According to Cointelegraph: The memecoin phenomenon, particularly on the Solana network, is sparking intense debate as trading volumes take a nosedive and skepticism mounts over its impact on the broader crypto ecosystem. Recent data reveals that the trading volume of Solana-based memecoins has dipped sharply, with some estimates suggesting an 80% decline in the last two weeks.
In an August 19 newsletter, Messari data engineer Mike Kremer voiced strong criticism, labelling memecoins as the “most extractive crypto phenomenon” since the ICO boom of 2017. Kremer argued that, unlike previous speculative bubbles in the crypto world, which often left behind some form of residual value, memecoins have had a far more destructive effect on the market.
“During DeFi Summer, projects like Uniswap Labs launched protocols that provided real utility to the crypto economy,” Kremer explained. “When the speculative frenzy subsided, there was still underlying value in these tokens because they were tied to functioning, valuable services.”
However, Kremer contends that memecoins lack such underlying value or utility, leading to a zero-sum game where value is not just redistributed but destroyed. His remarks come amid growing criticism of the pump.fun memecoin deployer, which has been blamed for flooding the market with low-value tokens.
Since its launch in January, pump.fun has seen 1.7 million new tokens created, with less than 1.5% of these tokens ever reaching a total value of more than $63,000. Moreover, recent data suggests that 60% of traders on the platform have lost money, while only 3% have made gains exceeding $1,000.
Despite these concerns, there’s ongoing debate about the accuracy of such data, with some arguing that it doesn’t account for realized gains. Additionally, a new CoinShares report revealed that Solana exchange-traded products experienced a record $39 million in outflows last week, further signaling trouble in the Solana memecoin market.
Are Memecoins Harmful or Beneficial?
While critics like Kremer argue that memecoins are damaging to the crypto ecosystem, others believe they play a positive role. Alon, the pseudonymous developer behind pump.fun, defended the platform, stating that the market clearly favors the lower costs associated with memecoin deployment.
In an August 7 post on X, Alon claimed that prior to pump.fun, the memecoin sector was plagued by scams like rug pulls and honeypots. He argued that each new iteration of memecoin technology makes it easier for newcomers to enter the crypto market, bringing the sector closer to mass adoption.
Some industry voices agree, viewing memecoins as an “easy” entry point for crypto newcomers, despite the inherent risks. Avalanche founder Emin Gün Sirer has previously stated that while memecoins are inherently worthless, they serve a purpose in “social signaling” and building strong crypto communities.
“They’re great for the space because they bring people in, keep them excited, occupied, and concentrated on what the technology can do,” Sirer told Cointelegraph in April.
In line with this belief, Avalanche announced in December that it would start using its $100 million community fund, originally meant for supporting NFT artists, to purchase memecoins.
As the debate continues, the future of memecoins and their impact on the crypto market remains uncertain, with advocates and critics closely watching how this controversial trend evolves.
