from history.
Case 1: SHIB
Figure 1: SHIB/USDT. Prices are in relative units.
Click here to see full-sized image.
This chart covers SHIB’s price action during the big rally of the last bull market in 2021. As you can see, SHIB rallied to make a high in May. But then, it dropped roughly 80% later that month … right at the start of the summer.
My colleague Juan Villaverde explained recently how the summer months tend to be slow in crypto … even in bull market cycles.
And look at that sideways action! SHIB consolidated for the entirety of the summer season.
Then, starting in October, it started to rally again a new all-time high for a roughly 11x gain.
Case 2: PEPE
Figure 2: PEPE/USDT. Prices are in relative units.
Click here to see full-sized image.
PEPE was launched in May 2023, and saw a modest rally off the bat. Subsequently, it crashed by 82%.
Then, after another long period of consolidation, it rallied 23x to reach a new all-time high.
But note the difference in timing here. PEPE launched right before the start of a long-term bull cycle. And its rally earlier this year was in-step with the broad market.
I believe that correlation will continue. When the broad market picks up again this cycle, it’ll take PEPE with it for the ride.
Case 3: BONK
Figure 3: BONK/USDT. Prices are in relative units.
Click here to see full-sized image.
Finally, we come to BONK. This coin was launched around November 2021, and shortly rallied. But then it crashed 90% with the broad market over the course of the bear cycle.
Now that’s a long consolidation.
But it sprang back to life in late 2023 as the next bull market got underway. It subsequently rose an impressive 121x.
These three cases show us that there is a …
Typical Memecoin Pattern
Now, we can see a pattern forming for quality memecoins. And it goes like this:
- After launch, there is a first rally.
- Following that, the coin usually crashes by 80-90%.
- After that, the memecoin can rally hard to stratospheric heights, producing gains of 10x to 100x.
Now what about WIF?
Unlike all the other memecoins mentioned above — which have undergone at least one rally and one major 90% dump — WIF has yet to do so. That’s because it’s the newest of the bunch. It only launched this past November, after all.
Let’s take a look at its current price action:
Figure 4: WIF/USDT.
Click here to see full-sized image.
WIF had an impressive rally from its initial price near 17 cents to $4.80 earlier this year. It has since retraced heavily to $1.50 today, following the broad market correction.
I think we are seeing WIF in the throes of its big correction right now. And it may even hit as low as 50 cents if it retraces particularly hard.
But after — if it follows the pattern of the other memecoins — it will rally by 10x to 50x.
In other words, WIF is going through what is considered normal for quality memecoins.
(And if you want to learn how to spot a quality memecoin, I suggest you check out my other memecoin-centric Weiss Crypto Daily issue.)
Indeed, as Marija mentioned yesterday, memecoins are more susceptible to the slings and arrows of market volatility. That means when downside pressure enters the market, they dump harder.
But on the flip side, when the rally returns, they’re the assets most likely to shoot to the moon.
All the coins I highlighted above are leading memecoin projects. And I anticipate all riding the market higher come the next bull rally.
So, if you’ve got the tolerance for a little more volatility and risk exposure, this correction period should be seen as a prime buying opportunity.
And, you may even want to consider a dollar-cost averaging strategy to help mitigate the impact of that volatility on your capital gains.
Best,
Dr. Bruce Ng
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