Meme Coin: the ultimate embodiment of negative sum games Meme coins (such as Dogecoin DOGE, Shiba Inu SHIB, Pepe coins, etc.) are the most extreme speculative varieties in cryptocurrencies, and their essence is close to negative sum games (most people lose money, a few people profit), even more dependent on market sentiment and liquidity manipulation than ordinary altcoins. The following is the key analysis: 1、 Core features of memetics 1. Without fundamental support, relying solely on narrative and hype Zero practical value: 99% of memes do not have practical application scenarios, do not generate cash flow (such as ETH gas fees), do not provide staking benefits (such as SOL staking), and their prices rely entirely on the expectation of "more people taking over". Example: DOGE was originally a joke coin mocking Bitcoin, with code copied from Litecoin and no technological breakthroughs. Narrative driven ups and downs: Relying on social media hype (such as Musk's Twitter), community frenzy (such as Reddit's WallStreetBets culture), or short-term marketing campaigns (such as exchange launches). Example: In 2021, DOGE rose 100 times due to Musk's call for orders, but then plummeted 90%. 2. The chips are highly concentrated, and the banker has obvious control over the market Early whale monopoly supply: Most memes reserve a large amount of tokens for teams or early participants during issuance, and retail investors can only accept them at high prices. Example: 50% of the initial supply of SHIB is directly deposited into the V God (founder of Ethereum) wallet and then destroyed by it. Pull and smash cycle: The market maker attracts FOMO (fear of missing out) sentiment by raising prices through low liquidity, and then sells to cash out. Data: After Pepe's listing in 2023, the top 5 addresses sold over 60% of their holdings within 3 months. 3. High inflation and unlimited issuance risks Unlimited supply: Many memes are designed for unlimited issuance (such as DOGE issuing 5 billion coins annually), diluting the value of holders in the long run. The proliferation of imitation disks: After a meme coin becomes popular, a large number of imitations (such as FLOKI and BONK) will emerge in the market, diverting funds and leading to the collapse of the original token. 2、 Why is meme currency a 'negative sum game'? ​​ 1. Transaction costs consume profits High slippage and handling fees: Meme coins are mostly traded on decentralized exchanges such as Uniswap, with shallow liquidity pools leading to significant bid ask spreads, and the actual cost for frequent traders may exceed 20%. Robot Rush: On chain transactions are transparent, and professional institutions use MEV (miners can extract value) robots to trade ahead, leaving individual investors at a disadvantage. 2. Liquidity Trap Entrance congestion during surge: When memes skyrocket, they attract a large number of retail investors, but exchanges may suspend withdrawals or restrict trading (such as Robinhood's suspension of DOGE trading). Unable to exit during a sharp decline: Once the market turns, liquidity quickly dries up and prices plummet to zero. Example: In 2021, the SQUID (Squid Game Coin) project team ran away and the token fell to $0 within minutes. 3. survivorship bias misleads investors A few successful cases have been magnified: The media only reported on 10000 fold coins such as DOGE and SHIB, but ignored the fact that 99% of meme coins were reset to zero. Data: According to CoinMarketCap statistics, over 80% of the memes issued in 2021 fell by over 95% within 6 months. 3、 Participation logic and risk control of memetics 1. Only suitable for extremely high-risk speculation Nature of Funds: The investment should be regarded as "entertainment consumption" (such as buying lottery tickets), rather than investment. Position control: Not exceeding 1% to 5% of total assets, and being prepared for zeroing. 2. Participation timing and strategy Early intervention: The life cycle of memetics is very short, and the foam cycle is usually completed three months before the listing (for example, Pepe coin will be listed in April 2023, and will peak in June). Follow the narrative: Keep an eye on social media trends (such as Twitter, Telegram), but be wary of taking the last blow. Strict stop loss: Set a hard stop loss line (such as -50%) to avoid emotional holding. 3. Avoid common pitfalls Reject FOMO: Do not chase after coins that have already skyrocketed (such as a coin that has risen 100 times and has very little space). Be wary of 'community beliefs': Meme coins have no fundamentals, and the community's popularity cannot sustain long-term prices. Verify liquidity: Before trading, check the depth of the liquidity pool on the chain (such as Uniswap's TVL) to avoid being deceived by "paper prices". 4、 Summary: The Essence of Meme Coins Short term: It may present a "pseudo positive sum" (everyone makes money) due to market frenzy, but the essence is a negative sum game (fees, banker harvesting, zero risk). Long term: 99% of memes will go to zero, and survivors (such as DOGE) rely on sustained speculation and bull market liquidity. Analogy: More like a 'roulette wheel in a casino' rather than an investment - the advantage of the banker (project owner, exchange, giant whale) is obvious, and the winning rate of individual investors is extremely low. Rational suggestion: Ordinary investors should stay away; If participating, it is necessary to use extremely small positions and strictly abide by discipline. True wealth accumulation still relies on positive sum games (such as Bitcoin, large cap stocks, index funds).