Recent research from Coinwire highlights the risks of investing in meme coins, especially those promoted by influencers on X (formerly known as Twitter).
While they promise huge profits, the study shows that most of these tokens ultimately result in huge losses for investors.
Meme Coins Promoted by Influencers: The Grim Reality
The promise of getting rich quick is often tempting, but most investors end up chasing a mirage. A recent report from Coinwire analyzed 1,567 meme coins promoted by 377 influencers over the past three months. The results are staggering: 76% of influencers promote dead meme coins — tokens that have lost more than 90% of their value.
Additional findings include that two-thirds (around 67%) of meme coins promoted by influencers are now worthless. The report also shows that after three months, 86% of meme coins promoted by influencers have seen a 10X drop in value. Furthermore, only 1% of influencers have successfully promoted a meme coin that has seen a double-digit increase.
Short-term performance is equally disappointing. After just one week, 80% of promoted meme coins lose 70% of their value. By the first month, the losses escalate to 80%.
Success Rate of Influencer-Backed Meme Coins. Source: Coinwire Research
Influencer promotions often promise huge profits, creating a buzz that attracts even unsophisticated investors. However, data suggests that most of these campaigns prioritize influencer profits over the quality of the promoted projects.
Influencers with more than 200,000 followers perform the worst, with an average negative return of 89% after three months. In contrast, smaller influencers with less than 50,000 followers do slightly better, with some even seeing positive returns over time.
Success rate of influencer predictions based on follower count. Source: Quinwire Research
On average, influencers earn $399 per promotional tweet, which incentivizes them to promote meme coins regardless of their viability. This financial dynamic often leaves their audience bearing the brunt of the losses.
X's role in the rise of meme coins
Challenges with influencer-backed tokens are not isolated incidents. BeInCrypto recently reported that 97% of all meme coins fail, with only 15 out of 1.7 million achieving sustained success. The reasons are multifaceted, ranging from lack of interest to poor project management.
The meme coin space is also fraught with controversy. Blockchain investigator ZachXBT recently uncovered 16 influencer accounts on X that orchestrated pump-and-dump schemes, leaving their followers to absorb losses. This has sparked debates about the ethical responsibilities of influencers in the crypto markets.
At the same time, X remains a major platform for promoting meme coins among influencers. The platform’s ability to amplify hype makes it an effective way to promote meme coins but it is also a breeding ground for financial risks.
Despite the bleak statistics, some traders still see opportunities in this volatile market. Cryptocurrency figures like Justin Sun, founder of Tron, suggest evaluating meme coins based on community size, narrative strength, and interest.
Meanwhile, crypto influencer Miles Deutscher recently shared a four-step meme coin trading plan: focusing on market timing, analyzing the token economy, understanding the project’s fundamentals, and managing risk through stop-loss strategies. Taken together, these approaches reflect the importance of caution and careful research.
While the hype surrounding meme coins is undeniable, this context highlights the need for caution. Influencer endorsements, while attractive, are not a reliable indicator of a token’s potential. Investors should vet projects, taking into account factors such as interest, community engagement, and long-term viability.