AI Memecoin: The Frenzy and Potential of Emerging Markets

In the first quarter of 2024, the total circulating market capitalization of the top ten AI technology tokens reached 30.9 billion USD, while the total market capitalization of the top ten AI meme coins during the same period was only 2.54 billion USD. Although the latter is smaller in scale, it has attracted more attention.

The emergence of GOAT and the Truth Terminal has ushered in a new era in the AI field, and this emerging category is expected to achieve hundredfold growth. This is reminiscent of the early opportunities during the DeFi summer of 2020.

Market Outlook Analysis

The rise of AI Fun Coin coincides with the intersection of two major super cycles: memecoins and AI, forming a unique "AI Memecoin full cycle" phenomenon.

In the first quarter of 2024, despite doubts about the fundamentals and token economics of some AI tokens, they still exhibited parabolic growth. The market valuation of the top ten AI technology tokens has exceeded $30 billion, which may just be the prelude to the integration of cryptocurrency and AI, with potentially larger scale growth expected in 2025.

However, the most significant performance may come from the AI novelty coin category. Currently, the total market capitalization of AI novelty coins is only equivalent to that of Ethereum Classic. Over time, AI novelty coins may attract more capital from AI technology coins, traditional novelty coins, and venture-backed projects.

A Repetition of History?

Some perspectives liken the rapid growth of GOAT from zero to a market capitalization of 1 billion dollars to a landmark event in this emerging industry. This brings to mind one of the catalysts of the DeFi summer in 2020 - the rise of YFI. YFI went from zero to a market capitalization of 1 billion dollars in just two months, activating a substantial influx of on-chain capital into DeFi tokens.

At that time, DeFi attracted a lot of attention due to its innovation and potential. In a zero interest rate environment, DeFi was seen as an emerging force that could attract capital away from traditional finance. This led to a speculative boom on-chain, providing valuable user bases and liquidity for DeFi applications.

When YFI was released, the total market capitalization of DeFi was about $5 billion, later reaching approximately $170 billion at the peak of the bull market, an increase of 34 times. Currently, the total market capitalization of AI novelty coins is less than $5 billion, indicating that we may still be in the early stages.

Reflexivity in the New Paradigm

The reflexivity theory suggests that investors' decisions are based on their perception of reality, rather than reality itself. The actions prompted by these perceptions can influence reality, which in turn affects investors' perceptions, ultimately impacting prices.

In the field of AI novelty coins, the price reflects the total market value, while the fundamentals depend on attention and people's imagination about its potential. These tokens are closer to the concept of "tokenized AGI" rather than purely novelty coins.

The role of reflexivity in this field may manifest as:

1. AI Fun Coin category attracts speculators, but most people may view it as just another PvP fun coin narrative and overlook it.
2. The AI agent functionality is continuously improving, changing investors' perceptions of this field.
3. Attract more capital and attention from both inside and outside the cryptocurrency space.
4. Unlike static novelty coins, these AI agents will operate on-chain, launch NFT/DeFi projects, and create real-world impacts.
5. The above factors set an almost unlimited ceiling for potential valuation, which may lead to the formation of bubbles and cycles of boom and bust.

Most of these tokens originate from fair issuance platforms, aligning with the current zeitgeist, the memecoin/AI supercycle, and anti-VC sentiment. Considering the predictions that AGI may be realized in 2025-2026, if one believes in the 4-year cycle theory, the peak of speculation may coincide with the peak of the cryptocurrency market in the fourth quarter of 2025.

Investment Strategy Considerations

In the last cycle, the total market value of DeFi reached 170 billion USD. If the AI novelty coin industry reaches a similar scale, it means there is about 40 times growth potential from the current level. Considering that the current total market value of cryptocurrencies is higher, breaking through this level is not impossible.

The key is to maintain confidence and patience, and to adjust the investment portfolio in a timely manner according to market changes, as the rotations and fluctuations in this field can be very intense.