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Meme coin traders can benefit from fundamental analysis, says Jupiter Zhang of HashKey Capital
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Meme coins recorded average returns of 1,300% during the first quarter, according to according to a report from CoinGecko. This made meme coins the most profitable narrative in that period and caused the number of tokens issued on Solana, the hottest blockchain for meme coin trading, to reach an all-time high of 14,648 tokens released.
In this scenario, new investors may be tempted to spread their funds across different meme coins and hope for stellar growth. Jupiter Zhang, head of liquid funds at investment firm HashKey Capital, highlights that “for every success story there are dozens more failures”.
“Market fundamentals have never been more important. […] FOMO is not a long-term strategy,” Zhang shared with Crypto Briefing. “Fundamental analysis provides a structured and analytical approach to investing, especially crucial in a volatile market like crypto. While the high returns of meme coins may seem attractive, they are often driven by hype and speculation rather than underlying economic value.”
Recently, HashKey Capital published a 217 page book titled “Digital Asset Valuation Framework”, a guide to fundamental analysis in cryptography. Zhang is the lead author and states that by understanding fundamental analysis, investors can identify assets with real potential and longevity, reducing risk and promoting a more sustainable investment strategy.
“This is crucial because, as the meme coin narrative shows, not everything that glitters in the crypto world is gold.”
Why worry about fundamentals?
Meme coins, as the name suggests, increase by backpacking a famous meme. Because of this, most of them generally have short life expectancies. Investors may not be inclined to learn how to do proper research since giving away money may be more profitable.
“Even in the seemingly extravagant area of meme coins, fundamental analysis can provide insights. For example, evaluating the token’s community engagement, development activity, and use cases can offer insight into its potential sustainability and growth,” explains Zhang.
Additionally, fundamental analysis can be useful in identifying which meme coins have a strong enough narrative to sustain long-term interest from those that are likely to fade away as initial enthusiasm fades.
“Fundamental analysis is not necessarily in opposition to narrative-driven investing, which focuses primarily on the stories and trends that capture market interest and investor sentiment. They can be used together to provide a more complete assessment of a digital asset’s potential.”
Zhang adds that while fundamental analysis aims for long-term growth against the often emotional and speculative waves of the market, narrative-driven investing is useful for riding the waves of market enthusiasm and investor psychology, potentially reaping rewards. quickly.
However, narrative-based investing often leads to fear of missing out (FOMO), and this often ends in bad investments. In other words, narrative driven requires an effort to time the market and move quickly before the narrative changes, while fundamental analysis investigates the intrinsic value of an investment, seeking to identify assets with strong fundamentals that suggest a higher intrinsic value. than the market. price.
“This is a more methodical path to potentially sustainable gains as it requires rigorous evaluation of data. Some things we look at when evaluating digital asset fundamentals: a thorough assessment of a token’s utility, governance structure, supply mechanics, technical stack, and potential innovations.”
More VCs in meme coins
The meme coin market has always been a way for investors to gamble without generating returns for VCs. This is because when a protocol token is made available to the public, VCs already have it in their hands at a significantly lower price. Hence, if this token becomes popular and its price increases, VCs will be the real winners.
Meanwhile, since meme coins are community-issued, this is a sector that VCs cannot profit from. Or couldn’t until recently. Shiba Inu closed a $12 million financing round with participation from Mechanism Capital, Big Brain Holdings, Cypher Capital and Shima Capital, among others, and this could turn the tide in the meme coin market.
“Across sectors, industries and opportunities, investors will look for returns in every corner of the market. Therefore, large-scale investments in meme coins are not really surprising,” says Zhang about the recent move by VCs into these tokens. “Shiba Inu’s fundraising success suggests that even meme coins can attract serious investor attention when they align with a compelling narrative and show potential for broader ecosystem development based on community engagement.”
Therefore, this is where fundamental analysis shows its weight. Zhang believes that as more people equip themselves with fundamental analysis tools, the number of serious investments going into select meme coins will show sustained growth over time.
“These will likely be those that demonstrate real utility, ongoing social value, or strategic importance within the crypto market beyond the initial hype.”
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