$PEPE has changed many lives, after doing a 375,000x in just 21...
Miles Deutscher@milesdeutscher
69 views
Jan 02, 2024
~7 min read
1
$PEPE has changed many lives, after doing a 375,000x in just 21 days.
But you can change yours too.
Here's my full guide to finding meme coin gems (and trading them for crazy returns). 🧵
But you can change yours too.
Here's my full guide to finding meme coin gems (and trading them for crazy returns). 🧵
2
In this thread, I'll cover:
• The basics of meme coin investing
• How to find and research strong meme coins
• The best meme coin buying strategy
• How to know when to take profits (full method)
Let's dive in. 👇
• The basics of meme coin investing
• How to find and research strong meme coins
• The best meme coin buying strategy
• How to know when to take profits (full method)
Let's dive in. 👇
3
When you buy any token, you're buying it on the premise that someone will (in the future) want to buy it off you at a higher price.
This is especially true for meme coins, as they rely more on psychological drivers as opposed to fundamentals.
This is especially true for meme coins, as they rely more on psychological drivers as opposed to fundamentals.
4
This is known in economics as the "Castle-in-the-Air Theory", (popularised by economist John Maynard Keynes), whereby 'investors try to build a sort of castles in the air and think of the probable price rise in the future than estimating the intrinsic values'.
5
The goal is to beat the crowd by building positions before other investors start buying.
But of course, this is a gamble, as meme coins have less fundamental drivers than your typical investment.
Therefore, you have to treat meme coin investing as a gamble.
But of course, this is a gamble, as meme coins have less fundamental drivers than your typical investment.
Therefore, you have to treat meme coin investing as a gamble.
6
You can think of meme coins like the games at a casino, and the L1s like Ethereum + exchanges as the house.
Remember, the house always wins.
We've already seen this reflected in the significantly increased $ETH burn over the last week.
More on chain activity = more $ETH burnt.
Remember, the house always wins.
We've already seen this reflected in the significantly increased $ETH burn over the last week.
More on chain activity = more $ETH burnt.
7
But here's the major difference between a meme coin and a casino game like Roulette.
When you bet on a roulette spin, the house automatically has ~5.26% edge.
But, when investing in meme coins, there are ways to tip the odds in your favour.
When you bet on a roulette spin, the house automatically has ~5.26% edge.
But, when investing in meme coins, there are ways to tip the odds in your favour.
8
Now admittedly, it is harder to create an edge here vs other styles of trading.
This is because there are so many unknown variables that can affect a meme coin's success.
But there ARE some measures that you can take to improve your EV.
This is because there are so many unknown variables that can affect a meme coin's success.
But there ARE some measures that you can take to improve your EV.
9
Here's a 5 step plan to find meme coins and increase your edge.👇
10
1. Monitor which coins are performing.
Look at the top gainers section on a site like @DEXToolsApp, so that you can measure which memes are performing from a price perspective.
You only want to invest in memes that are gaining momentum.
Look at the top gainers section on a site like @DEXToolsApp, so that you can measure which memes are performing from a price perspective.
You only want to invest in memes that are gaining momentum.
11
2. Verify that the token has a strong culture.
Meme coins ONLY succeed if they have a strong community.
In this sector, community trumps all other variables.
The meme must be funny, entertaining, and easy to understand.
Meme coins ONLY succeed if they have a strong community.
In this sector, community trumps all other variables.
The meme must be funny, entertaining, and easy to understand.
12
There are many ways to track a token's social performance:
• Monitor social metrics on @LunarCrush
• Determine whether the token is being talked about in social circles: Twitter, Telegram, Discord etc.
• Is the token trending on Twitter, Google, DexTools or CoinGecko?
• Monitor social metrics on @LunarCrush
• Determine whether the token is being talked about in social circles: Twitter, Telegram, Discord etc.
• Is the token trending on Twitter, Google, DexTools or CoinGecko?
13
3. Research the fundamentals.
Ask yourself:
• Who is the team? Are they doxxed? If not, have they shown competence in terms of building hype?
• What are the tokenomics like? Is there dilution to come/burning mechanisms?
Ask yourself:
• Who is the team? Are they doxxed? If not, have they shown competence in terms of building hype?
• What are the tokenomics like? Is there dilution to come/burning mechanisms?
14
In all honesty, when it comes to meme coins - these questions are less important than when researching a legit project.
But it still counts to put in a bit of work to help create an edge.
But it still counts to put in a bit of work to help create an edge.
15
One of the biggest headwinds in this sector are the constant rugs and exploits.
Although you can't avoid this entirely - there are 2 methods I use to help avoid this:
1. Run a quick audit on @Token_Sniffer
2. Assess the distribution of wallets on @bubblemaps
Although you can't avoid this entirely - there are 2 methods I use to help avoid this:
1. Run a quick audit on @Token_Sniffer
2. Assess the distribution of wallets on @bubblemaps
16
4. Work out whether you want to follow the leader, or play the rotation game.
The "leader" typically has a higher market cap, but is less risky.
For example, $DOGE is the leader of the "Inu" coins.
Now $PEPE is the leader of the "Frog" coins.
The "leader" typically has a higher market cap, but is less risky.
For example, $DOGE is the leader of the "Inu" coins.
Now $PEPE is the leader of the "Frog" coins.
17
@_FabianHD asserted in a recent post that "the best play is usually to just go long the leader."
I recommend reading the full explanation as to why in the tweet below.
I recommend reading the full explanation as to why in the tweet below.
18
New liquidity gravitates towards the leader first, then filters down into the smaller coins in that niche.
When liquidity rotates within a specific sector, profits from the smaller coins often flow back into the leader.
This typically makes the leader a better R/R play.
When liquidity rotates within a specific sector, profits from the smaller coins often flow back into the leader.
This typically makes the leader a better R/R play.
19
The second option is to try and play the rotation game, which involves investing in the smaller caps that emerge underneath a niche leader.
This can result in some nice gains IF you get the timing rate, but for the reasons stated above - often times it's the inferior R/R play.
This can result in some nice gains IF you get the timing rate, but for the reasons stated above - often times it's the inferior R/R play.
20
5. Follow the smart money.
To find new meme coin opportunities, you can look at what the whales/others successful meme coin traders are buying.
To find new meme coin opportunities, you can look at what the whales/others successful meme coin traders are buying.
21
Here's how:
1. Go onto Etherscan and look at early buyers of successful meme coins like $PEPE
2. Find additional "smart money" wallets on @lookonchain
3. Track their wallets on DeBank to see what they're buying
4. Use these buys as a basis to research further (find patterns)
1. Go onto Etherscan and look at early buyers of successful meme coins like $PEPE
2. Find additional "smart money" wallets on @lookonchain
3. Track their wallets on DeBank to see what they're buying
4. Use these buys as a basis to research further (find patterns)
22
Now let's assume you've completed your fundamental research.
You've picked a coin, and you're ready to buy.
How do you approach the trade itself? (buying and taking profits)
A 3 step plan. 👇
You've picked a coin, and you're ready to buy.
How do you approach the trade itself? (buying and taking profits)
A 3 step plan. 👇
23
1. Treat it like a casino.
Investing in meme coins is fun, and you may get very lucky.
But treat it like the casino it is.
If you wouldn’t walk up to the roulette table at a casino and feel comfortable betting that exact same amount on a spin - you’re probably over allocating.
Investing in meme coins is fun, and you may get very lucky.
But treat it like the casino it is.
If you wouldn’t walk up to the roulette table at a casino and feel comfortable betting that exact same amount on a spin - you’re probably over allocating.
24
2. Only trade meme coins on a seperate on-chain wallet.
Don't mix your investing capital and your meme coin capital.
This will help you clearly seperate your strategies and reduce emotional toll.
You should be willing to lose 100% of the funds in this new wallet.
Don't mix your investing capital and your meme coin capital.
This will help you clearly seperate your strategies and reduce emotional toll.
You should be willing to lose 100% of the funds in this new wallet.
25
3. Use TA to help you get entries.
Due to liquidity constraints and a lack of historical price data, executing accurate TA is difficult.
But I've found it helps to use charting to develop some sort of plan so you're not going in blind.
Due to liquidity constraints and a lack of historical price data, executing accurate TA is difficult.
But I've found it helps to use charting to develop some sort of plan so you're not going in blind.
26
One method I've found works well is to wait for significant corrections, then long the next HTF breakout (this worked well on $PEPE).
That way you're not apeing into highs.
There's also nothing wrong with DCAing over a predetermined period. No need to rush in all at once.
That way you're not apeing into highs.
There's also nothing wrong with DCAing over a predetermined period. No need to rush in all at once.
27
But if you're really feeling FOMO, sometimes there's nothing wrong with just getting an initial entry at market.
This could be 20-30% of your final position size.
Think about it as hedging against your own emotions by going long.
This could be 20-30% of your final position size.
Think about it as hedging against your own emotions by going long.
28
Let's fast forward.
Let's assume you're now up. It's time to take profits. What's the strategy?
Meme coins can make you life changing money quickly.
But make sure you actually use that money to change your life.
Let's assume you're now up. It's time to take profits. What's the strategy?
Meme coins can make you life changing money quickly.
But make sure you actually use that money to change your life.
29
Don't roundtrip profits.
One easy rule is to take your initial entry out after a 2x. That way you're riding the trade with "house money".
One easy rule is to take your initial entry out after a 2x. That way you're riding the trade with "house money".
30
Technically the remaining capital is still yours, so riding the position isn't technically "risk free" - but at least you're guaranteeing profits on the trade itself.
31
Every additional 2x after that I would ladder out a predetermined %.
For the risk averse, you may want to keep taking your initial $ size out.
But if you're more degen, you may opt for a lower %. For example, 20% or 30% per additional 100% gains.
For the risk averse, you may want to keep taking your initial $ size out.
But if you're more degen, you may opt for a lower %. For example, 20% or 30% per additional 100% gains.
32
This strategy works UNTIL a top is in. After that point, you're likely to experience severe drawdowns.
But there ARE a few indicators that can indicate that a top is forming, so you can de-risk accordingly.
But there ARE a few indicators that can indicate that a top is forming, so you can de-risk accordingly.
33
These indicators include:
• 24h trading volume flipping market cap
• Lower highs being formed on a HTF
• Number of holders decreasing, or holder growth significantly slowing
• Large whales starting to sell
• Funding rates shifting from negative > positive
• 24h trading volume flipping market cap
• Lower highs being formed on a HTF
• Number of holders decreasing, or holder growth significantly slowing
• Large whales starting to sell
• Funding rates shifting from negative > positive
34
There's no guaranteed way to predict when a top is in 100% of the time.
But hopefully a combination of some, or all, of the above indicators can help you de-risk when top signs appear.
But hopefully a combination of some, or all, of the above indicators can help you de-risk when top signs appear.
35
I hope this thread helps you become a better meme coin trader.
Follow me @milesdeutscher for more content like this.
I'll also keep you updated as I find new opportunities in this sector.
Like/Retweet the first tweet below if you can. 💙
Follow me @milesdeutscher for more content like this.
I'll also keep you updated as I find new opportunities in this sector.
Like/Retweet the first tweet below if you can. 💙