The Meme Token Phenomenon
Meme tokens are mostly community-driven and often trendy on Twitter (X) and other social media channels. Although these symbols are quite funny, they are worth billions of dollars—and are the first port of call for many people. But they need investor participation to succeed, so is that a diverse user base?
If meme tokens show high wallet overlap, it means they share the same demand groups. This implies that their price movements could have similarities. On the flip side, separate sites may imply a more stable ecosystem with independent growth.
Mapping Wallet Overlap Between Meme Tokens
To investigate investor overlap, we examined wallet addresses that have interacted with Dogecoin, Shiba Inu, Floki Inu, and PEPE using blockchain reliable tools such as Nansen, Dune Analytics etc. Key metrics included:
- Total wallets for each token. Unique Holders.
- The wallet that holds multiple meme tokens at the same time.
- Fund flows among various meme tokens and their ecosystems.
Findings from the Data
1. High Overlap Between DOGE and SHIB
Over one-third of DOGE investors also put their cash in SHIB, as both coins are derived from the same dog meme.
When the market is on the rise, wallets holding both tokens constantly shift their assets back and forth. As a result, the tokens move together because they influence one another.
2. Moderate Overlap Between SHIB and PEPE
Any shared wallets are about a quarter of Shiba holders who are also investing in PEPE to some extent.
The success of PEPE: Viral NFT culture managed to lure a younger user base that would not have otherwise considered investing in meme tokens.
3. Low Overlap Between DOGE and PEPE
Just ten percent of DOGE holders also hold PEPE, suggesting these communities are quite distinct.
PEPE appeals to newer, faddish investors, while DOGE appeals to veteran crypto-investors. Thus, there is a major demographic difference.
4. Cross-Token Movements
During the hype cycle, larger wallets frequently transfer meme tokens for convenient selling.
Whale activity impacts all meme tokens disproportionately in the market. This shows a connection between different communities.
Case Study: PEPE Price Surge (April–May 2023)
PEPE went up explosively from April to May 2023… And that illustrates how overlap among investors influences meme token dynamics.
- The first investors to buy into PEPE were a large group of new players who entered the hype. Moreover, the price was at $0.0000000001/token, so it was low enough for them to view it as a gamble.
- SHIB and DOGE holders began to allocate a bit out of their respective bags into PEPE on account of gaining traction through the overlapping crossover effect temporarily.
- Market impact: the existence of crossover investors caused price spikes as well as drops, with PEPE’s price going up drastically only to fall down drastically.
This case demonstrates that concurrent communities can ensure the uptake and volatile nature of memes.
Implications of Investor Overlap
By knowing how wallet overlap occurs, we can study the meme token market.
For Traders
- Correlation risk: Due to the high overlap, the prices of related meme tokens may move together.
- Arbitrage can be profitable because shared wallets are regularly swapped with different tokens, giving rise to arbitrage opportunities.
For Developers
- If it is a project that aims to last, it needs to build out its very own community rather than mooch off existing communities that arrive with meme tokens.
- If large investors pull their money at the same time, there may not be enough assets to satisfy requests.
For Regulators
- When too much is owned by the whales, markets as a whole could be manipulated or crash.
- Maybe looking at wallet activity in greater detail might help identify systemic risks before they escalate much more.
Are Meme Token Investors Truly Distinct?
Our analysis reveals a mixed picture.
Many investors are holding a lot of meme tokens together. Older tokens like DOGE and SHIB are especially popular. As a result, the behavior of these tokens correlates with each other.
New tokens PEPE and others are beginning to create independent communities, though there’s some overlap still.
A few rich wallets are very powerful. They are making everything blurry in all the projects.
“Meme tokens may have different attributes, but the trend seems to be interconnectedness.” Meme tokens may be interchangeable for speculative purposes, an investor believes.
What Do You Think?
People buying meme tokens have the same wallets. This information from Glassnode highlights how these assets are acquired by the same buyer. Some projects may help create niches, but the overall ecosystem is interlinked and can go through simultaneous boom and bust cycles.
Meme tokens need to gain real-world relevance to prevent being considered irrelevant. If this is not done, the meme token space may just become a playground for day traders.
Conclusion
Investor interest in DOGE, SHIB and PEPE has a significant overlap as per wallet data. This shows that communities you run with are dictating price action elsewhere. Most holders of meme tokens are not that independent. Their base remains shared with other meme tokens. The same is true for many whales. Even PEPE is not entirely standalone. When different projects attract the same investors, the risks affecting the system increase while the benefits of diversification decrease. It became necessary for projects to build up and build long-term identity and value and insulation from the madness the bubble creates.
