The Rise of Microcap Memecoins in 2024: Can Pump.fun Sustain Its Success? Read CoinChapter.com on Google News

NAIROBI (CoinChapter.com)— The rise of microcap memecoins in 2024, driven by the success of Solana-based dApp Pump.fun, now faces challenges as the market becomes saturated.

Pump.fun has allowed anyone to launch a memecoin on Solana at zero cost, leading to a surge in new tokens. This rapid proliferation has raised concerns about the trend’s sustainability and impact on traders.

Since its launch in Jan., Pump.fun has generated nearly $100 million in revenue. While the platform peaked in July, recent reports indicate a revenue decline in Aug.

Pump.Fun Revenue Growth from March to Aug. 2024. Source: K33

K33 analyst David Zimmerman noted that Pump.fun’s revenue has fallen short this month, with just a week remaining. Despite this drop, the platform remains a top revenue generator in DeFi. In a 24-hour period, Pump.fun generated $520,000, outpacing major platforms like Solana and Ethereum.

The key question now is whether Pump.fun can sustain its success.

Solana’s Role: The Memecoin Chain or a Victim of Its Own Success?

Few Layer 1 (L1) blockchains beyond Ethereum have stood the test of time, but Solana has emerged as a prominent player.

Recently, Solana overtook BNB Smart Chain to become the third-largest L1 in terms of Total Value Locked (TVL), showcasing impressive growth in 2024. This growth remains robust even when viewed in SOL terms, highlighting the strength of the chain.

Solana (SOL) TVL growth from Jan. to Aug. 2024. Source: K33

Much of Solana’s success has been driven by its technological advancements, with future upgrades like Firedancer and Jito’s restaking initiative on the horizon. However, the tech isn’t what’s drawing most of the market’s attention. A significant portion of Solana’s TVL is flowing into the booming microcap memecoin sector, earning Solana the nickname “the memecoin chain.”

This reputation is largely due to the overwhelming activity on Pump.fun, which dominates the mindshare of on-chain traders. While Pump.fun’s success is evident, some market participants argue that this concentration on memecoins might be detrimental to Solana and the broader crypto market.

The Dark Side of the Memecoin Boom

Pump.fun’s rise has not come without challenges. The platform’s simplicity and accessibility have led to a massive influx of memecoin launches.

Since January, over 1.8 million memecoins have been created on Pump.fun. In the last 24 hours alone, 10,740 tokens were launched, but only 136 managed to reach the $69,000 market cap required to graduate to decentralized exchange (DEX) trading.

Pump.fun Cumulative Memecoin Launches from Jan to Aug 2024. Source: K33

This overwhelming number of new tokens has created a highly competitive and, some argue, unsustainable environment. Zimmerman notes that the sheer volume of coins makes it nearly impossible for most traders to profit unless they engage in pump-and-dump schemes.

Larger wallets, holding $100,000 to over $1 million, often dominate the market, leaving smaller traders with little chance of success.

Is Memecoin Mania Spreading Beyond Solana?

The memecoin craze is not confined to Pump.fun or Solana. Ethereum and its Layer 2 networks recorded over 403,000 new token launches in July, slightly exceeding the 398,000 on Pump.fun. This proliferation of tokens across multiple blockchains underscores a broader issue within the crypto market, where altcoins often provide little innovation and primarily extract value from the ecosystem.

ETH L1 + Major L2 Token Launches from Jan to Aug 2024. Source: K33

Pump.fun isn’t the only player in the memecoin space. Justin Sun’s Tron has recently launched its memecoin deployer, Sun.pump. In just one week, Sun.pump has seen over 26,000 tokens created, according to data from Dune.

Tron’s move highlights growing competition in the memecoin sector as other platforms seek to capture a share of the profits.

Zimmerman highlighted that Pump.fun’s challenges mirror a broader issue in the crypto market: a flood of new tokens with insufficient capital to support them. As Pump.fun’s revenue declines and competition intensifies, the easy profits from new microcap memecoins may be over.

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