The Memecoin trend, which began with the Solana blockchain two years ago, appeared to be organic. But since then, blockchain has attracted well-known individuals, including US President Donald Trump and his wife Melania Trump, as well as Argentine President Javier Mairi.
These well-known individuals are driving the rapid growth of memokine in Solana. This has led to an increase in the number of secret participants who control a significant portion of the Mutli-Billar Memecoin market.
As a result, insiders or knowledgeable people can stop trading the most advantageous while the majority of retail investors are incurring losses.
Repeated previous cryptography cycle
MemeCoins first began to surface a few years after Bitcoin creation, when developers began riffing internet memes as jokes.
The first somewhat successful Memecoin in Solana was Bonk. This began shortly after the collapse of the FTX and Sam Bankman-Fried empires. At the time, investors were eager to make money right away after the crypto market collapsed.
Since then, faster and cheaper than Ethereum, Solana has become the preferred blockchain for launching Memecoin. For example, both Trump and Melania launched their official memokine in Solana. Both Memecoins have fallen sharply since launch.
Libra, the memo coin that sparked political debate over Mirei’s support, was also launched in Solana.
Market participants told Bloomberg that Solana is attracting increasingly controversial memokine due to the interlocking network of participants behind the creation, release and sale of tokens. In fact, market participants view it as a repeat of previous crypto cycles.
The advantages of insiders
Retail investors pay a large price if they invest too late. For example, Trump’s Memecoin lost nearly 85% of its value, according to data from Cryptoslate.
Similarly, Melania’s Memecoin has dropped by nearly 95% from its peak of around $13.5, Cryptoslate data shows. Libra lost most of its value shortly after its release. These losses are primarily borne by those who are too late to invest.
Jordi Alexander, founder of Selini Capital, a digital asset trading company that creates a market for tokens, including MemeCoins, told Bloomberg.
“The launch of Memecoin was promoted as an antithesis for “utilities” coins that VC Insiders can invest at a 100x lower rating and can be sold to retailers after launch.
Some of these insiders are called KOLS or major opinion leaders. They are part of the Memecoin project before launch and often buy them at a deep discount in exchange for receiving many people or tempting them to promote and buy followers.
Most MemeCoin projects claim to practice a “fair launch” model in which all tokens are made available to the public simultaneously, but Mohamed Ezeldin, head of Toconomy for the Animoca brand, told Bloomberg.
Memecoin Cabals performs pumps and dumps
“Cabals” is a group specializing in launching MemeCoin. And it is these Cabals that help influencers connect with Memocoin creators. Joseph Edwards, head of research at Enigma Securities, believes these cabals are often involved in creating and manipulating members’ prices to exploit investors.
In other words, Cabal creates pump and dump memo coins that focus on attracting buyers for launches, but lose most of the value almost immediately afterwards. Hayden Davis’s Kercia Venture, who was involved in the launch of Libra, is one such group. Edwards said:
“We had a variety of market makers who were doing the same thing in 2021. The liquidity of the dark pool… helps launch these tokens, and it’s pump and dump every time.”
One of the mechanisms commonly used by Cabal to take charge of retail investors is “sniper.” Sniper refers to the use of trading bots to buy meme coins during launches, and sell them quickly to take advantage of the short-term profits of otherwise worthless tokens.
Snipers became most prominent during the launch of Trump’s memo coins when certain wallets acquired tokens at negligible costs. These wallets quickly dumped tokens after launch, causing price crashes.
Furthermore, the issue has been exacerbated by the rise of the platform in Solana, which encourages the creation and launch of Memecoins. The most notable platforms include Pump.Fun and Meteora. Trump, Melania, and Libra memokines were all fired using Meteora.
“With the rise of platforms like Pump.Fun, what people are really allowed to do is focus solely on ROI and zoom in on people who aren’t focusing on basics and utilities,” said Ezeldin of Animoca Brands, referring to the return on investment, adding:
“They’re focusing on (Memecoin Investors) “You can get in as quickly as possible and how you can get closer to the top and get out the exit.” By doing so, I created a zero-sum game. ”
Lessons for retail investors
In February, staff from the Securities and Exchange Commission (SEC) revealed that the institution did not consider memokine to be securities. They compared memokine to digital collectibles that were not functional or utilities.
Therefore, Memecoin creators and sellers do not need to register with the SEC. But even more importantly, it excludes Memocoin investors from federal securities protection.
However, ARK Investment Management Cathie Wood believes that “the message is loud and clear from regulators,” and retail investors believe they will learn lessons from Memecoin’s losses. She said:
“There’s a horrific decline in the prices of some of these meme assets, and there’s nothing that people you know will lose money to learn.”
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