The Death and Life of the Average Memecoin

Key Takeaways

• Memecoins peak fast and die slowly. The median memecoin reached its all-time high 17.2 days after being first traded and a quarter peak within 1.6 days. Memecoins collapse a median 370 days from that peak to death (−95%).
• Recovery essentially does not happen. 81% fell ≥ 90% from an all-time high. Only 5 (3.3%) ever regained it.

Introduction

While often associated with retail speculation and eye-popping returns, memecoins have proven effective at bootstrapping attention and liquidity in new ecosystems. Solana’s revival from the FTX collapse came with a wave of memecoin activity in late 2023, followed by Base in 2024 and most recently on Robinhood Chain, where memecoins are being paired with tokenized stocks.

But the same viral and attention grabbing nature comes with a short lifespan. Launchpads like pump.fun and PONS have amplified this dynamic by lowering the barrier to memecoin creation. Millions of memecoins are spawned, of which only a tiny fraction graduate to centralized exchanges and even fewer end up surviving.

Memecoins’ boom-and-bust cycles are well known but rarely quantified. How long do memecoin market cycles last? Just how well (or poorly) do they perform over a long time horizon? In this issue, we measure the lifecycle of a broad cross-section of memecoins, from first price to collapse, to give a top-down view of the memecoin sector.

Modeling the Memecoin Market Lifecycle Using Survival Analysis

To frame the definition of a token’s market lifecycle, we first define the following events:

• Start: When a coin is first traded on an exchange.
• Peak: A memecoin’s all-time-high (ATH) price point.
• Collapse: A 95% drawdown from ATH.

We applied the Kaplan-Meier estimator, a technique used in survival analysis to estimate the median survival in clinical trials, to measure the typical market lifecycle of memecoins. We applied the KM Estimator on a sample of 150 memecoins in the Talos Market Data universe. The sample specifically uses memecoins launched when Solana memecoins (“Solana Memecoin Era”) became widespread in December 2023 when BONK was launched.

An important caveat is that this universe oversamples tokens which are relatively successful; to qualify in this universe, a coin must have a price from at least one centralized exchange. This obviously discounts the large swaths of memecoins generated from launchpads such as pump.fun. Thus, the figures in this study systemically overestimates the lifespan of your typical memecoin on a launchpad. The drawdown threshold of 95% is also arbitrarily chosen and the choice of threshold can significantly affect what the estimator yields for a median lifespan.

Another caveat is that price comparisons to all-time-highs, by definition will, always appear unfavorable. ATHs are a useful reference point despite being only known retroactively, as other alternatives (e.g. local maxima) are subject to unpredictable price discovery paths. Take this exercise more as an illustrative model rather than a precise statistical estimate.

Source: Talos CM Market Data Pro

How to read the curves: The estimator walks forward in time from left to right. At each moment an event occurs, it asks: of the coins still at risk right now, what fraction just died? It multiplies those conditional survival rates together. A coin that is still alive contributes to the “at risk” denominator for as long as it is observed, then drops out without ever counting as a collapse. The curve starts at 100% and steps down; the KM median is where it crosses 50%.

The upshot: the median memecoin reached its all-time high just 17.2 days after first being traded and a quarter peak within 1.6 days. Memecoins collapse to -95% of its ATH a median 370 days after it hits an ATH.

Buyer Beware: The Gruesome Returns from the Memecoin Casino

Previously, we traced the market lifecycle through time. Now, we examine how token price returns are distributed across assets.

The chart below shows the distribution of memecoin price levels since their ATHs. From this, we glean that over half of memecoins trade 95% below their ATHs.

Source: Talos CM Market Data Pro

Source: Talos CM Market Data Pro

Most memecoins begin within a tight band of returns before skewing downward - only five of 151 tokens are above their day-one price. After 300 days, a majority of tokens are worth 10% of their initial value. The negative returns since inception affect all memecoins regardless of size. Three of the five largest tokens by market cap launched during the Solana Memecoin Era (TRUMP, PUMP, and PENGU) are worth less now than at launch.

Source: Talos CM Market Data Pro

50% of memecoins launched in the Solana Memecoin Era have completed the lifecycle from launch to ATH to down -95% in an average 456 days. By day 1,000 roughly 90% of tokens have fallen 95% from their peak.

The Sankey below walks through the fate of memecoins. Only 19% of memecoins avoid a collapse of 90% from their ATH. Of the 81% memecoins that collapse 90% from ATH, only 3% ever regain their ATH.

Is This The Top? A Look at Local Tops vs. ATHs

When the market is taking you for a ride, how do you know when you’ve reached a local top or the absolute pico-top? It’s impossible to know, but historically, memecoins have rarely achieved more than one “top”.

Two-thirds of Solana-era memecoins never stage a failed rally at all. They go up once, top out in a few days, and never again approach that level. The remaining third take a few months on average to achieve an ATH.

Beyond Price: An On-Chain Activity Perspective

We can apply a similar analysis from above using on-chain activity. Using active addresses with a balance of at least $1 on Solana, we can compare peaks in activity to now. Much like the price discovery mania, on-chain activity has few local tops before achieving its summit. On-chain activity rarely recovers since their initial peak. Today, we see the “major” memecoins retain no more than 7% of their active addresses since peak.

Source: Talos CM Network Data Pro

Outlook: Is This Age of Bonk Collapsing?

The numbers paint a grim picture for memecoins broadly. Does that spell the end of memecoin speculation?

The evolution of memecoin trading to other platforms indicates otherwise. There’s little evidence which suggests that the asymmetric returns from memecoins reward the long odds of hitting the jackpot. But to assume that memecoin speculation depends on rational market participants making serious investment decisions would be a category error. Although the market generally knows that memecoins tend to make poor long-term investments, it hasn’t stopped new patrons from trying their hand at the trenches, so to speak.

Speculation is deeply ingrained in the culture of markets regardless of the rails under which they are built. It is not unique to blockchains, although blockchains enable these markets to proliferate efficiently and permissionlessly. As more assets become financialized and tokenized on-chain, emergent ways of gambling will likely continue to take on new and unexpected forms.

^{Disclaimer: The information herein is provided for informational purposes only. Talos Trading, LLC and its affiliates (“Talos”) does not give any representations or warranties in relation to the accuracy, validity, or completeness of the information of this material, including without limitation the factual information obtained from publicly available sources considered by Talos to be reliable at the time. Talos accepts no liability for any consequences of using the information contained in this material. Any opinions or estimates expressed herein reflect a judgment made by the author(s) as of the date of publication and are subject to change without notice. Neither this material nor any copy thereof may be taken, reproduced, or redistributed, directly or indirectly, without Talos’s prior written permission. Any views or opinions expressed are those of the authors and do not necessarily reflect the views of Talos. This communication does not constitute an offer to buy or sell, or a promotion or recommendation of, any digital asset, security, derivative, commodity, financial instrument, or product or trading strategy. This document and information are not intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.}

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