AI Memecoin: The Rise and Potential of Emerging Markets

In the first quarter of 2024, the total circulating market capitalization of the top 10 AI technology tokens reached 30.9 billion USD, while the total market capitalization of the top 10 AI memecoins during the same period was only 2.54 billion USD. Although the latter has a smaller market capitalization, it has attracted more attention.

The emergence of GOAT and terminal of truths has created a whole new category of AI, which is expected to achieve a hundredfold growth in the future. This opportunity is comparable to the early stages of the DeFi Summer in 2020.

Market Opportunities

The rise of AI memecoins can be seen as a combination of the memecoin supercycle and the AI supercycle. In the first quarter of 2024, many AI tokens exhibited parabolic growth, despite questions regarding their fundamentals and tokenomics. The top 10 AI technology tokens are valued at over $30 billion, which may just be the beginning of the integration of cryptocurrency and AI, with potentially larger-scale growth expected in 2025.

The AI memecoin category could become the most outstanding sector. Currently, the total market capitalization of AI memecoins is comparable to that of Ethereum Classic. Over time, AI memecoins may attract funding from AI technology coins, traditional meme coins, and venture capital-backed tokens.

"DeFi Summer" Returns

The rapid growth of GOAT from zero to a market value of 1 billion dollars has been compared to the "YFI moment" of this emerging industry. An important catalyst of the DeFi Summer in 2020 was the emergence of YFI, which reached a market value of 1 billion dollars within two months of its fair launch in July. This demonstrated that fairly issued DeFi tokens could start from zero and reach huge valuations, thereby activating a large amount of on-chain capital into the DeFi token space.

The reason why DeFi became a hot topic in the last cycle is that it is innovative, attractive, and sparks people's imagination. In a zero interest rate environment, DeFi is seen as having the potential to attract capital from traditional finance and become the future of finance. This led to a surge in on-chain speculation, helping DeFi applications gain a large total value locked (TVL) and users. When YFI was launched, the total market capitalization of DeFi was about $5 billion, reaching approximately $170 billion at the market peak, a growth of 34 times. If GOAT is similar to YFI, then the AI memecoin sector is still in a very early stage, as its total market capitalization is still less than $5 billion.

Reflexivity in the New Paradigm

The reflexivity theory posits that investors' decisions are based on their perception of reality rather than reality itself. The actions triggered by these perceptions can influence reality or fundamentals, which in turn affects investors' perceptions and ultimately impacts prices.

In the AI memecoin space, prices reflect the total market capitalization, while the fundamentals are based on the level of attention and the scale of "dreams." These tokens are not purely memecoins but are closer to the concept of "tokenized AGI." They start at zero dollars and provide everyone with an opportunity for early participation.

The role of reflexivity in this field may be as follows:

1. AI Memecoin category attracts speculators, but most people may overlook it, thinking it's just another PvP memecoin narrative.
2. AI agents improve their functions over time, changing investors' perceptions of these tokens from "memecoin" to "a whole new realm."
3. This has activated more capital and attention both inside and outside of cryptocurrency, attracting more speculative activities. Some failed AI startups may choose to issue tokens as a last effort.
4. Unlike static memecoins, these AI agents will perform activities on-chain, launch NFT/DeFi projects, and create real-world impacts, thereby attracting more attention.
5. These factors set an unlimited ceiling for potential valuations, which may give rise to bubbles and ultimately lead to cycles of boom and bust.

These tokens have all started from a fair distribution, which aligns with the current spirit of the times, the Memecoin/AI supercycle, and anti-VC sentiment. Considering that AGI may be realized in 2025-2026, if we believe in the 4-year cycle theory, the peak of speculation may coincide with the peak of cryptocurrency in the fourth quarter of 2025.

Market Positioning

In the last cycle, the total market value of DeFi reached 170 billion USD. If the AI memecoin sector reaches this level, it would mean a growth of about 40 times from now. However, since the total market value of cryptocurrencies is higher, we may easily surpass these levels. The key is to maintain confidence and patience, and adjust the portfolio according to market changes, as rotations and volatility can be very intense.