Jupiter Zhang, of HashKey Capital, says meme currency traders can benefit from fundamental analysis

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Meme cryptocurrencies posted returns of 1,300% on average during the first quarter, according to a report by CoinGecko. This made meme coins the most profitable combo of the period and brought the number of tokens issued on Solana, the hottest blockchain for meme trading, to an all-time high of 14,648 tokens issued.

In this landscape, new investors may be tempted to splash their money on different cryptocurrencies and hope for excellent growth. “For every success story there are dozens of other failures,” Jupiter Chang, head of liquid funds at investment firm HashKey Capital, highlights.

“Market fundamentals have never been more important. […] “FOMO is not a long-term strategy,” Chang said with Crypto Summarying. “Fundamental analysis provides a structured, analytical approach to investing, which is especially critical in a market as volatile as cryptocurrencies. While high returns from meme currencies may seem attractive, they are often driven by hype and speculation rather than underlying economic value.”

Recently, HashKey Capital published a 217-page book titled “Digital Asset Valuation Framework,” a guide to fundamental analysis in cryptocurrencies. Zhang is the lead author, and says that by understanding fundamental analysis, investors can identify assets with real potential and longevity, reducing risk and promoting a more sustainable investment strategy.

“This is crucial because, as the meme narrative shows, not all that glitters in the world of crypto is gold.”

Why bother with the basics?

Meme coins, as the name suggests, rise through the emergence of a popular meme. For this reason, most of them usually have a short lifespan. Investors may not be inclined to learn how to conduct proper research because distributing funds may be more profitable.

“Even in the seemingly geeky field of meme coins, fundamental analysis can provide insights. For example, assessing community engagement, development activity, and use cases for a token can provide a glimpse into its potential sustainability and growth.”

Furthermore, fundamental analysis can be useful in identifying currencies that are likely to fade as the initial hype fades away.

“Fundamental analysis does not necessarily conflict with narrative-based investing, which focuses primarily on stories and trends that drive market interest and investor sentiment. They can be used in conjunction to provide a more comprehensive assessment of a digital asset’s potential.”

Chang adds that while fundamental analysis aims to achieve long-term growth against the often emotional and speculative waves of the market, narrative-driven investments are useful for riding the waves of market enthusiasm and investor psychology, potentially reaping quick rewards.

However, narrative-based investing often leads to fear of missing out (FOMO), and this usually ends in bad investments. In other words, narrative requires effort to time the market and move quickly before the narrative changes, while fundamental analysis delves into the intrinsic value of an investment, looking to identify assets with strong fundamentals that indicate a higher intrinsic value than the market. price.

“This is a more systematic path to potentially sustainable gains, because it requires rigorous data evaluation. Some of the things we look at when evaluating the fundamentals of a digital asset: a comprehensive assessment of the token’s utility, governance structure, supply mechanisms, technical stack, and potential innovations there.”

More VCs to meme coins

The meme market has always been a way for investors to bet without generating returns on their investment capital. This is because when a token from a protocol is made available to the public, venture capitalists already own it for a much lower price. Therefore, if this token becomes popular and its price rises, venture capitalists are the real winners.

At the same time, since the community issues meme coins, this is a sector that venture capital cannot capitalize on. Or I couldn’t until recently. Shiba Inu has closed a $12 million funding round with participation from Mechanism Capital, Big Brain Holdings, Cypher Capital, and Shima Capital, among others, and this could turn the tide in the meme market.

“Across sectors, industries and opportunities, investors will seek returns across the market. “So large-scale investments in meme coins are not really surprising,” says Zhang about the recent movement of investment capital into these tokens. “The Shiba Inu’s success in raising Donations points out that even meme cryptocurrencies can attract serious investor attention when they align with a compelling narrative and demonstrate the potential for broader ecosystem development based on community engagement.”

Therefore, this is where fundamental analysis shows its weight. Zhang believes that as more people are equipped with fundamental analysis tools, the number of serious investments directed at selected meme coins will show sustainable growth over time.

“These are likely to be those that demonstrate real utility, ongoing social value, or strategic importance within the cryptocurrency market, beyond just the initial hype.”

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