Iggy Azalea has launched her own token on Pump.fun, and the platform has seen the creation of over a million other tokens. However, this may not be good news for investors and the overall market.
Table of Contents
1. Memecoins for the masses
2. Lightning strikes
3. Is Pump.fun sustainable?
One fascinating aspect of the volatile world of cryptocurrency is how a new project can quickly gain popularity. Pump.fun is a prime example of this phenomenon, as it allows anyone to create their own memecoin. The platform was launched in January of this year and has already generated an estimated $265 million in annual revenue, according to DefiLlama.
Pump.fun is currently earning over $500,000 per day in fees, and during times of market frenzy, this number can reach $1.5 million. On July 2, the project even surpassed Ethereum in 24-hour revenue. Additionally, Dune Analytics data shows that Pump.fun has facilitated the launch of over 1.16 million tokens on the Solana blockchain.
So, how does Pump.fun work, what has contributed to its success, and can this frenzy be sustained?
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Memecoins for the masses
For years, novelty tokens have emerged in response to viral events. In 2022, for example, an altcoin was quickly created after Will Smith slapped Chris Rock at the Oscars. The token, named Will Smith Inu, experienced a rapid surge in value but quickly lost a significant portion of its market capitalization.
Pump.fun simplifies this process, allowing even those without technical expertise to create their own tokens. The website provides a clear explanation of how it works.
Source: Pump.fun
Lightning strikes
A visit to Pump.fun can be overwhelming, as newly created tokens appear on the page in a shaking yellow box. Many of these tokens seem to revolve around cat pictures, as is often the case on the internet. However, the platform reached a major milestone when Iggy Azalea launched her token, MOTHER, and promoted it to her 7.7 million followers. Within a week, the memecoin’s market capitalization skyrocketed to $200 million, further fueling the frenzy.
However, data from CoinGecko shows that latecomers to the party often suffer losses. MOTHER’s price has since dropped by approximately 75%, bringing its valuation down to $58.8 million at the time of writing.
Source: CoinGecko
This brings us to the downside of Pump.fun. Celebrities with little knowledge of cryptocurrency can make speculative investments they later regret. Additionally, there can be serious consequences for these stars, as Kim Kardashian experienced when she was banned from discussing crypto on social media for three years and fined $1.26 million for endorsing EthereumMax on Instagram without disclosing payment.
If the Securities and Exchange Commission is willing to take such drastic measures against someone who simply posted about a digital asset, one can only imagine how they would react to a celebrity who launched their own token.
Despite the safeguards in place to prevent fraudulent activities, Pump.fun has not been without incidents. In May, a former employee of the platform was arrested in London on allegations of exploiting the project for nearly $2 million. The individual, Jarett Dunn, is currently out on bail and is expected to appear in court in August.
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Is Pump.fun sustainable?
It is evident that a significant bubble is forming in the memecoin space. This phenomenon is reminiscent of the situation three years ago when non-fungible tokens were selling for exorbitant prices. Ultimately, investors saw the value of their investments decline rapidly, while creators profited tremendously.
The memecoin mania also raises concerns about the sustainability of the ongoing bull run in the crypto market. Historically, excessive greed and speculation have signaled the end of prosperous times, and the current landscape is no exception.
Disclosure: This article is not intended as investment advice and is for educational purposes only.