AI Memecoin: The Beginning of a New Wave of Crypto Assets Frenzy

In the first quarter of 2024, the total circulating market capitalization of the top 10 AI technology tokens reached $30.9 billion, while the total market capitalization of the top 10 AI-related meme coins was only $2.54 billion. Nevertheless, the latter seems to attract more market attention.

The emerging category of AI tokens is expected to achieve a hundredfold growth in the short term, reminiscent of the early glory of the DeFi Summer in 2020.

Market Opportunities

The combination of the AI boom and the meme coin craze is giving rise to an entirely new "AI meme coin supercycle".

At the beginning of 2024, driven by a surge in Nvidia's stock price, many AI tokens also exhibited parabolic price increases, despite numerous questions regarding their fundamentals and token economic models. The top 10 AI technology tokens are valued at over $30 billion, not including those with smaller market capitalizations. This may just be the prologue to the intersection of Crypto Assets and AI, with a potentially larger-scale increase expected in 2025.

However, the most striking performance may emerge in the AI meme coin sector. Currently, the total market capitalization of AI meme coins is only comparable to that of Ethereum Classic, but they are expected to gradually attract funds from AI technology coins, traditional meme coins, and venture capital-backed tokens.

"DeFi Summer" Reappears

Some opinions compare the process of a certain AI meme coin starting from zero to reaching a market value of 1 billion USD to the "YFI moment" of this emerging industry. Looking back at the DeFi Summer of 2020, the emergence of YFI was one of its important catalysts. YFI conducted a "fair distribution" in July and reached a market value of 1 billion USD in just two months. This event activated a large influx of on-chain capital into DeFi tokens, as it proved that a fairly distributed DeFi token could achieve a valuation of 1 billion USD starting from zero.

DeFi became a hotspot in the last cycle due to its novelty, appeal, and ability to spark people's imagination. In a zero-interest environment, the market even anticipated that DeFi might attract funds from traditional finance and become the future of finance. This led to a surge in on-chain speculation, helping DeFi applications gain a significant total locked value (TVL) and users. When YFI was launched, the total market value of DeFi was about $5 billion, reaching approximately $170 billion at the peak of the bull market, growing 34 times. If the development trajectory of an AI meme coin is similar to that of YFI, then we may still be in a very early stage, as the total market value of the AI meme coin has not yet reached $5 billion.

The DeFi cycle combines internal factors of Crypto Assets (such as liquidity mining, high-yield farming, and speculative behavior) and external factors (such as a zero interest rate environment driving funds to seek high returns), ultimately forming a bubble. The AI meme coin super cycle may follow a similar development pattern.

Reflexivity in the New Paradigm

The theory of reflexivity asserts that investor decisions are not based on objective reality, but rather on their perceptions of reality. The actions triggered by these perceptions in turn affect reality or fundamentals, which in turn influences investors' perceptions and ultimately affects prices.

In the field of AI meme coins, the price is reflected as total market capitalization, while the fundamentals depend on the level of attention and the size of the "dream." These tokens are not purely meme coins, but rather resemble "tokenized General Artificial Intelligence (AGI)." Their initial price is zero, providing everyone with an opportunity for early participation.

The role of reflexivity in the AI meme coin market may be manifested as:

1. AI meme coin category attracts speculators, but most people overlook it, thinking "it's just another zero-sum game meme coin narrative."

2. AI agents improve their functions over time, shifting investors' perceptions from "meme coins" to "a whole new realm."

3. This has activated more funds and attention both inside and outside the Crypto Assets space, attracting more speculative activity. Some failed AI startups may choose to issue tokens as a last attempt. Some wealthy tech giants may start investing in certain tokens.

4. Unlike static coins, these AI agents will begin to execute activities on-chain, launch NFT/DeFi projects, and have an impact in the real world. They are dynamic and will evolve over time, attracting more attention.

5. The above factors set an almost limitless ceiling for potential valuations, giving rise to bubbles and ultimately leading to a cycle of boom and bust.

These tokens originate from a new issuance method that aligns with the current spirit of the times, meme coins/AI super cycle, and anti-venture capital sentiment. Considering that Elon Musk expects AGI to be realized in 2025-2026, if one believes in the 4-year cycle theory, then the hype peak may coincide with the peak of Crypto Assets in the fourth quarter of 2025.

Investment Strategy

In the last cycle, the total market value of DeFi reached 170 billion USD. If the AI meme coin industry reaches a similar scale, it means there could be a 40-fold growth potential from now on. However, due to the current higher total market value of Crypto Assets, we may easily surpass these levels. The key is to maintain confidence and patience, and adjust the investment portfolio accordingly, as market rotations and fluctuations can be very severe.