Author: Andrew Hong

Translation: Ladyfinger, blockbeats

Editor's Note:

This article delves into the behavior and impact of meme coins in the current market, revealing the diverse performance and investment potential of these cryptocurrencies through a detailed analysis framework. The data and charts in the article are sourced from a dataset specifically compiled for Farcaster meme coins, providing a comprehensive perspective to help readers understand the community and financial performance of meme coins. By combining community data with financial data, the author attempts to provide more scientific evaluation and classification of these tokens, thereby offering decision support for investors and analysts.

Introduction

Every market cycle is accompanied by the emergence of meme coins. If you are unfamiliar with the concept, think about the frenzy in 2021 when the Reddit forum drove up the price of AMC stock. A group of people rallied around a meme, causing a short-term (ranging from a day to several months) surge in the price of a certain asset. This has become a popular market strategy in the crypto field from the blockchain layer to the application layer, as it involves not only price movements but also community attention. Some projects, such as Avalanche, have even established an official foundation for meme coins to go further.

The difference between meme coins and any other tokens may not be very clear, but generally, apart from the meme image itself, there is nothing else supporting the token. For example, as a token, DOGE is truly supported only by Shiba Inu images, which is different from ETH protected by the Ethereum blockchain, UNI backed by the complete Uniswap protocol, or MKR supported by a complete collateralized stablecoin service.

Farcaster meme coins (such as DEGEN) are the latest trend, with their main advantage being their publicly accessible community. Therefore, I would like to conduct some basic analysis by combining community and financial data.

How to Evaluate a Meme Coin

We can use the following chart to categorize all meme coins:

The chart above divides meme coins into five main areas:

• Extreme Risk: Meme coins with low liquidity and trading volume are very risky and prone to RUG, as there are too few liquidity providers.
• Bot Arena: Most meme coins will never break out of the war, as thousands of coins, including many with the same or similar token names, are competing for community and asset attention.
• Volatile Growth: Meme coins that have broken through the initial stage need to maintain their momentum and growth. During this period, price fluctuations of 100-500% may be observed, and many Key Opinion Leaders (KOL) will start to seize upon the meme, regardless of whether the fluctuations are upward or downward.
• Well Established: Leaders in the meme coin market will occupy a high position in terms of community attention and financial value for a period of time, forming a clear gap with other competitors. This leading status may manifest as smaller price fluctuations, demonstrating stability, as the number of new investors interested in the meme coin balances out the number of exiting investors, thereby maintaining sustained attention on the meme coin.
• Sleeping Giant: Meme coins with significant growth in both community and funds and have not suffered from "RUG" may temporarily fall silent. It is likely that a DAO has been formed, they are starting to launch minting or products, and dealing with the chaotic situation in the community, while hoping to be noticed again.

Most meme coins should be trapped in the "Bot Arena," some notable meme coins in the "Volatile Growth" section, and perhaps one or two meme coins can become "Well Established." In this process, some may lose community power and become "Sleeping Giants," while others may lose liquidity and become "Extreme Risk."

The roadmap for a successful meme coin should look like this:

Many meme coins may receive high media attention due to bot or KOL promotions, but in reality, their liquidity may not be strong, which could expose investors to the risk of being "RUG," meaning that if the project suddenly withdraws liquidity, investors will suffer losses.

After extensive data analysis, I created charts related to Farcaster meme coins on Dune:

This actually aligns with my expectations. You can see DEGEN is located at the farthest end of the upper right corner, followed by others like ENJOY, HIGHER, TN100X, and EVERY in the middle. Other meme coins are trapped on the left, competing for attention and liquidity.

It is worth noting that I did not filter out Sybil attacks or bots here, so the community scores of some meme coins may be biased. This is an area for future improvement.

Now, let's explain how these two scores are generated from the final chart. I will also propose further research questions and provide detailed explanations of my logic for those who want to delve deeper.

There are some other charts that I did not list in this article, which can be found here.

Community Score

Each score consists of a "base" part and a "growth" part. For the community score, we first measure the delivery and participation of tokens. Therefore, according to this method, "$DEGEN" would be counted, but "DEGEN" would not. Symbols related to the token, such as degen hat, higher arrow, and tn100x ham, are also included in the total.

This provides us with five main indicators:

• Deliverers: The number of people delivering to a specific token.
• Percentage of Receivers: The percentage of these deliverers who have received the token before.
• Deliveries: The number of deliveries containing the specific token.
• Channel Count: The number of channels where deliveries containing the specific token were made.
• Activity Level: Participation (likes + replies) plus the cube root of the number of deliverers multiplied by the cube root of the number of channels.

The overall community score is calculated by multiplying the "base" activity level with the "growth" multiplier based on the weekly change in unique deliverers and receivers. Essentially, if we see more and more people delivering to a certain token and these people are trying to acquire these tokens, it is definitely a very healthy signal.

Overall, it looks like this in the table:

Financial Score

Here are several financial indicators:

• Fully Diluted Value (FDV): Total supply x price.

• Price: Latest price based on DEX trades.

• Daily, Weekly, Monthly Price Change Percentage: Percentage change in price on a daily, weekly, and monthly basis.

• Liquidity: This liquidity refers to non-token liquidity, meaning for a DEGEN-WETH (Ethereum) pool, we only calculate the WETH portion. This can provide us with a more stable signal of how much good liquidity a given token has.

• Trading Volume: DEX trading volume in the past 30 days.

• Transfer Volume: Number of ERC20 transfers in the past 30 days

• Total Trading Volume: USD trading volume on DEX in the past 7 days

The "base" part of the financial score is determined by its non-token liquidity and DEX trading volume, while the "growth" part is calculated based on the week-over-week change in liquidity. Overall, it looks like this in the table:

Follow-up Questions

Here are some questions I hope to delve into further from here:

• How to score "deliverers" for Sybil attacks or bot behavior based on the value of tokens held in wallets?
• Can "deliverers" be graded based on their relationship with known groups or communities?
• How to classify the stages of community and financial growth? What is the correlation between them? Is there any time lag or interdependence?
• Are there the same groups or types of people driving the initial growth stage? What are the characteristics of those who joined a meme coin earliest, at the right time, and the latest? How does this relate to user ranking?
• What are the driving factors behind a meme transitioning from one hot spot to another?
• How to evaluate a person's level of interest based on their involvement in the community or financially? Do people change their "delivering" behavior after buying or selling a specific token?
• What is the average lifespan of a meme coin in terms of community and financial aspects?

Data Query Guidance

Although all the outputs here appear to come from one dataset, the backend data is somewhat complex. You can query related data based on the following guidance:

• dune.neynar…… "The dataset is uploaded by Neynar's team, which indexes all Farcaster data. If you are not familiar with the concept of Farcaster data, start with my beginner's guide. Generally, if you see "dataset" in the tab name, it means it was uploaded by the team name displayed after the "dune." prefix.

• If you see "result" in the table name, it is a matview. I created the "ERC20 Token Summary Table" to obtain all transaction, price, liquidity, and transfer data for specific tokens. This summary table is further broken down in subqueries, so the final query runtime is only 3 minutes. The total runtime for all queries is about 60-70 minutes.

• If the table name you see does not follow the above prefix (and is not an original or decoded table), it is likely from the spellbook. Therefore, tokens.erc20 provides me with all tokens with symbols or decimals, dex.trades provides me with all DEX trades on the blockchain, and so on. You can search for table namespaces or table names (such as "dex" or "trades") in the GitHub codebase to find the logic of the tables.

Conclusion

As a unique type of cryptocurrency, meme coins are often strongly influenced by community media and dynamics. In addition to proposing a framework for evaluating meme coins, this article demonstrates that through data analysis built on the Dune platform, we can more accurately monitor and predict the performance of these tokens.

Despite certain challenges, such as the potential risks of Sybil attacks or bot manipulation, continuous monitoring and technological improvements can make meme coin analysis more precise and practical. Future research may further deepen the understanding of these complex factors and bring new insights to the broader field of cryptocurrencies.

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