Meme coins, once regarded as mere internet jokes, have surged in popularity, with notable examples like Dogecoin (DOGE) and Pepe (PEPE) leading the charge. This surge has propelled the meme coin sector to become the fourth most valuable in the cryptocurrency space. However, a recent study titled “State of Memecoin 2024,” conducted by Chainplay, a GameFi market data hub, uncovers the underlying volatility and risks associated with these digital assets.
Meme Coins’ Short Lifespan and High Failure Rate
The study, published on August 13, analyzed over 30,000 meme coin projects across major blockchains like Ethereum (ETH), Solana (SOL), and Base. It reveals that the average lifespan of a meme coin is only about one year, significantly shorter than the three-year average lifespan of other cryptocurrency projects. Alarmingly, the report found that 97% of all meme coins have already failed, with more than 2,000 meme coins disappearing each month. This high turnover rate highlights the speculative nature of the market, as nearly 60% of investors view meme coins as short-term investments rather than long-term holds.
The study also noted that meme coins launched in 2020 are dying at a rate of 20 per month, mainly due to the difficulty new projects face in gaining traction and maintaining their viability.
Prevalence of Malicious Actors in the Meme Coin Market
The report exposes a significant risk within the meme coin sector: the high prevalence of scam activity. More than half (55.24%) of the meme coins analyzed were classified as “malicious,” with Base blockchain leading the way at 59.15%, followed closely by Ethereum at 55.59% and Solana at 51.87%. The criteria for identifying “dead” meme coins included factors such as 24-hour trading volumes below $1,000, inactive Twitter accounts for over three months, liquidity pools under $50,000, or deleted social media accounts.
The financial risks are underscored by the fact that nearly one-third of investors (28%) reported being scammed by fraudulent meme coin projects. However, the study also found that audit reports can effectively identify fraudulent activities, with an 81% success rate in spotting potential scams.
Continued Popularity of Meme Coins Despite Risks
Despite the high risks and volatility, meme coins continue to attract a substantial number of investors. The study found that 58% of cryptocurrency investors have ventured into the meme coin market, lured by the prospect of high returns. However, the level of experience among investors influences their sentiment towards these assets. Newer investors, those in the market for less than six months, are more likely to view meme coins as essential parts of their portfolios, while more experienced, long-term investors approach them with greater caution.
Media coverage of meme coins remains largely skeptical, with only 13.77% of news reports expressing a bullish outlook. This reflects the broader cautious sentiment towards the meme coin industry and its inherent risks.
Pump.fun’s Remarkable Revenue Amid Meme Coin Boom
Despite the challenges and high failure rates, interest in meme coins persists. This is exemplified by Pump.fun, a Solana-based platform for deploying meme coins, which recently generated an impressive $5.33 million in revenue within just 24 hours. According to DefiLlama data, this revenue outstripped the combined daily revenue and fees of established blockchain networks like Ethereum and Solana, which recorded $2.35 million and $1.72 million, respectively.
In conclusion, while the meme coin market continues to draw attention and investment, the Chainplay study highlights the sector’s inherent risks and the high likelihood of failure. Investors are urged to exercise caution and conduct thorough research before diving into this volatile market.
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