At the Q1 2024 top, the top 10 “AI Tech” coins had a collective CIRCULATING market cap of $30.9B. On the other hand, the top 10 AI memecoins, which arguably have captured a lot more attention, are ONLY at $2.54B.

I believe the emergence of $GOAT and@truth_terminal""> @truth_terminal kicked off a new AI category that can easily grow 100x from here. There is an amazing opportunity to be early into a PvE (Player vs. Environment) category, similar to getting in early to DeFi Summer in 2020.

The Market Opportunity

Memecoin Supercycle + AI Supercycle = AI Memecoin Omegacycle

Following NVDA’s crazy run in Q1 2024, many AI coins went parabolic despite questionable fundamentals and tokenomics. We saw the top 10 “AI Tech coins” hit over a $30B valuation, and we’re not even counting the FDV and the smaller market cap coins. I believe this was a “test pump” for the Crypto x AI sector, and we are going to see much larger parabolas in 2025.

However, I believe that the vast majority of the outperformance will be in the AI memecoin category. The collective market cap of AI memecoins is equivalent to ETHEREUM CLASSIC. AI memecoins will slowly vampire attack capital away from AI Tech coins, static memes, and VC coins.

The “DeFi Summer” Moment

Many have compared $GOAT’s emergence from $0 to $1B as the “YFI moment” for this new sector. One of the catalysts for DeFi Summer in 2020 was the emergence of $YFI, which “fair launched” in July and hit a $1B market cap in 2 months. This activated a lot of onchain capital into DeFi coins because it gave the sector validation that a fair launch DeFi token is capable of starting from $0 and hitting $1B.

DeFi was a hot sector last cycle because it was new, captivating, and gave people the ability to dream big. With interest rates at 0%, the narrative was that DeFi will vampire attack capital from TradFi and become the future of finance. It led to a speculative mania onchain which helped DeFi apps gain TVL and users to battle test the ecosystem. When YFI launched, the total DeFi market cap was around $5B. It peaked at ~$170B at the market top, a 34x increase. If $GOAT is analogous to YFI, then we are incredibly early as the collective market cap of AI memecoins is sitting at less than $5B.

The DeFi cycle combined catalysts/factors internal to crypto (liquidity mining, ponzi yield farming, speculation) and outside crypto (interest rates to zero —> capital comes to crypto searching for yield). Bubbles formed.

The AI Memecoin Omegacycle is no different. The prevailing narrative within crypto is the Memecoin Supercycle, and the stock market has relentless tailwinds due to AI. It’s the perfect cocktail for the bull market.

In crypto, you find parabolas in sectors that allow people to dream big.

Reflexivity in this New Paradigm

Reflexivity theory states that investors don’t base their decisions on reality, but rather on their perceptions of reality instead. The actions that result from these perceptions have an impact on reality, or fundamentals, which then affect investors’ perceptions and thus prices.

Price is the collective market cap of the AI memecoin sector.

Perception is the market’s view of what these tokens represent.

Fundamentals are based on attention, and how “big the dream” is.

The way I think about it, these aren’t “pure memecoins.” In my opinion, they are closer to “tokenized AGI” that all fair launched on pumpfun. These are tokens that would launch at $1B FDV with a 10% float, if VCs wanted to dump on retail. But these AI memecoins are starting from $0, giving anyone an opportunity to get in early. We are running back ICOs in real-time.

Here’s how I see the reflexivity playing out:

• “AI Memecoin” category attracts speculators. Most people ignore it because “it’s just another PvP memecoin narrative.” (WE ARE HERE)
• AI agents improve functionality over time (Zerebro launching a record label, Truth Terminal in Infinite Backrooms v2, etc), thus changing investor perception from “memecoin” to “an entirely new sector.”
• This activates more capital/attention within crypto and outside crypto, garnering more attention and speculative activity. Unsuccessful AI startups pivot to launching coins as a last ditch effort. Rich tech billionaires start investing in a few coins.
• Unlike “static memes,” these AI agents will start to perform activity onchain, launch NFT/DeFi projects, and create real world impact. They are not static. They evolve over time, capturing more attention.
• All of the above factors create an infinite ceiling for potential valuations. It creates a bubble that ultimately ends in a boom-and-bust cycle.

It’s incredibly important that all of these coins started on pumpfun. It fits the current zeitgeist for cult-forming, the Memecoin/AI supercycle, and anti-VC sentiment. Elon Musk expects AGI by 2025-26, so peak hype may coincide with a Q4 2025 top in crypto, if you believe in 4 year cycles.

How I’m Positioned

The honest answer is I don’t know the right way to allocate. If this is a “meme” category, it’s likely that the current winners stay the winners and you want to bet on them. On the other hand, if $GOAT is similar to YFI, it will pump a lot - and then be eventually flipped by “better tech.” Personally, I am self-aware enough to admit that I have no idea which coins will win, so I have developed a basket of AI memecoins that allow me to benefit in a “rising tide lifts all boats” scenario.

Here’s a rough framework for allocating capital into this emerging category:

• With tokenized AGI, you’re making a bet on which agent will continue to maintain and grow in attention. Instead of “revenue,” think “attention captured.”
• LLMs will only improve over time - you need to bet on a founder/dev that is hungry enough to fine-tune these models to create the best agents.
• This category is in a secular bull market. Think about AI agents that have potential attention capture outside the mini-bubble that is Crypto Twitter/X.
• At some point, tokenomics start to matter. What can the token be used for? What does it represent? If the token pumps, does it help the AI agent further achieve its goals? Reflexivity matters for each token (price, perception, fundamentals).

The total DeFi market cap hit $170B last cycle. If this sector reaches those valuations, that represents a ~40x increase from here. But since the total crypto market cap is higher, we can easily surpass those levels. The key is to build conviction, stay patient, and size accordingly because the rotations & volatility will be aggressive. Maximize your sleep-adjusted returns.

Please take me seriously when I say that I have no idea what I am doing. In fact, I don’t think anyone really knows what they are doing. This can change anytime, but my current AI memecoin basket consists of:

$GOAT - The current leader.

#ZEREBRO - Crypto native founder in tune with culture, ships incredibly fast.

#Fartcoin - Satisfies the left, mid, and right curve. Everyone farts.

#Ai16z - Lots of drama but maintained a cult-y developer community. If they survive this, they become antifragile.

$FOREST - AI monkey trying to save the rainforest. Real world impact.

For more content around the AI Memecoin Omegacycle, please check out my YouTube channel and subscribe to @HFAResearch to gain access to my research in real-time. Thanks!

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