Zhao Changpeng (CZ)’s family office YZi Labs (formerly Binance Labs) head Ella Zhang stated in an exclusive interview this week that the trend of the market flocking to meme coins is slowing down, with funds gradually returning to non-meme coins. She emphasized that “projects with weak fundamentals will ultimately disappear.”
(Background: Elon Musk warns: Meme coins are like gambling, don’t go All In! It’s foolish to rely on memes for wealth.)
Since the beginning of 2024, the meme coin craze has swept through this cycle, with market funds noticeably shifting from VC-backed tokens to community-driven memecoins. However, the recent popularity of meme coins has significantly declined, and investors seem to be gradually returning to non-meme tokens. Ella Zhang pointed out in an interview released by BeInCrypto on the 14th: “Although the community-driven narrative provides investors with a fairer entry point, they (meme coins) have lost momentum over time due to weak fundamentals.”
Interest in VC-backed tokens began to decline at the end of the first quarter, while the popularity of meme coins surged, leading to the so-called meme coin frenzy. VC tokens have become less favored in this cycle, characterized by low circulation and high FDV, with demand for these tokens noticeably decreasing. According to Dune data, the benchmark for unrealized profits for VCs has significantly dropped to only 3 times, a stark contrast to previous cycles where venture returns peaked at 563 times. Investors are turning to high-circulation meme coins and altcoins for fairer token distribution, rejecting the role of being the bag holder for VCs’ offloaded tokens. There is a clear decline in the demand for low circulation, high FDV VC tokens.
Funds are flowing back to non-meme coins. However, Ella Zhang mentioned that the trend of traders flocking to meme coins is currently slowing down, with a return to VC-supported altcoins. “According to data from CoinMarketCap, this trend is currently slowing down. The ratio of meme market capitalization to non-meme altcoin market capitalization has been decreasing, indicating that funds are gradually returning to non-meme coins. We believe this is a natural market cycle—while the community-driven narrative can generate momentum, long-term value ultimately comes from strong fundamentals.”
Without fundamentals, value cannot be maintained. For Ella Zhang, the success of meme coins is destined to be a temporary phenomenon, as most meme coins lack fundamentals.
While 40,000-50,000 crypto tokens are created daily, the average lifespan of circulating meme coins is 1.3 hours, with only about 5% of meme coins achieving a market cap over 10 million dollars. This does not imply that there are no good meme coins; rather, for any asset to have lasting/growing value, it generally requires one or more foundational services, businesses, products, technologies, or innovations driving price increases.
Without fundamentals, value cannot be maintained.
VCs must adapt to the fair-launch Web3 landscape. Although VC-supported altcoins are regaining ground, Ella Zhang believes these projects should learn from the lessons of the meme coin frenzy and adapt to the principles of fair launches. “Venture capital must adapt to the evolving Web3 landscape, which is increasingly driven by community-centered, fair-launch principles that have become a native culture in the cryptocurrency space. VCs that adapt to this shift by supporting projects with real utility and a focus on fair, transparent practices will be better positioned to thrive as the market continues to evolve.” Ella Zhang also stated that project teams should not completely abandon venture capital. In many ways, they can balance the advantages of venture funding, fair token distribution, and community ownership aspirations.
CZ calls on projects to create slowly released token economics. Regarding CZ’s proposal last month for what he believes constitutes sustainable tokenomics, he suggested that the initial 10% of tokens be unlocked and sold in the market, with each subsequent unlocking meeting all the following conditions:
- Six months after the last unlocking.
- Only when the token price has maintained above twice the previous unlocking price for over 30 consecutive days prior to unlocking.
- A maximum of 5% of tokens can be unlocked at each time.
Ella Zhang explained: “CZ calls for long-term builders to commit to slowly released token economics and achieve significant milestones—this refers to projects starting with low circulation and gradually increasing supply based on significant milestones, ultimately becoming high circulation projects.” In conclusion, she stated, “Ultimately, it all must return to fundamentals.”
Projects with strong fundamentals will continue to grow, while those with weak fundamentals will ultimately disappear.
