Opinion Article: The Wild Rise of Meme Coins – Is the Market in Danger?
This week, the market’s focal point has undeniably been meme coins. Among them, the Troll token skyrocketed over a thousand times in just one week after Elon Musk changed his Twitter bio to “Chief Troll Officer” (CTO). Not only did Musk’s meme coin surge, but Zuzalu, previously mentioned by Vitalik Buterin, also became a speculative opportunity and rose 20 times in three days.
What does the surge of meme coins mean for the market? Before answering that question, let’s briefly review the rotation of sectors in the crypto market over the past three months: Bitcoin and blue-chip tokens -> Layer 1 (SOL, Avax) -> New concept L1 (Sei, Inj, Tia) -> ETH ecosystem (Arb, Op, Metis, Pendle) -> Meme coins (Troll, Smiley).
Meme coins are usually seen as the last sector to rise because funds in the market can’t find any other tracks to speculate on. When funds flow into meme coins, it also means an increase in risk appetite in the market, which poses a danger to the future trend of the overall market.
In industry news this week:
1. ETF Approval = the Beginning of a Market Crash? $800 Million Worth of Bitcoin Transferred from Grayscale Address to Coinbase Prime
On January 17, a total of 18,638 bitcoins (approximately $798 million) were transferred from Grayscale Trust’s address to Coinbase Prime. Since the approval of the BTC spot ETF on January 10, Grayscale Trust has transferred a total of 31,638 BTC (approximately $1.366 billion) to Coinbase Prime over three trading days.
2. Ethereum Developers Deploy the Cancun Upgrade on the Goerli Testnet
The Cancun upgrade is a major positive development for ETH, as it allows for cheaper gas fees and faster transaction speeds on Layer 2. On January 17, Ethereum core developers deployed the Cancun upgrade on the Goerli testnet, marking the prelude to its official upgrade.
3. Following the success of the Solana phone airdrop frenzy, Saga Chapter 2 phone is released
The first-generation Saga phone received little attention initially, but due to the value of the airdrop it contained exceeding the price of the phone, it sold out quickly. Seizing the opportunity, Solana released the second-generation “Saga Chapter 2” phone, priced at $450. Within less than a week, over a million pre-orders were made, a remarkable achievement.
Now let’s observe the ETH and BTC ecosystems:
– ETH/BTC exchange rate: This week, it surged by 4.5%, reaching approximately 0.059. As mentioned in the previous weekly report, the breakout of the ETH/BTC exchange rate is just the beginning.
– BTC ecosystem development: Bitcoin’s price dropped by approximately 7.7% this week. Surprisingly, tokens like Ordi and Rats performed strongly and did not drop along with Bitcoin. However, other Bitcoin ecosystem tokens remained weak.
– DeFi market changes: DeFi’s total value locked (TVL) had minimal changes this week, increasing by only 1.17%.
– Layer 2 TVL changes: The total value locked in Layer 2 protocols decreased slightly by 3.5% this week.
The top-performing Layer 2 protocol this week was Metis, with a 13.09% increase in TVL over seven days. It outperformed other Layer 2 protocols, and its focus on V God’s mother as the founder, excellent price performance, and the narrative boost from having a decentralized orderer, make it an undeniable focal point in the Layer 2 space.
As for the growth of different sectors this week, almost all major sectors experienced a decline:
– LSD: 36.34 billion -> 35.49 billion -> -2.33%
– Lending: 23.75 billion -> 22.85 billion -> -3.7%
– DEX tokens: 14.86 billion -> 14.9 billion -> +0.27%
– Overcollateralized stablecoins: 10.43 billion -> 10.2 billion -> -2.2%
In terms of emerging potential protocols this week, Yield Farming took the crown. The author selected protocols that experienced the highest TVL growth within seven days and had a TVL of at least $10 million. Among them, Sui accounted for three of the top positions.
It’s worth noting that Renzo is a protocol related to the Eigenlayer concept. Users can deposit Ether to receive ezETH and enjoy rewards including staking APR, platform points, and Eigen points. Renzo recently raised $3.2 million in funding.
Dojo is the first native AMM Dex on the Inj chain, and its token price has tripled since its low point.
The 8th to 10th positions are occupied by Sui ecosystem protocols, which are worth paying attention to due to the recent strong performance of the Sui token.
In terms of market financing, DeFi projects accounted for 30% of the total this week, with most of the financing going to Web 3 and infrastructure projects.
The highest-funded project this week was MAP Protocol, which received strategic investment of $50 million in BTC ecosystem growth funds from Bitrise Capital. MAP Protocol serves as a Layer 2 solution for Bitcoin and provides infrastructure for improving operability between assets, storage, and computation. Users and developers can use and build anything cross-chain in a peer-to-peer manner.
In the stablecoin market, the total market capitalization increased slightly by 0.21% this week, reaching $133.8 billion. USDT dominates the market with a market share of over 70%.
Stablecoins continue to increase in value, unaffected by market fluctuations, for the second consecutive month.
Data interpretation: To determine whether the overall market rally is driven by external hot money flowing in, we can observe changes in stablecoin market capitalization. If the market is rising and stablecoin market capitalization is increasing, it may indicate that off-market funds are pushing up prices. Conversely, if the market is rising but stablecoin market capitalization remains unchanged or decreases, it is more likely that the bears are at a disadvantage in the long and short game.
This opinion article presents multiple perspectives and does not represent the stance of “WEB3+.”
Proofread by: Gao Jingyuan