How to find the next PEPE? Become an early investor in potential meme tokens

Author: @milesdeutscher
Compiled by: Crush, Biteye core contributor

*The full text is about 2500 words, estimated reading time is 5 minutes.
After achieving a 375,000x increase in just 21 days, $PEPE has changed the lives of many people. If others can do it, I believe you can too!

This is my complete guide to finding early potential meme tokens (and exchanging them for crazy returns).

In this article, I will cover:

• The basics of meme coin investing

• How to find and research strong meme coins

• The best meme coin buying strategies

• How to know when to take profits (complete method)

01 Basics

When you buy any token, the premise is that you can sell it for a higher price in the future.

This is even more true for meme coins, as they rely more on psychological drivers than on fundamentals.

This is known in economics as the "castle in the air theory" (popularized by economist Keynes), which states that "investors try to build a castle in the air and believe that its price will rise in the future, exceeding its intrinsic estimated value."

Our goal is to get in ahead of others, entering the market faster to buy the tokens we need. Of course, compared to the projects you usually invest in, meme coins have far fewer fundamental drivers. Therefore, you must view meme coin investments as a gamble!

You can think of meme coins as games in a casino, where L1 and exchanges are like the house, and users invest within this house, but the house always wins.

Last week's ETH consumption is also increasing, meaning more on-chain activity leads to more ETH being burned.

However, compared to real casino games, the probability of successfully investing in meme coins is actually higher.

Although the success of a meme depends on many factors, we can take some measures to increase this probability.

02 How to Find and Research Memes

Here is a 5-step plan to find memes and gain an edge:

1. Monitor Tokens

Check out several tokens with high increases on sites like @DEXToolsApp to assess which tokens have potential from a price perspective.

2. Validate the Meme Culture of the Token

Meme coins can only succeed with a strong community; among all success factors, community outweighs all other variables.

Memes must be interesting and easy to understand. We have many ways to analyze the social aspects of a token:

• Monitor social metrics on @LunarCrush

• Determine if the token is being discussed on social platforms: Twitter, Telegram, Discord, etc.

• Is the token popular on Twitter, Google, DexTools, or CoinGecko?

1. Research Fundamentals

Ask yourself the following questions:

• Who are the team members? Are they using their real names? If not, do they excel in hype operations?

• What is the tokenomics like? Is there a dilution/burning mechanism?

To be honest, when it comes to meme coins, these questions may not be that important, but we still need to put in some effort to understand the project and create an advantage.

At the same time, one of the biggest resistances in the industry is the constant occurrence of rugs and exploits. Although these cannot be completely avoided, learning the following methods may significantly reduce your risk of being rugged.

1. Quickly audit the token using @Token_Sniffer;

2. Assess the token's wallet distribution using @bubblemaps;

3. Figure out whether you want to follow the leader or play a different game.

Leaders are typically the first tokens to appear in a certain category; they have higher market caps and lower risks. For example, $DOGE is the leader of the "Inu" category, just as $PEPE is the leader of the "frog" coins now.

@_FabianHD asserted in a recent post, "The best play is usually to go long on leader tokens."

For more details, you can read the following tweet

New users are first attracted by the leader and then gradually enter various smaller market cap clones. When liquidity flows back and forth within a specific type of token, the profits from clones usually flow back to the leader tokens, so these leader tokens often have a high risk-reward ratio.

The second option is to look for clones, which may bring some decent short-term gains, but for the reasons mentioned above, the risk-reward ratio of these clones is usually not high.

4. Follow Smart Money

When we don't know what to buy, we can look at what some whales or other successful meme coin traders are purchasing.

The specific process is as follows:

1. Go to Etherscan and check early buyers of successful meme coins, like $PEPE

2. Look for additional "Smart Money" wallets on @lookonchain

3. Track their wallets on DeBank to see what they are buying

4. Based on these people's token purchases, conduct further research

03 Buying Strategies

Now let's assume you have completed the research above and have selected the tokens you plan to buy. How should we handle the trade itself? (From purchase to taking profits)

Here are the 3 steps I have summarized:

1. Treat it like a casino

Investing in memes is fun, and you might get very lucky, but treat it like a casino and don't allocate too much capital.

2. Use a separate wallet to buy Meme

Do not mix meme coins with your other investment tokens, and be prepared for the possibility of losing all funds in this wallet. This will help you formulate strategies and reduce emotional fluctuations.

3. Use technical analysis to help you enter the market

Due to liquidity constraints and a lack of historical price data, precise technical analysis can be challenging. However, I have found that creating a plan using charts can help you avoid blind investments.

One effective method is to wait for a significant pullback and then go long in anticipation of the next breakout (this has worked well with $PEPE), which can reduce the probability of getting stuck at a high point.

It's also fine to scale in over a specific period; there's no need to rush in all at once.

However, if you really feel FOMO, then jumping in all at once isn't wrong either; just consider it a way to hedge your emotions by going long to prevent feeling down after missing out, but keep it within 20-30% of your final investment budget.

04 Selling Strategies

Assuming you are now in profit, how should you sell, and what is the strategy?

Meme coins can quickly change your life, but make sure you really use this money to change your life and don't give back the profits you gained.

A simple rule is to take out your principal after doubling your investment, so you can use the profits to continue participating without any psychological burden.

Although technically, profits are also your money, this approach at least reduces the probability of going to zero.

After each doubling, we can withdraw a portion of the profits. Of course, if you believe the token will rise significantly, you can leave more principal to continue participating.

This strategy remains effective until a peak appears. After the peak, you may experience significant profit pullbacks. By using the following indicators, you can determine whether a peak is forming for the token to reduce corresponding risks.

These indicators include:

• 24-hour trading volume exceeding market cap

• Decreasing price highs

• Decreasing number of holders, or significantly slowing growth in holders

• Whales starting to sell their chips

• Funding rates turning from negative to positive

We cannot guarantee a 100% prediction of when a peak will occur, but we hope the combination of the above indicators can help you identify peaks and reduce risks. We also hope this article is useful to you and helps you become a better meme coin investor.