Meme coins on Solana: saturated supply and limited Liquidity

Author: hyphin, On Chain Times

Translation: Jinse Finance xiaozou

1. Introduction

Since our last memes article (in March this year), the total market size and market share of this industry have continued to rise without any apparent signs of stagnation. Without a doubt, it is the fastest horse on the track.

This phenomenon can be attributed to the viral spread of social media (its inherent nature), extremely low barriers to entry, and the emergence of fresh narratives, which attract speculators. Although many (if not most) fail to sustain meaningful follow in the long term. Nevertheless, market participants have become accustomed to this and often come in and out in profitable short-term trends, capitalizing on momentum while maintaining loyalty to high conviction bets, making them more enduring. Despite some people's reluctance to admit it, in the current market environment, the likelihood of the demise of long-standing memes that have been thoroughly tested by the market is lower than that of assets that rely solely on impressions and do not provide any substantive value (limited to fund transfers).

While Solana may not be the sole contributor to the market capitalization of these large tokens, most of the activity in this space does occur within its ecosystem trenches. For this reason, this article will continue to focus on this chain and attempt to provide a global picture.

2. Tribute to Pump

With the birth of pump.fun (a Solana native Token incubation platform), there has been a major shift in the local market dynamics. The interaction with speculative Tokens has become simpler, cheaper, and more secure (from a security perspective). Through a user-friendly interface, standardized Token deployment in a controlled environment, anyone can create new Tokens based on common configurations, eliminating the abuse risks hidden in Smart Contracts. In fact, this only requires the deployer to provide some creative input, without any technical knowledge. Abstracting away all complexity, the focus is on what really matters - large-scale speculation.

Once a tokenization meme is created, it can be traded directly on the internal market of the platform. Once the Market Cap reaches about $69,000, it will be automatically deployed to Raydium. However, most creations fail to reach this threshold and are never released to the market.

About every 100 Tokens, one graduates from pump.fun, due to immense saturation and limited Liquidity, among other reasons beyond the scope of this article. Those who step into the arena must demonstrate something interesting, shocking, and unique to catch the attention of the warriors in the trenches. Despite these challenges, the protocol quickly established itself as a true gateway for trading micro-cap Tokens and launching new Tokens, surpassing all other competitors in the field.

So far, the deployment dominant advantage of this application has reached an astonishing 71.9% compared to other alternative solutions, demonstrating its wide popularity and far-reaching influence. The recent momentum has quickly made it mainstream, with many new users from TikTok joining in with ambitious plans to make it bigger and keep the fire burning.

3. All roads lead to Raydium

Whether it's a secret launch, pump.fun release, or presale Token, the majority of memes' liquidity pools come from Raydium. A large amount of memes entering the market increases its market share, and Decentralizationexchange accounts for a significant portion of Solana's current on-chainvolume.

In the gold rush, those who sell shovels to speculators often reap the most rewards. This analogy also applies to the current situation. No matter how well meme tokens perform, platforms that facilitate trading activity will benefit greatly from the volume generated by increasing speculation. Many facts and common sense indicate that only a few tokens gain followings, while the rest are destined to gradually fade from people's sight. This viewpoint can be confirmed or refuted simply by observing the market capitalization distribution of all existing trading pairs.

Due to a lack of effective tagging methods by data providers, it is quite difficult to differentiate between memes and non-memes on a larger scale. After careful consideration, the approach used for curating the comprehensive dataset is to collect information from all Raydium Liquidity pools with non-zero Liquidity (as of November 25, 2024), excluding official token listings and legitimate projects on CoinGecko. The remaining 493,203 pools consist of 474,161 unique Address Tokens, which will serve as the basis for this section's analysis.

Most Tokens, at any given point during their lifespan, often form conspicuous peaks in the range of $100,000 to $10,000, even with very little activity, in the early and middle stages. Clearly, the chart forms a gradually smooth declining tail, highlighting a few Tokens with high valuations, which is expected, as maintaining a moderate Market Cap in such an attention environment is challenging. While this example encompasses the entire dataset, it is also worth exploring potential structural distribution differences between Tokens originating from pump.fun and Tokens deployed directly to Raydium.

Looking at them separately can provide important insights into the clear patterns of the overall distribution, as well as their respective performances, and showcase unique features.

pump.fun

Please note that pump.funToken needs to exceed a certain Market Cap threshold to obtain Liquidity pool. Due to the more Liquidity provided at the time of issuance, their value is usually higher, ranging from $5,000 to $15,000. This indicates that most issued Tokens cannot maintain or exceed the Market Cap before migrating to Raydium. These Tokens also have many in the mid-range (hundreds of thousands to a few million), as the deployment pipeline filters out unattractive memes to some extent and allows the community to use the reputation or traction gained on the platform during this process as a rise catalyst.

Direct Deployment

In the lower Market Cap swing trading, there is still a clear density, which indicates that many smaller and less ideal Tokens are difficult to gain significant appeal. Part of the reason may be due to saturation, the timing of these Tokens being introduced to the market is not ideal, or due to a significant lack of narrative, originality, and proper publicity. Although not obvious, the density of high Market Cap memes listed on multiple centralized exchanges is more concentrated, and these memes appeared long before pump.fun.

In our dataset, the aggregation around low Market Cap Tokens confirms the above points. Although the exhaustion of trends and the inevitable burst of speculative bubbles are huge obstacles for any Token, inconsistent incentives have largely led to the collapse and subsequent disappearance of many meme moments. Anonymous scammers mislead their users, while those with ulterior motives, the so-called 'developers,' have made open fraud in this field the norm, leading to the immediate demise of many seemingly promising concepts. Upon careful examination, it is found that a large portion of Tokens have intentionally been set up to fail in order to extract maximum value from unsuspecting speculators, which remains a persistent threat to those brave enough to take risks behind the scenes.

In just the past 30 days, nearly two-thirds of the Tokens were slaughtered within the first 24 hours, with over 90% of the available Liquidity evaporated. Recovering from such a catastrophic event in its infancy is often impossible, but occasionally disgruntled Token holders will attempt to take over the community by creating new social media accounts, trying to regain lost momentum by creating new social media accounts and sometimes starting over out of stubbornness or resentment. The outcome of doing so is predictable, but if done well, it may give supporters a dignified exit.

4. Conclusion

The memes landscape on Solana is both unpredictable and dynamic, a mix of boundless creativity, rampant speculation, and ever-present risk. Platforms like pump.fun and Raydium have emerged as central to this thriving ecosystem, offering participants both opportunities and challenges. While some prominent Tokens have quickly risen to fame, igniting dreams of overnight success, the sobering reality is that most memes fail to sustain their initial momentum, leaving a trail of shattered hopes. With the continued development of this speculative frenzy, one thing has remained clear: in a world where viral spread often outweighs facts, a cautious attitude and thorough investigation are crucial. Whether you are a curious bystander or an active participant, navigating niche markets requires a keen eye for trends and a steadfast skepticism towards promises of easy riches.