Solana memecoin frenzy raises questions about crypto utility, reputation

The Solana blockchain is presently surpassing competitors such as Ethereum, Avalanche, and BNB Chain in terms of network usage, expansion, and acceptance. This success can be attributed to the meme coin craze that has swept through the cryptocurrency industry.

During the last thirty days, memecoins in great numbers have been introduced on the Solana blockchain, generating billions of dollars in trading activity. Some newly-emerged memecoins gained significant attention and reached new price peaks in a short timeframe, while others drew controversy for defrauding users or promoting offensive content.

Meme coins are a type of digital money born from internet culture and popular memes. They lack real-world significance beyond serving as amusing references in the online world. Yet, they’re frequently supported by passionate online communities.

During past market upswings, memecoins such as Dogecoin (DOGE) and Shiba Inu (SHIB) gained popularity and attracted widespread interest due to significant price increases.

The memecoin craze we experienced earlier is insignificant in comparison to the present trend. This phenomenon originated on Solana and has since expanded to other platforms such as Coinbase’s layer-2 solution Base, Binance’s BNB Smart Chain, and more.

In the previous bull market, memecoins reached all-time peaks gradually, with their growth largely driven by an energetic online following.

Elon Musk, the CEO of Tesla, significantly boosted Dogecoin by enabling its acceptance for purchases at Tesla’s online merchandise shop as a sign of endorsement.

During this present period, memecoins are being introduced at an extraordinary frequency, and some tokens that are only a few hours old have already accumulated substantial trading volumes and massive market valuations.

The rise of Solana memecoins

Based on a report published in April by CoinGecko, memecoins emerged as the highest-performing cryptocurrency category during Q1 2024, delivering an average profit of over 1,300% across leading tokens based on market capitalization.

Significant advancements were made by BRETT, which saw a remarkable increase of 7,727.6%. Dogwifhat (WIF) experienced a substantial rise of 2,721.2% during the past three months. Book of Meme (BOME) rapidly soared over 40,000% shortly after its introduction.

Solana memecoin frenzy raises questions about crypto utility, reputation

On March 14, the anonymous artist Darkfarms1 introduced BOME to the market with an approximate value of $4 million attached to it.

Within just a few days after its debut, the market value of this new entity surpassed $1.45 billion. A week later, it gained listing on prominent cryptocurrency exchanges such as Binance, Bybit, and KuCoin.

By the end of Q1 2024, approximately nine months after its debut in November 2023, Dogwifhat ranked as one of the fifty most valuable cryptocurrencies with a market capitalization nearing $50 billion.

Memecoins distorting crypto’s image

Many individuals have become new crypto millionaires due to the hype surrounding Solana’s memecoin, but unfortunately, even more have suffered significant losses in their pursuit of striking it rich with this particular memecoin.

Additionally, a large number of emerging meme coin initiatives have been identified as potential rug pulls. This is where the creators abruptly abandon the project and make off with the investment capital.

Cautious crypto experts advise against putting money into memecoins because they don’t offer any practical uses and the memecoin trading scene bears an uncanny resemblance to a casino.

A representative from Bitrue’s research group explained to CryptoMoon that the excessive excitement in the crypto market could distort the perception of digital currencies, which might harm their trustworthiness and hinder the wider acceptance of blockchain technology.

“While the influx of new participants and trading volume may initially seem positive, the speculative nature of memecoins raises concerns about the maturity and integrity of the crypto market.”

Supporters argue that the excitement around meme coins has drawn a large crowd of newcomers into the cryptocurrency market and yielded substantial gains for certain investors.

In simpler terms, keep in mind that investing in speculative assets such as memecoins comes with risks because they don’t have real value and can be extremely unpredictable. While a few people might make money, many more could suffer losses. Therefore, it’s crucial to follow cautious investment strategies and learn about the market before participating.

According to Ryan Lee, the chief research analyst at Bitget, the surging prices of Ether (ETH) and Solana (SOL), which serve as the foundational assets for Ethereum and Solana blockchains respectively, act as a significant driving force behind the memecoin market’s upward trend.

“According to Lee, who spoke with CryptoMoon, one major reason for the rise in memecoins is their availability on Ethereum and Solana networks, where they are usually traded using ETH and SOL. As the value of ETH and SOL increases on decentralized exchanges, so does the price of memecoins.”

The Ethereum ICO era-like frenzy

On Solana, the memecoin craze has mirrored past crypto market triumphs with an influx of dog- and cat-themed memecoins bringing in massive trading volumes. This trend was then followed by popular memecoins inspired by world leaders, such as former US President Donald Trump and current President Joe Biden.

Simultaneously, numerous memcoin developers and enthusiasts are crowd-funding new projects through social media platforms. Amidst challenges for major crypto firms in securing venture capital investment, these X users have amassed hundreds of millions of dollars in just hours for pre-seed funding. Yet not every project came to fruition as some turned out to be “rug pulls.”

Observers draw a parallel between the recent mania for meme coins with countless new tokens, marked by fraudulent schemes and lacking practical applications, and the ICO craze on Ethereum’s network in 2017.

In the frenzy of Initial Coin Offerings (ICOs), numerous projects amassed millions of dollars in funding. Yet, many of these projects ultimately distributed tokens that had limited or no practical application. However, it’s important to note that even during this period, most ICOs at least gave an appearance of providing a legitimate product.

Solana memecoin frenzy raises questions about crypto utility, reputation

In the cryptocurrency market surge of 2017, Ethereum‘s network was put to the test due to a significant rise in daily transactions which multiplied by twenty-four times over the course of just one year.

In much the same way as Solana, there has been a significant growth in the number of daily active addresses. Starting from approximately 600,000 on January 1, 2024, this figure climbed to more than 1.5 million by the second week of April – representing a 2.5-fold increase.

The ugly side of memecoins

During the height of memecoin craze on the Solana blockchain, both dog and cat themed memecoins were popular. However, offensive tokens with racist and homophobic slurs also emerged.

Some of these tokens were able to garner market capitalizations into the billions of dollars.

Due to the increasing number of these coins, members of the crypto community urged Solana’s developers for action.

At Buidl Asia 2024, Austin Federa from Solana Foundation put forth an opinion. He believed wallet creators should be allowed to implement blocklists. He noted that most wallets across all networks automatically exclude “spam NFTs” and “annoying tokens” for users. However, he emphasized the importance of maintaining the core network’s permissionless nature, allowing users to reveal their assets if they choose to do so.

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In contrast, Martin Lee, the chief data journalist at Nansen, explained to CryptoMoon that memecoin trends mirror the wider crypto market. He described this market as the most open and liberated in the world, where the creation of a token and active trading of those tokens are facilitated by the advantages of cryptocurrency. These trends aren’t inherently good or bad by nature.

The excitement surrounding memecoins has created a significant rift within the cryptocurrency world. While some seasoned crypto investors view this trend with skepticism, having witnessed similar cycles before, they argue that memecoins lack practical application and essentially equate to taking risks, akin to gambling.

Alternatively, supporters argue that memecoins are attracting new investors to the cryptocurrency sphere and illustrate the principles of a competitive marketplace in which individuals can generate their own tokens for trading.

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2024-04-11 17:22