Original title: A Look Inside the Memecoin Trenches of Solana
Original author: hyphin
Original source: https://www.onchaintimes.com/
Compiled by: Daisy, Mars Finance
This has never been a flash in the pan; the meme coin supercycle has arrived. We are being escorted to the land of dreams. In this new paradigm, there are no pullbacks.
— All those predicting meme coin prices on Twitter
Introduction
Since our last discussion on meme coins in March of this year, both the total market size and attention in this field have shown a trend of sustained growth, with no apparent signs of stagnation. Undoubtedly, this makes it the fastest 'racehorse' on the field.
The emergence of this phenomenon can be attributed to several factors:
Viral propagation driven by social media
Extremely low barriers to participation
Emerging narratives continuously attract the attention of speculators
Nonetheless, many (if not most) of these narratives struggle to maintain genuine attention over extended periods. Market participants have already adapted to this, frequently switching between trends that offer high short-term returns, while maintaining more loyalty to high-conviction investments that are well thought out and possess stronger durability. Despite some reluctance to admit, in the current environment, the likelihood of a meme coin that has existed for some time and has been fully tested by the market going to zero is significantly lower than people's expectations for assets that are purely driven by hype and lack practical utility.
While Solana may not be the sole contributor to the vast total market cap of these tokens, most of the activity in the meme coin space does indeed occur in the 'trenches' of its on-chain ecosystem. Therefore, this article will focus on Solana, exploring the landscape of this field from a more macro perspective.
Respect for 'pump and dump'
Since the inception of the Pump.fun platform, Solana's native meme coin incubation ecosystem has significantly changed the dynamics of the local market. Interactions with speculative tokens have become simpler and cheaper than ever, while also being more secure. Through a user-friendly interface, the platform has achieved standardized token deployment in a controlled environment, allowing anyone to create new tokens based on common configurations, eliminating potential risks caused by malicious actors hiding vulnerabilities in smart contracts. This process requires creators to provide only some creative input, without the need for any technical skills. All complexities are shielded, allowing users to focus naturally on what truly matters—massive speculative gambling.
When a tokenized meme is generated, it is traded directly in the internal market of the platform. Once its market cap reaches around $69,000, it is automatically deployed to Raydium. However, most tokens fail to reach this threshold and never 'break free'.
Approximately one in every hundred tokens graduates from Pump.fun's 'Academy'. This phenomenon stems from reasons such as high market saturation and limited liquidity (beyond the scope of this article). To stand out in a competitive environment, participants must present certain intriguing, shocking, or unique content to attract the attention of these 'trench warriors'. Nevertheless, the Pump.fun protocol has not spent much time establishing itself as a practical gateway for micro-cap token trading and new token issuance, quickly surpassing other platforms in the field.
As of now, the platform's market share in token deployment has reached an astonishing 71.9%, demonstrating its widespread popularity and far-reaching influence. Recent developments, such as attracting a large number of new users through TikTok, who harbor ambitions of 'getting rich overnight', have added more fuel to the entire market.
All roads lead to Raydium
Whether it’s secretly released tokens, tokens launched on the Pump.fun platform, or pre-sale tokens, the vast majority of meme coin liquidity pools are concentrated on Raydium. The influx of meme coins into the market has significantly increased Raydium's market share, making it an important component of Solana's current on-chain trading volume.
During a gold rush, those selling shovels often make the most profit. This metaphor applies to the subject discussed in this article. Regardless of how meme coins perform, the platforms facilitating trading activities benefit significantly from the increased trading volume brought about by speculation. According to common sense and some anecdotal evidence, only a few tokens can stand out, while most are doomed to fade into obscurity. This viewpoint can be validated or refuted by observing the market cap distribution of all existing trading pairs.
Differentiating meme coins from non-meme coins on a broader scale is somewhat challenging due to the lack of efficient labeling mechanisms among data providers. After careful consideration, the approach taken for this data organization is to collect all liquidity pool information on Raydium as of November 25, 2024, filter out pools with non-zero liquidity, and exclude official token listings and legitimate projects listed on CoinGecko. The remaining 493,203 liquidity pools cover 474,161 unique tokens, which will serve as the basis for analysis in this section.
Among these tokens, most exhibit some trading volatility during their lifecycles, with market caps typically concentrated in the $100 to $10,000 range, and a significant peak forming at the mid-to-low thousands. This indicates that the data presents a clearly right-skewed distribution, with a gradually smoothing decline in its tail, representing a smaller number of tokens with higher market caps. This situation is not unexpected, as maintaining a moderate market cap is a challenge in a market that heavily relies on attention.
While the above examples encompass the entire dataset, it is also significant to explore the structural differences in distribution between tokens generated by Pump.fun and those directly deployed to Raydium.
Separately analyzing the two not only provides insight into the overall distribution patterns but also helps understand their respective performances while revealing some unique characteristics.
Pump.fun
Since tokens on the Pump.fun platform need to reach a certain market cap threshold to gain liquidity pool support, these tokens are often given higher valuations at launch due to ample liquidity, with market caps primarily concentrated in the $5,000 to $15,000 range. However, most successfully graduated tokens struggle to maintain or exceed this valuation when migrating to Raydium. These tokens are also more commonly found in the mid-to-high market cap range (from hundreds of thousands to low millions), as the platform's deployment process screens out less attractive meme coins while allowing the community to leverage the visibility or hype gained on the platform as a catalyst for growth.
Direct deployment
In the lower market cap range, directly deployed tokens are significantly dense, indicating that many smaller, less popular tokens struggle to gain substantial attention. This may be partly due to market saturation, the timing of these tokens' release, or a lack of effective narrative, originality, and promotional capability on Twitter. Although not immediately obvious, there are more meme coins listed by multiple centralized exchanges in the high market cap range, many of which were created before the emergence of the Pump.fun platform.
The continuous accumulation of tokens at lower valuations in the dataset confirms the previously mentioned point: trend exhaustion and the bursting of speculative bubbles are significant obstacles universally faced by meme coins, while incentive misalignment greatly accelerates the instant collapse and subsequent death of many tokens.
In the realm of meme coins, pseudonymous scammers mislead audiences, and 'developers' with malicious motives face almost no consequences. This phenomenon has led to blatant fraud being gradually seen as the norm, resulting in many seemingly promising concepts failing right from their launch. A closer examination reveals that many tokens are deliberately designed as tools to extract maximum value from short-term speculators, posing a continuous threat to brave investors who take the plunge.
In just the past 30 days, nearly two-thirds of tokens have been 'slaughtered' within 24 hours of their launch, with over 90% of liquidity evaporating. In the early stages of such catastrophic events, it is nearly impossible for a token to recover. However, there are occasional instances of angry holders attempting to revitalize a token through community takeovers. They may create new social media accounts out of stubbornness or even revenge, starting over. Although the outcomes usually align with expectations (failure), if executed properly, supporters may find decent exit opportunities.
Conclusion
The meme coin ecosystem on Solana is both vibrant and extremely unpredictable, showcasing boundless creativity, frenzied speculation, and risks that may be exploited at any moment. Platforms like Pump.fun and Raydium have become the core of this thriving ecosystem, providing opportunities for participants while also bringing numerous challenges.
While a few standout tokens rise rapidly, igniting dreams of 'getting rich overnight', the sobering reality is that most meme coins cannot sustain their initial heat, leaving behind a trail of shattered hopes. As this speculative frenzy continues to evolve, one thing is clear: in this world where hype often outweighs substance, due diligence and caution are crucial.
Whether you are a curious bystander or an active participant seeking to make a mark in this niche market, you not only need a keen eye to capture trends but also a persistent skepticism towards the promise of 'easy wealth'.