Memecoin Cabals from Solana Take the Edge Off the Hottest Crypto Frontier
Bloomberg) — The rug pulls. snooping. exchanging “cabals” For anyone who are not familiar with the mechanisms that lead to token prices abruptly rising and then falling, the Solana blockchain’s specialized meme coin market is dangerous.
Although the upstart network-centered meme coin craze seemed natural when it first started two years ago, its explosive growth—most recently driven by well-known newcomers like Donald and Melania Trump and Argentine President Javier Milei—has led to the emergence of a network of clandestine players who now control a sizable portion of the multibillion-dollar cryptocurrency market.
Because of this, the business has come to feel like an insider market, with insiders securing the most profitable deals and regular investors frequently taking the brunt of losses.
Only a few years after the inception of cryptocurrencies like Bitcoin, the first memecoins were released, with creators making lighthearted references to well-known internet memes. Bonk Inu, which was developed following the failure of the FTX exchange, was the breakout memecoin on Solana. As Solana emerged from the shadow of Sam Bankman-Fried’s collapse over cryptocurrency, it became an instant hit in late 2023 as investors looked to make a quick profit on the all but worthless but well-liked dog-themed coin.
The Solana blockchain, which was hailed as being quicker and less expensive than the ground-breaking Ethereum network, is likely to be used when a memecoin is launched today. According to market participants, the interlocking network of participants behind the creation, launch, and sale of the cryptocurrencies has made Solana the preferred option for everything from the Trump meme coins to the Milei-endorsed Libra token that sparked political controversy. They see this as a rerun of previous crypto cycles.
According to Jordi Alexander, founder of digital-asset trading company Selini Capital, which creates markets for tokens like memecoins, “Memecoin launches were being marketed as the antithesis to the ‘utility’ coins where VC insiders were able to invest at 100 times lower valuations and sell to retail after launch.” “Memecoin launches actually frequently have just as much, if not more, of an insider advantage.”
In the memecoin market, the dangers for those who arrive late are readily apparent. According to rates on CoinMarketCap, the Trump memecoin has lost almost 85% of its value since it surged to a peak of nearly $74 the day before his inauguration.
Key opinion leaders, or KOLs, are the most well-known players in the memecoin market. They are frequently social media influencers with sizable fan bases on sites like X. They are essential for establishing recognition in the midst of the hundreds of memecoins that are introduced every day following Pump and similar platforms.To create tokens, Fun lowered the technological bar.
Before a project launches, KOLs frequently receive token investments at steep discounts in return for recommending them to their followers. Mohamed Ezeldin, head of tokenomics at Animoca Brands, claims that although memecoins frequently assert that they follow a “fair launch” paradigm, in which all tokens are made available to the public at once, this is rarely the reality.
‘Pump and Dump’
Dave Portnoy, the founder of Barstool Sports, who recently started trading memecoins, stated in an X space on February 16 that he was asked to assist in the launch of Libra, which included speaking with Milei. Before the debut, Portnoy claimed he was offered Libra coins in return for his support, but he declined. A request for response from Portnoy was not answered.
Through what cryptocurrency traders refer to as “cabals,” or organizations that specialize in launching memecoins, influencers frequently establish connections with producers. Included in this group is Hayden Davis’ Kelsier Ventures, which launched Libra. Joseph Edwards, head of research at London-based Enigma Securities, claims that these groups are frequently heavily involved in the development and purported manipulation of the pricing of different memecoins in order to take advantage of individual investors.
In 2021, a number of market makers were engaging in similar practices, namely dark pool liquidity, according to Edwards. “They would support the launch of these tokens, and each time it would be a pump-and-dump.”
Before Davis revealed his involvement in Libra in an interview with YouTube journalist Coffeezilla, few outsiders were aware of him. He also asserted that he was connected to Enron memecoins and Melania. Most other cabals, such LA Vape Cabal and Fantom Troupe, use pseudonyms. A request for comment from Davis was not answered.
One of the strategies that’s employed by the cabals is called sniping, which is when trading bots are utilized to buy tokens during a launch and then sell them immediately to reap the generally short-lived price increases. Snipers earned prominence during the Trump memecoin debut, when certain digital wallets acquired tokens at minimal costs before dumping them immediately after the launch, causing the market to plummet. Bloomberg earlier reported that just hours before Trump announced the memecoin’s debut on Truth Social, one wallet that purchased it at launch had been pre-funded.
According to a leaked audio recording of a conversation between Ben Chow, a co-founder of the decentralized exchange Meteora, based in Solana, and Moty Povolotski, co-founder of the cryptocurrency project DeFiTuna, Povolotski claimed to have witnessed Davis and his family sniping Enron. Povolotski confirmed the authenticity of the recording to Bloomberg. Requests for comment from Chow were not answered.
Although the most widely used platform for launching and exchanging memecoins is Pump.fun, Meteora has gained popularity. Meteora was used to launch Trump, Melania, and Libra. Jupiter, a larger Solana ecosystem that combines token trading, including Meteora.
Additionally, Jupiter is the owner of Moonshot, an app that lets users purchase and sell memecoins using Apple Pay or credit cards. Shortly after Libra’s demise, Chow of Meteora resigned after claiming in the audio leak that he had linked the Melania token’s team to Kelsier Ventures.
About return on investment, Ezeldin of Animoca Brands stated, “What it’s really allowed people to do is zoom in on those who are only focused on ROI and not focused on fundamentals or utility.” Pump.fun is one such platform. “All they’re thinking about is ‘how can I enter as early as possible and how can I leave as near the top?'” As a result, we have produced a zero-sum game.
‘Fearsome Declines’
The future of memecoins appears to be unaffected by the debate, though. Staff from the US Securities and Exchange Commission declared at the end of February that memecoins are not securities. Noting that memecoins have little to no value or functioning and are frequently accompanied by warnings regarding their hazards and lack of utility, the SEC staff likened them to collectibles. Therefore, buyers are not covered by federal securities laws, and those who offer and trade memecoins are exempt from registering with the government.
In an interview with Bloomberg Television, Cathie Wood, the chief executive officer of Ark Investment Management, stated, “The regulators have made their message very clear. There will be some frightening drops in the prices of some of these meme assets. You know, there’s nothing like losing money for the people to learn.”
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