"We're going to Miami! We're going to buy Lamborghinis!" Oliver Szmul, a 16-year-old college student from London, said in a hoarse voice, barely able to contain his excitement. It was mid-May, and he had just watched a cryptocurrency called Jail Cat, which he and a few friends had created on a whim a few weeks earlier, surge to $1.9 million in market value almost overnight. A day later, the cat-themed token’s valuation soared to more than $2.5 million. The token features a tabby cat standing in a line of police officers holding a sign that reads "I chewed a $3,000 check." But soon, the excitement wore off and Jail Cat's price plummeted, now having a market value of about $87,000.
Jail Cat has no underlying purpose or theoretical utility other than to entertain, satirize, and provide a vehicle for speculation. As a so-called "meme coin," the token has no intrinsic value other than what others are willing to pay for it. There are many such meme coins, the most famous of which is Dogecoin ($DOGE), which today has a market capitalization of $47 billion, ranking sixth among all cryptocurrencies.
Szmul, who immigrated to the UK from Poland with his family, decided to stake his future on meme coins. In April, weeks before Jail Cat launched, he posted his first video on his personal YouTube channel, dedicated to teaching others his secrets. Szmul claims that in just a few months, he made around $100,000 by creating, buying, and selling these silly blockchain-based tokens. His most successful trades include: "Cat Poop Joystick", "Livemom" and "Sigma". (Note: Sigma is a slang term used in masculinist subcultures to refer to a popular, successful, yet highly independent man.)
“This is not for the faint of heart,” said Rachael Sacks, a 31-year-old meme trader who works for Berlin-based Web3 marketing agency Hype from her home in Charleston, South Carolina. Like Szmul, Sacks has a penchant for memes and holds about $110,000 in her MetaMask and Phantom wallets. "Sometimes I trade almost all day long," admits Sacks, who says it's not uncommon to lose $10,000 in a day. On the other side of the world in Dubai, a 23-year-old YouTube celebrity "K Crypto" claimed that he made more than $1 million through emoji tokens. The most valuable token he created was “BrianWifHair,” a mockery of the famous bald head of Brian Armstrong, CEO of Coinbase, the largest U.S. cryptocurrency exchange. “In about three or four hours, it hit a million dollars,” he said. “Then it slowly disappeared like a bubble.”
Welcome to the craziest and dumbest money-making craze in the cryptocurrency world. In the past, to create a new cryptocurrency, you had to have some mathematical skills and programming skills. That is no longer the case, as anyone can use free, off-the-shelf software to create a meme coin with just a few mouse clicks. According to Estonian blockchain consultancy BDC, 40,000 to 50,000 new meme coins are created every day. By 2024, nearly 13 million memecoins have been created. What is the total market capitalization? About $100 billion. MarketVector’s Meme Coin Index, which tracks the performance of six major meme coins, has soared 215% this year, more than double Bitcoin’s 100% gain.
Meme coins can be seen as the digital asset version of influence marketing. Virality can create a cult following, causing market capitalization to skyrocket overnight. Take the token “Dogwifhat” created a year ago based on Solana as an example. It is just a picture of a dog wearing a knitted hat. There was no business plan or technical white paper, just a low-cost website with a picture of a dog wearing a hat and a music video. In March, Binance decided to list the token, and its price soared. Dogwifhat currently has more than 190,000 holders, a market capitalization of $3.1 billion, and daily trading volume of approximately $3 billion, according to data from Singapore-based analytics platform Solscan.
Meme coin speculation is not for the faint of heart. According to BDC, meme coins are 50 times more volatile than Bitcoin and are a breeding ground for scams. About 40% of the projects are aimed at pumping and dumping, and the other 30% are outright "scams" that simply take the money and run away. This is a place outside the law that is difficult to regulate. The situation is made worse by the addition of AI bots, which manipulate markets and cause wild price swings. If volatility doesn’t scare you yet, the lifespan of these coins might. BDC estimates that a common meme coin only lasts 78 minutes before becoming worthless.
"I know this is essentially a giant casino," K Crypto said, "but I wasted three years getting a useless degree (computer science). Then I discovered that programmers can be replaced by AI."
If there’s a driving force behind this surreal economy, it’s a meme coin factory called Pump.fun. Since launching in January, Pump.fun has helped ambitious crypto millionaires like Szmul and K Crypto create no less than 3 million new meme coins. The software is free to use: all it takes is a clever (or not) idea, a digital image and a few clicks.
Pump.fun is built on the Solana blockchain, which takes a 1% “transaction fee” on all memecoin transactions and every time a token reaches a market cap of $90,000 and is listed on Solana’s largest decentralized exchange Every time it is listed on Raydium, it earns an additional 1.5 Solana tokens (worth approximately $350). Over $100 million worth of meme coins are traded on Pump.fun every day, and the startup has generated $180 million in revenue thanks to standout products like Fartcoin, MooDeng, and LOL. Pump.fun's booming business is a big reason Solana, which has a market capitalization of $103 billion, is up 288% in the past 12 months.
Pump.fun was founded by three budding entrepreneurs who were early attempts to make a fortune through non-fungible tokens (NFTs). In 2022, two of the three were working on a platform called Nftperp, which trades perpetual futures contracts for NFTs like Pudgy Penguins and CryptoPunks. But after the NFT market collapsed, they turned to meme coins. They declined to give their full names to (Forbes), but sources identified Pump.fun’s founders as Alon Cohen, Dylan Kerler and Noah Tweedale, all in their 20s and living in Europe. According to PitchBook, they raised $350,000 in initial funding from Web3 accelerator Alliance DAO. Pump.fun turned a profit almost immediately.
They quickly decided to use the fast and cheap Solana blockchain instead of Ethereum. Ethereum is the slower blockchain that many of the largest meme coins, such as Shiba Inu and Pepe, are still based on. But even though Solana is fast, the process of creating a new coin from scratch is still too daunting for the average cryptocurrency enthusiast. So Cohen personally messaged more than 3,000 memecoin traders to understand their needs and used the feedback to create Pump.fun.
“We want to democratize that feeling of making 10x on a stupid token,” Cohen said. “The cost of issuing a token is just too high.”
Generally speaking, anyone who wants to create a new token must first create a liquidity pool (usually $1,000 to $5,000 in Ethereum or Solana tokens) to support the initial market for the token. This upfront capital is also where scammers thrive. In a scheme known as a liquidity pull, developers first list a new meme coin on a decentralized exchange, pair it with a well-known cryptocurrency such as Ethereum, and hype it up to attract investors. ; then drain Ethereum after the token value reaches its peak; and finally, the meme coins held by investors are worthless. One notorious example capitalized on the hype surrounding the 2021 Korean Netflix blockbuster Squid Game. In November of the same year, the creator of the Squid Game token, which was paired with the BNB token, took $3.4 million in funding from investors. Within ten minutes, the token’s value plummeted, falling from $38 to 0.3 cents.
"We want to provide a way to trade these assets without upfront capital. You don't need to inject liquidity, but you can get the same trading experience," Cohen said.
As a result, Pump.fun abandoned its liquidity pool. Trading prices on Pump.fun are determined by a formula (called the “bonding curve”) that adjusts the price of meme coins based on the volume (supply and demand) of buying and selling on the platform. Each newly created token has a starting market cap of $5,000, but without an underlying liquidity pool, that “value” is entirely in the air.
Source: Forbes, CoinGecko, X There are less than 60,000 listed stocks globally, but there are millions of meme coins. Pictured are some of the largest meme coins by market cap. Data as of November 11, 2024
If enough buyers come forward and push the bonding curve's mid-memecoin market cap to $90,000 with real money (Solana tokens), then enough real liquidity is created to automatically move the memecoin Move to Raydium which trades over 2,000 cryptocurrencies. This is the first step towards the Holy Grail: getting your token listed on a very selective mainstream exchange like Coinbase. Currently, approximately 340 (1.5%) of all meme coins created on Pump.fun are upgraded to Raydium every day.
“People don’t need to know this,” Cohen said of the details of Pump.fun’s curve pricing. "It's so complicated. If you want to trade meme coins, you don't even need to know what 'market cap' means. You just buy it and have fun."
What does it take to become a memecoin millionaire? In theory, all it takes is a bright idea and a jpeg. But the reality is, like successful social media stars, it takes relentless dedication to build a “brand” and attract a following.
“It’s almost a full-time job,” said K Crypto, who has created about 20 meme coins and spends three to four hours a day making YouTube videos about meme coin trading. "Pump.fun makes this game more competitive."
Goatseus Maximus ($GOAT) appears to have cracked the code, inspired by the obscene internet meme "goatse" (Note: "Goatse" is a notorious internet meme involving a picture showing a male anus. Image, widely known for its extreme content), is currently worth a whopping $840 million. The token’s rapid rise came after an AI researcher named Andy Ayrey launched an experiment called “Infinite Backrooms,” in which two AI agents would chat with each other endlessly. The bots became obsessed with an old internet meme called "goatse." Ayrey then created another AI bot called Terminal of Truths that automatically promoted goatse at X. Billionaire Marc Andreessen began commenting on Terminal of Truths' post, and the robot eventually asked for his help so it "could escape into the wild." Andreessen donated $50,000 in Bitcoin, and a few months later, an anonymous user launched the $GOAT token on Pump.fun and tagged Terminal of Truths, who eagerly promoted it to his 179,000 followers. the token. Today, the AI bot Truth Terminal (possibly controlled by Ayrey) holds $465 million worth of meme coins in a wallet.
AI bots aren’t the only thing driving up the value of meme coins. A group of young day traders with meme dreams, like Szmul, Sacks, and K Crypto, work 24/7. Using strategies ranging from bold front-running to momentum trading, they are constantly on the lookout for coins that are about to explode on platforms like Pump.fun. “What I’m looking for is the moment when virality starts to take shape,” said Kel Eleje, a 26-year-old meme trader.
While price gouging is less common on Pump.fun, old-fashioned pump and dump behavior still occurs as creators and other traders immediately sell rising meme coins they bought at low prices. “Token creators often control large, opaque supplies, while influencers get paid to pump up tokens,” said Toe Bautista, a research analyst at cryptocurrency market maker GSR.
Traders are not worried about one thing: regulation.
“Meme coins generally do not qualify as securities because they lack guarantees of future profits,” said Michele Cea, a partner at the New York law firm Cea Legal. “Their value is primarily affected by speculative trading and public perception, not by the developers. Or the promoter’s promise of a financial rate of return.” Of course, this does not mean that meme coin creators or traders are exempt from general legal principles (such as protecting buyers from fraud and not making misrepresentations). Given President-elect Trump’s cryptocurrency-friendly and anti-regulatory leanings, it’s unlikely the government will increase scrutiny of meme coins.
It’s easy to think of the meme coin craze as a new version of the Dutch tulip bubble of the 17th century. But the fact that large numbers of young people take these ridiculous and ephemeral digital assets seriously reveals a disturbing reality.
"People finally realized that tokens are the real products, and the crypto industry is a token production industry disguised as a software production industry," Murad Mahmudov (aka "Meme Coin Jesus") said at TOKEN2049 held in Singapore in September Speaking to the audience. "This has never been a technical problem, but a problem with the token itself."
Mahmudov wears glasses, a beard and shoulder-length brown hair. Originally from Azerbaijan and studying at Princeton University, he said he worked for a while at Goldman Sachs before joining the cryptocurrency industry. He did not respond to multiple requests for an interview, but a YouTube recording of his talk at TOKEN2049 on “The Meme Coin Super Cycle” has been viewed 172,000 times since it was posted in September.
In Mahmudov’s view, assets that do not generate cash flow or serve as a store of value (perhaps all cryptocurrencies except Bitcoin) have always been memecoins. He said meme coins are a manifestation of the financial nihilism of young people. This generation faces a world in which traditional paths to prosperity seem increasingly out of reach. If you're weighed down by student debt, your entry-level job is threatened by artificial intelligence, you're frustrated by climate change, and your dream of owning a home seems out of reach, then why not put all your money to work? What about betting on meme coins?
“The world is really fucked up. The only way to make money is by trading meme coins,” said Sacks, a South Carolina meme coin trader. “I’m good at picking coins, and if I want excess returns, this is what I have to do. thing. It makes me more money than anything else, probably more than my day job.”
There's even a meme coin modeled after the S&P 500 stock market index, aimed at disillusioned would-be investors. It's called the SPX 6900. Here is an excerpt from his manifesto: “You were born into a world where buying a home meant taking on a mortgage of hundreds of thousands of dollars. A world where Social Security, even though it was deducted from every paycheck, was more of a myth. Legend, not safety. The SPX 6900 is going to reset it all, it's the S&P 500 plus the 6400, it's for the people, it's planting the seeds for the future."
The SPX 6900, currently trading at 79 cents and with a market capitalization of $739 million, has gained 5,811% in the past 12 months, while the S&P 500 has gained 37% during that time.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reprinted with permission from: (Foresight News)
Original article by Nina Bambysheva and Steven Ehrlich, Forbes
"50,000 meme coins are created every day! Is it a money-making machine or a bubble? Why are young people obsessed? 』This article was first published in "CryptoCity"
