From the perspective of the long cycle, memes: similarities and differences with previous rounds

Original Alex Xu Alex's Investment Research Memo
In my personal experience of the crypto cycles (2016-2026), each round of cycles has its own place for memes.

However, in the past few rounds of vigorous bull markets, the presence of memes has varied greatly. My personal feeling is:

2016-2018 Bull Market: The presence was relatively thin; I can hardly recall any meme assets from that round besides Doge (it may also be that the time is simply too far back).

2020-2022 Bull Market: The presence increased somewhat, but still not at the center stage (the original Doge and the new generation Shib performed well; in the 4-5 months before the crash on May 19, 2021, meme dynamics were rampant).

2023-2025 Bull Market: The true center stage, with significantly extended heat and presence time, and a rich variety of mutated forms (from the earliest Bitcoin inscription memes to political memes, cult memes, social media memes, presidential-level memes, and then to AI agent memes).

A question worth pondering and answering is: What determines the presence and mental share of memes in each round of the crypto bull market cycle?

This question will affect how we choose our investment themes throughout the entire crypto bull market, namely: in this round of the bull market, should we continue to overweight memes in terms of energy and funds?

From the examples of meme types in each round above, it can be seen that my definition of memes is quite generalized. For instance, inscription assets and AI launchpad projects themed around agents are all categorized as memes.

Because in my definition, crypto assets can roughly be divided into business/production-type assets and meme-type assets:

When the main focus of attention and trading is on its business aspects, such as a protocol's product-market fit, AUM, revenue-generating ability, and token buyback and burn, that asset approaches the business/production-type asset category. These assets can be driven by various narratives in the short term, but the ultimate question they must answer is: How is my profit-generating ability/token return ability? This is similar to most publicly listed companies.

When the main trading focus is on the consensus aspect of the asset, namely: the scope of dissemination and understanding of that asset, as well as the strength of recognition from investors and potential investors, this type of asset approaches meme assets. From this perspective, consensus is the "fundamentals" of meme assets.

In this seemingly binary classification, there are also some gray areas, such as a large number of AI agent projects based on Virtual and ai16z emerging in 2025 (do you still remember the web3 virtual influencer Luna who sang and danced live? And the web3 research AI chatbot aixbt?).

These projects mostly emerged with a business-type positioning but were initially driven more by narrative consensus. By the time they concluded, they were still far from achieving true product-market fit and meaningful revenue scale, so in my definition, they are closer to memes rather than business-type projects.

Another type of marker is the meme launchpad, such as pumps and pons. Although they belong to meme infrastructure, they essentially belong to business-type projects. However, the participation heat of memes is their core business metric, determining their valuation level.

Returning to the key question, what determines the positioning and weight of memes in each market cycle? Under what circumstances will memes become the main theme of the market?

I believe the core factor is mainly: the supply and quality of business/production-type assets in the cycle.

When the narrative of business-type assets in that cycle explodes + business development goes smoothly, it will become the main direction for speculative funds in the crypto space. When business-type projects decline, quality product innovation is scarce, and business data is generally weak, crypto funds will choose to flow into meme asset categories that are unrelated to traditional fundamentals.

Because FOMO emotions and the desire for sudden wealth always resurrect with the cycles, the influx of funds and emotions brought by bull markets must have a destination.

This is also why the presence of memes has been so different in the past few cycles:

2016-2018 Bull Market: The year of the explosion of smart contracts/public chains, the most explosive cycle in terms of narrative and imagination, where the narrative of public chains and the future business imagination space were large enough to drive even traditional VCs crazy, consuming almost all speculative funds;

2020-2022 Bull Market: The year of blockchain applications, where the narrative was still high quality, with DeFi, NFTs, and GameFi taking turns to appear, the web3 concept became globally popular, and observable business data skyrocketed (TVL, trading volume, transaction fees, active address numbers, and crazy APRs), the amount of funds attracted by the industry further increased. However, under the influence of celebrities like Musk and Vitalik (whose address was hit by coins), memes began to absorb the overflow of funds;

2023-2025 Bull Market: The most depressed round for blockchain business-type narratives and businesses, where most product innovations from the previous round were debunked, and there were no strictly new products. The growth rate of funds absorbed by the industry, although far less than in the previous two rounds, still remained large, mostly flowing into memes.

So, what are the background conditions determining the positioning of memes in the current seemingly unfolding bull market cycle?

Currently, many conditions are similar to the previous cycle, namely:

1. Quality business-type narratives (business models that make sense) are still scarce; the few available (RWA, prediction markets) are mostly controlled by non-token issuing companies or publicly listed companies, and there are not many good secondary token carriers (mainly Ondo, but the token value has yet to be captured);

2. FOMO and the desire for sudden wealth remain undiminished; any era's casino has its gamblers.

Therefore, unless a batch of quality business-type projects re-emerges at some stage, memes will likely still be the main theme of this bull market (if not the only one).

Does this mean that investors should overweight memes in this round? Not necessarily.

This round has two new points that will increase the difficulty of speculation and survival for memes:

The supply side of memes is very abundant: After experiencing the previous cycle, the meme issuance pipeline and harvesting process have become highly industrialized, and the supply side is more sufficient, even approaching infinity.

The demand side mentality is short-sighted and fragile: After multiple rounds of harvesting various narratives in the previous cycle, the investment base with sufficient faith in memes has significantly diminished (do you remember Murad's advocacy for the meme supercycle in the last round?), the essence of meme consensus is a form of capital collective, and changes in mentality can lead to instability in the collective, resulting in a decrease in the market cap ceiling and median lifespan of memes.

More importantly, the short-sighted mentality on the demand side and caution towards collective action will, in turn, lead the supply side (developers) to tighten their nets more quickly. This is a self-reinforcing process, and it is also the most concerning situation for meme launchpad projects.

In fact, even at the beginning of the last meme supercycle (January 2024), when memes were overweighted, as of today, the returns of the meme sector are still in the middle of the crypto sector, still negative, and significantly underperforming BTC:

Note: Based on the sosovalue crypto track index, the index statistics logic is based on the top ten targets in the track (monthly updates) and market cap weight (refreshed every five minutes).

It is worth noting that the above index, because it statistics the top market cap memes, has a significant gap from the actual operations of early meme users on-chain. The mortality rate and volatility (including upward volatility) of early on-chain memes are much higher than those of top memes. Although there are no reliable statistics, I suspect that it is likely a curve with worse cyclical return rates.

Having discussed the difficulties of meme speculation in this round, let’s talk about the marginal positive points compared to the last round:

Mainly, the new player Robinhood's net inflow of users and funds on-chain.

Of course, the current number of users on Robinhood who are traditional brokerage app investors is still likely low, but if Robinhood's memes continue to be hot, users who are continuously beaten in semiconductor stocks may consider trying their luck here.

Additionally, Robinhood still has some cards to play, such as launching its own strong memes and meme launchpads on the main site, having the ability to fuel on-chain heat.

However, if these cards are played too early, it may lead to a lack of subsequent imagination, so keeping them under wraps in the short term poses a greater deterrent to the bears.

Let’s take a look at what new narratives are currently emerging in the meme market.

As mentioned earlier, memes are a generalized asset class. In just over two years of the last round, it has gone through inscriptions, politics, cult/retro internet culture, social media, top influencers (Trump), and then to multiple iterations of AI agents.

Among the current categories of memes, "Bull Come" is not difficult to understand as a Chinese meme. A relatively new one is the stock-themed memes on Robinhood, also known as stock memes. The key points of these memes include:

1. Paired with publicly listed company stocks: where there is Nvidia (NVDA), there is AI (Artificial Inu), freely created.

2. Paired with on-chain RWA stock groups based on Uniswap's AMM liquidity pools.

3. Based on the above mechanisms, the creators of stock memes have various custom ways to handle the fees generated from transactions, such as using them to buy back and destroy stock memes or distributing them to stock meme holders.

Based on the above mechanisms, the narrative that has recently emerged in the market is: "Coin-Stock Memes Squeeze Wall Street."

In specific processes: Enthusiastic meme traders buy stock memes on-chain because the on-chain liquidity of stock memes mainly comes from pairing with coin stocks. Therefore, when users buy stock memes with stablecoins or ETH, they first need to route to buy the paired coin stocks, creating unilateral buying pressure on coin stocks. If the on-chain coin stocks cannot mint smoothly due to weekends or other reasons + the total on-chain amount is small, and cannot quickly balance the on-chain price of the coin stocks with the normal price in the stock market through minting and selling, it will lead to a situation where the on-chain price of coin stocks surges several times in a short period.

The recent situation of Boner (stock meme) - Hims (coin stock) on Robinhood is just like this.

Considering that Hims itself has a large short position in the stock market, the narrative of "On-chain Finance Counterattacks Wall Street" or even "Squeezing Wall Street" has taken shape.

So how is the quality of this type of meme narrative?

Generally speaking.

A good meme narrative needs to have a good narrative logic and appeal, strong communicability, and good anti-falsifiability.

First, the short-term surge of HIMS coin stocks comes from the unsmooth minting mechanism of coin stocks on Robinhood, so this narrative is logically weak and easily falsifiable (the minting/burning depth of Ondo's coin stocks is better, and the HIMS it provided that day did not have much fluctuation).

Secondly, "Squeezing Wall Street" is an old tune with insufficient novelty, full of traces of artificial planning, lacking the original movement targets—2021's GameStop—debuting naturally through community fermentation and bringing appeal and self-communication to the public.

Additionally, the narrative template of stock memes is also rapidly being copied, with projects like SAYLORMOON emerging quickly.

At the end of the article, I want to discuss what kind of investors are suitable for memes.

Whether it is investment or speculation, the core of the former is to assess the long-term intrinsic value of assets, while the core of the latter is to predict short-term capital voting, although the methods and focuses differ.

However, there is a commonality in one aspect: those who are skilled and focused in this area win money from those who are not focused or skilled.

Based on my observations of excellent meme players around me, they often possess several or all of the following advantages:

1. Energetic, active thinkers, passionate about trading itself.

2. Imaginative, highly sensitive to narratives.

3. Stable, continuous on-the-ground/on-chain vigilance and responsiveness to market temperature and directional changes.

4. Relatively closed high-cognition practical small circles, sharing targets and cognition, with frequent and intensive communication.

5. Formed a relatively systematic speculative framework, with the ability to quickly patch and even iterate overall.

*Another important bonus point:

If you are a KOL with a sufficient number of downstream subscribers, you have the ability to diffuse narratives, accelerate consensus building, and attract collective action for some smaller, earlier memes, helping small projects cross the critical stage from death to life. If you also have a network connecting other KOLs, you can join forces to amplify this ability.

In the field of value investing, some of the above advantages will become ineffective, or even have negative impacts. Their behavior patterns are:

1. Low trading frequency, fewer actions.

2. Unwilling to pay for the imagination and story premium of assets.

3. Staying away from Mr. Market, not closely monitoring fluctuations and market quotes, actively isolating public emotions.

This is why value investing and market speculation are difficult to reconcile in one person, as the core endowments required are clearly mutually exclusive.

It is hard to imagine someone actively paying for the grand vision and story of target A, while becoming cautious and conservative when it comes to target B, only believing in logic with sufficient evidence.

But in any case, whether doing speculation or investment, it requires a thorough self-understanding, not choosing investment routes incompatible with one's own endowments and nature, fully leveraging strengths and avoiding weaknesses, which is also a form of "not making difficult problems" in investment.

This is just one perspective, for reference only.

Wishing everyone success in hunting during this bull market cycle.