This article describes my methodology for selecting among the thousands of memecoins to invest in. Most projects are scams, but it is undeniable that the rare diamond in the rough will continue to produce 1000x returns for the investors who are savvy enough to catch it early.
At the end, I’ll discuss a handful of promising crypto projects based on the criteria described below.
The challenge and promise of Memecoin Selection
The rise of crypto in 2021 has seen the proliferation of new tokens. On popular chains like Ethereum and BINANCE Smart Chain, there are hundreds of cryptocurrencies launched every day. Each project tries to build hype as the next Bitcoin or Doge Killer. Most vanish within a few weeks, leaving a trail of hoodwinked investors.
The reality is that the vast majority of new token launches are copy-paste scams designed to quickly extract money from naive investors.
However, the meteoric rise of tokens like Dogecoin and SafeMoon demonstrate that there is still massive potential for investors who are able to spot truly promising tokens early. It is simply impossible to find returns as eye-watering as these outside of crypto, and it is the very real possibility of a 1000x that warrants further investigation into meme tokens.
This article will discuss best practices for researching memecoins and choosing which to invest in. All investments (whether in cryptocurrency or elsewhere) are inherently risky — much as token names like “SafeRise” try to suggest otherwise. But through careful research and diligence, we can learn to spot major red flags and identify the rare projects with trustworthy teams and long term focus.
Risk and Reward
Ultimately, all wise investment analyses boil down to an evaluation of risk and reward. Very simply, we will learn to identify tokens with:
- Low Risk: Since 90% of new tokens are short-term scams, simply learning to avoid rugpulls will massively increase our expected returns.
- High Potential Reward: Strong teams with a dedicated long-term focus and a unique vision for the future, rather than simply a copy-paste project.
Minimizing Risk by Avoiding Rugpulls
Having analyzed hundreds of crypto projects, I have learned firsthand the many telltale signs of a crypto rugpull. This checklist applies primarily to tokens that were launched on a decentralized exchange like Uniswap or PancakeSwap.
What was the initial token distribution?
The developer of a new token has complete flexibility to distribute the initial token supply. Often dev teams will give themselves a big chunk of the tokens for free. It is also popular to give up to 50% of the entire supply to a crypto celebrity. Be careful of these gimmicks — remember that these people did not buy in along with the rest of the investors, and can dump their huge allocations at any point.
In contrast, a fair launch is one where all of the tokens are put onto Uniswap/PancakeSwap for purchase by anyone.
Who owns the liquidity pool?
When a development team creates a new token and puts it in a decentralized swap exchange, the default is for the developers to own the entire liquidity pool. This means that at any moment, they can remove the entirety of the pool, along with all the ETH and BNB inside it.
This is a recipe for a painful rugpull. The first thing I check is the top LP holders. For a small new project, the vast majority of the LP should be held by the burn address (0x0000…).
What are the fees to transfer tokens?
It is fashionable for tokens to have large fees on every transaction, in order to deter people from selling tokens later on. These fees are sometimes outrageously high, like 30% of every transaction. What’s more, these fees are not transparent to users: you may think you are buying 100 tokens on PancakeSwap but only receive 70 because of the fees. It is very important to do research beforehand to understand the fees involved.
Remember that in order to make any profit, you’ll need to pay fees twice. If you buy into a token with 25% fees, that means you need the token value to double before you can break even.
It’s worth noting that one of the great promises of cryptocurrency is that it has much lower fees on large transactions that comparison methods like credit cards, which charge 2% on every transaction. If a cryptocurrency bakes in a 10% fee to every trade, it is hard to imagine long-term adoption as a real currency.
What is the current token distribution?
On sites like etherscan and bscscan, it is easy to quickly glance at the top holders of a token. Generally, you are looking for a smooth distribution where many stakeholders own decent-sized investments, rather than a sharp distribution where one person holds 20% of the supply.
The distribution will naturally flatten out as the token grows, so it is more forgivable to have large holders for a smaller project, because anyone can pick up a substantial chunk of the token supply for a relatively small amount of money.
Be wary of “locked wallets.” It is common practice for the dev team to allocate themselves 20–40% of the supply, but attempt to assuage investor concern by locking these tokens temporarily. Just because a wallet is locked, does not mean it is safe. Make sure to verify the duration of the lock, and be aware that when the lock expires, the entirety of that wallet can be dumped.
Automated rug-pull checks
These are a lot of things to keep track of! For sizable investments, I recommend doing a thorough analysis of these elements yourself. However, there are some automated tools that are good places to start.
For Binance Smart Chain, the website bscheck is easy to use. Just paste in the contract address you are interested in, and the site will automatically check token holders, LP holders, ownership renunciation, etc.
Maximizing Reward: the Search for 100x Potential
Recall that our goals are twofold when selecting a memecoin investment: reduce risk substantially by filtering out rugpulls, and identifying which coins have a real possibility of reaching the moon.
This latter task is more art than science; there are no explicit checklists to follow here. We are looking for something qualitative and unique about the project. Here are a few things to look for:
A long-term focus on community building and adoption
Spend some time hanging out in the token’s community. What do the devs talk about? Are they constantly trying to pump the price or pressure people into buying? Are they focused on the short-term fluctuations in the price chart?
Or do they have a long-term focus on building a great community over time. Ultimately, a crypto project is only as strong as its community and adoption. Ideally, you can find a small project with a dedicated team that has its eye toward long term growth.
Is the team trustworthy or full of empty promises?
Trustworthiness is the most important quality to gauge in the development team. When the team says they’re going to do something, do they actually follow through and do it? Or are they constantly making promises just to pump the price, always claiming that a new listing is around the corner?
Similarly, see whether the team is genuinely welcoming to new members. This is often overlooked, but if new users have a bad initial experience, they won’t stick around long enough to invest.
Is there a whitepaper with a real vision?
It is increasingly common for new projects to copy and paste not only the smart contract code, but even websites and whitepapers. Spend some time reading through the project’s website and whitepaper. Is it thoughtfully written? Does the team articulate a real vision for the future and lay out how they’re going to get there?
Is the token cute, with real meme potential?
The reality of today is that cute tokens win market share. People love to buy adorable tokens. Everyone who follows dogecoin has learned not to overestimate the potential of a memeable pup.
A Selection of Promising Coins
Here is a small selection of up and coming memecoins that look promising by the above analysis:
- BabyDoge: “Baby Doge is cute but with a lot of BITE! $Baby Doge is a deflationary coin designed to become more scarce over time.”
- MiniDoge: “The World’s first Auto-Boost, Hyper Deflationary Coin”
- CorgiCoin: “With all tokens locked on PancakeSwap and the keys burned, CorgiCoin is 100% community owned.”
- CateCoin: “Catecoin is used in Meme Platform where meme creators will submit memes and get paid in Catecoin.”
Having said so, 1000X is just a dream to many, it has a lot of risks that comes with it. The intention of this article is to share how you can maybe spot one. -“Do your own research”.
This article is written by Anndy Lian, an intergovernmental blockchain expert. He is currently the Chairman for BigONE Asia, Advisory Board Member for Hyundai DAC and Chief Digital Advisor for Mongolian Productivity Organisation.
Disclaimer: The information contained on this article is provided for educational purposes, and does not constitute investment advice.
