More than 99% of meme coins will soon go to zero. So how can we use data to improve our investment success rate? This article introduces how to use Farcaster social data and financial scores to identify the current market stages of meme coins and provide corresponding trading strategies for each stage.
Table of Contents:
5 Stages of Meme Coins
Bot Arena
Volatile Growth
Well Established
Sleeping Giant
Extreme Risk
Trading Framework for Each Stage
Definition of Social Score and Financial Score
Social Score
Financial Score
Since more than 99% of meme coins will soon go to zero, how can we use data to improve our investment success rate? Following the previous article on using Farcaster social data to find crypto hotspots, this article further extends the use of this data to calculate the social score of meme coins and combines it with the financial score to comprehensively evaluate the five stages of meme coins. The analysis method and data panel in this article are provided by on-chain data analyst ilemi.
Bot Arena
At the initial launch, many meme coins compete in this arena, with low social scores (the level of discussion about the token in the Farcaster community) and financial scores (measured by trading volume and liquidity). Most meme coins never stand out in this stage.
Volatile Growth
Meme coins that manage to stand out start gaining attention and promotion from some KOLs. Social scores rise, and financial scores show significant volatility (daily price fluctuations of 100-500%). This stage is usually driven by bots until early adopters join.
Well Established
Both community activity and financial health are impressive, and weekly data shows less volatility, maintaining a balance of attention. Currently, only $DEGEN is in this stage according to the data panel designed by ilemi, with $TN100x being the closest.
Sleeping Giant
Community discussions significantly decrease, while financial volatility remains low. In this stage, the community of the token has been formed and other products or features are released in an attempt to regain attention.
Extreme Risk
Meme coins with low social and financial scores eventually reach the stage of going to zero (the destiny of most meme coins). This can transition from either the “Volatile Growth” or “Sleeping Giant” stages, as retail investors lose interest and traders turn to other tokens with potential for growth. For meme coins in this stage, if liquidity and trading volume are low but the social score is high, it may indicate very high risk and susceptibility to Rug Pull.
In response to this, @apurvkaushal, co-founder of Intract, a mission platform, suggests using coin age, social score, and financial score to identify the stage of meme coins and provide corresponding trading strategies for each stage.
1) Launch Stage
In this stage, meme coins have just been released, and we need to find clues for alpha:
Are there discussions about the token within the inner circle?
Are OG traders buying in?
Find out who deployed the token, which can be further referenced in the tweet.
2) Volatile Growth
In this stage, market noise is the highest, and it is necessary to filter out good coins using financial scores and social scores. The rest is about timing:
Prioritize based on the weekly growth rate (WoW growth): This means higher opportunities for returns (but also higher risks).
Join the Telegram group to observe the atmosphere and ensure there are no bots.
Monitor the purchasing behavior of OGs.
Use sniper tools.
Finally, pray that you are right.
3) Well Established
In this stage, the upside potential is limited, so it is advisable to allocate only a small portion of the investment portfolio to these coins. The focus is on the community:
Strength of the community: A strong and trusted community.
New product developments, such as Doge Chain, Degen L3, etc.
4) Sleeping Giant
For newly added coins, it is recommended to wait and watch. Occasional small investments can be made based on macro market or exciting community announcements (such as listing on a centralized exchange, new product announcements).
Social Score
The fields used to measure social score include:
Casters: The number of users mentioning specific token tags (e.g., $DEGEN).
% Recipients: The percentage of these users who have received (i.e., bought or acquired from other addresses) the token.
Casts: The number of tweets containing specific token tags.
Channels: The number of channels containing specific token tags.
Activity Level: Engagement (likes + replies) plus the product of the number of tweets and the number of users and channels, all cubed. The formula is shown in the image.
Financial Score is calculated by multiplying the Activity Level by the weekly variation rate of tweet users and the weekly variation rate of recipient users.
The social score and financial score enable investors to more effectively evaluate the current market position and potential risks of meme coins, thus making wiser investment decisions.
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Wall Street Enters Meme Coins! VanEck Launches “Memecoin Index” Including DOGE, SHIB, PEPE, and Other Six Tokens
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