From memes to multi-million dollar uploads, scams and rug pulls

From memes to multi-million dollar uploads, scams and rug pulls
From memes to multi-million dollar uploads, scams and rug pulls

Memecoins, or meme cryptocurrencies, began as a cultural phenomenon with the launch of Dogecoin (DOGE) in 2013, inspired by an internet meme and a critique of the wild cryptocurrency market at the time.

Dogecoin was developed by software developers Billy Markus and Jackson Palmer as a joke to poke fun at what many saw as irrational investment hype around cryptocurrencies.

Memecoins started out as a form of social token. They were often created and promoted by online communities or individuals with a common interest or sense of humor. The social element of memecoins played a significant role in its success and adoption. Other reasons for its popularity could be the considerable total supply and low token prices.

A decade later, memecoins are a multi-billion dollar ecosystem, popular as a high-risk speculative investment.

From DOGE to Pepecoin (PEPE), memecoins have come full circle. From their initial inspiration as parodies of cryptocurrencies to now being the very parody they mocked, attracting irrational speculative investment to drive up prices.

Pepecoin’s popularity helped it explode to a market capitalization of over $1 billion, but in a matter of days its market value dropped by more than 40% to below $600 million.

Ironically, the concept of memecoins has become a meme in itself. Although there are always stories about how a random trader turned an investment of a few hundred dollars into millions, for those lucky traders many others lose their entire life savings.

The 2021 bull run was a turning point for memecoins

The 2021 bull market transformed memecoins from parodies to legitimate investment options. Prior to 2021, memecoins were primarily social media-based, with strong internet communities driving their popularity. This changed when DOGE’s unofficial ambassador appeared: Elon Musk.

Musk became an ardent supporter of DOGE, and the community behind it declared him the unofficial CEO of the project. The Musk-Doge relationship began as a continuation of the meme concept. Musk said on many occasions that he loved memes and therefore loved the idea behind a cryptocurrency like DOGE.

With the 2021 bull run fueled by growing institutional interest in cryptocurrency and Bitcoin (BTC), Musk began pitching DOGE as the true currency of the internet. The backing from the tech billionaire did wonders for the memecoin, with its price rising 23,000% in 2021.

With the rise of Dogecoin, the memecoin frenzy became a new phenomenon in the cryptocurrency market. This attracted many new entrants – from experienced traders to regular people – to the cryptocurrency market, hoping to ride the bullish wave. Other memecoins began to emerge, with many of the new tokens seeing multi-digit price hikes, sometimes just because of a tweet from Musk himself.

The memecoin frenzy of 2021 made many cryptocurrencies millionaires and attracted new traders to the ecosystem. In a year that saw memecoins crack the top five cryptocurrencies with the largest market capitalization, there was no shortage of stories of traders losing their savings after buying tokens at market highs or believing that Musk would continue to positively influence prices.

Throngs of new traders tweeted at Musk to post about DOGE; however, as soon as the frenzy died down, the token lost more than 90% of its value.

Since the DOGE craze of 2021, the market has been flooded with tens of thousands of memecoins and “shitcoins” trying to become the next Dogecoin or Shiba Inu (SHIB).

Anjali Young, co-founder of blockchain app development platform Abridged, explained to Cointelegraph that the current memecoin frenzy is all about managing the fear of missing out.

“A crucial aspect is managing FOMO. There are many approaches on how to manage it, and it’s best to find the one that works for you. Some find it helpful to formulate a thesis of purchase and stick with it, or invest only what they’re willing to That being said, it’s important to mention that with cryptocurrency trading 24/7, it’s easy to get carried away by the constant influx of news and trading activity. When you succumb to FOMO, learn your lesson and move on. And then manage that FOMO again “, Explain.

The age of anonymous memes is full of scammers and rug pullers.

In addition to the memecoin speculative frenzy, observers were concerned about the risks posed by new cryptocurrencies.

New anonymous memecoins often come with many smart contract vulnerabilities, including closed-source contracts, proxy contract mechanisms, tradable logic with pause functionality (carpet-pulling risk), and setting high sales taxes that make it difficult to trade. token sales. These vulnerabilities can cause losses to traders.

Gracy Chen, CEO of cryptocurrency exchange Bitget, told Cointelegraph that while original memecoins like DOGE and SHIB still have a strong community base, the new closed-source and anonymous meme tokens are mostly scams.

“Most new age memecoins are anonymous in nature and have many contractual vulnerabilities. Some memecoin issuers concentrate a large number of tokens at a single EOA address [cuenta de propiedad externa] or distribute them to multiple addresses under their control, which poses significant dumping risks in the short term. When trading memecoins, especially newly established ones, it is essential to exercise caution and do your own research,” Chen explained.

The dark side of the frenzy became apparent in 2023, with the launch of several new scam tokens in the guise of being a meme coin.

In May, blockchain analytics firm PeckShield published a report warning the cryptocurrency community to beware of fake memes. The security firm listed 24 fraudulent meme tokens created in the first week of May.

ZachXBT, an online sleuth known for uncovering scams, highlighted how one account created 114 fraudulent memecoin tokens in just over a month.

Another popular memecoin scam arose from the moderator of the popular trading subreddit r/WallStreetBets. The group created a memecoin called WSB Coin (WSB), claimed it to be the official Wall Street Bets memecoin, and launched it on May 2. The developers of the WSB token claimed that 10% of the coins would be reserved for the subreddit, with no allocation for the team.

On May 4, the moderator dumped a significant portion of the token on the market, and in two days, the token price plummeted from an all-time high of $0.00067279 to an all-time low of $0.00004827 at the time of writing. article.

According to Satoshi Nakamoto’s original vision, the purpose of cryptocurrencies is to solve the limitations of traditional finance and provide greater access to everyone. Although some people have achieved financial freedom through memecoin speculation, if you look at history, most end up on the losing end.

Kadan Stadelmann, Komodo’s CTO, told Cointelegraph that there are two main reasons why the current memecoin investment trend is bad for the cryptocurrency ecosystem:

“First, it dilutes potential funding that might otherwise go to serious projects that have more innovative technology and real use cases. Second, many portfolios will lose value as a result of not selling at the top or pursuing projects of scam.”

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