Meme coin on Solana: Saturated supply and limited Liquidity

The total market size and market share of MEME have been continuously rising without any obvious signs of stagnation. There is no doubt that it is the fastest horse on the track.

Author: hyphin, On Chain Times

Compiled by xiaozou, Golden Finance

1. Preface

Since our last (March of this year) MEME coin article, the total market size and market share of the industry have been continuously rising, without any apparent signs of stagnation. There is no doubt that it is the fastest horse on the track.

This phenomenon can be attributed to the viral spread of social media (its inherent characteristics), extremely low entry barriers, and the emergence of fresh narratives that attract speculators, although many (even if not the majority) fail to maintain meaningful follow in the long term. Nevertheless, market participants have become accustomed to this and often enter and exit in profitable short-term trends, leveraging momentum for gains while maintaining loyalty to high conviction bets and making them more enduring. Despite some people’s unwillingness to admit it, in the current market environment, memes that have been thoroughly tested by the market have a lower likelihood of extinction than 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 massive market capitalization of these Tokens, most of the activity in this space does indeed occur within its ecosystem trenches. For this reason, this article will continue to focus on this chain, attempting to provide a global picture.

2. Tribute to Pump

With the emergence of pump.fun (a native Token incubation platform on Solana), there has been a significant shift in the local market dynamics. Interacting with speculative Tokens has become simpler, cheaper, and more secure (from a security perspective). With a user-friendly interface, standardized Token deployment can be done in a controlled environment, allowing anyone to create new Tokens based on common configurations, thus eliminating the risk of potential malicious actors hidden in Smart Contracts. This actually only requires the deployer to provide some creative inputs without any technical knowledge. Abstracting away all complexities, the focus is on what truly matters - massive speculation.

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

Approximately every 100 Tokens, one graduates from pump.fun due to massive saturation, limited Liquidity, and other reasons beyond the scope of this article. Those who step into the arena must show 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 dominance of this application compared to other alternative solutions has reached an astonishing 71.9%, demonstrating its widespread popularity and far-reaching impact. The recent momentum has rapidly made it mainstream, with many new users from TikTok joining in, ambitious to expand and fan the flames even further.

3、All roads lead to Raydium

Whether it is a secret release, pump.fun release, or pre-sale Token, the majority of meme coin liquidity pools come from Raydium. The influx of a large number of meme coins into the market increases its market share, and Decentralizationexchange accounts for a considerable portion of Solana’s current on-chain volume.

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 coins perform, platforms that facilitate trading activity will benefit greatly from the volume generated by increasing speculation. Much evidence and common sense indicate that only a few tokens gain followers, while the rest are destined to gradually fade from people’s sight. This viewpoint can be confirmed or refuted simply by observing the distribution of market capitalization among all existing trading pairs.

Due to the lack of effective tagging methods by data providers, it is quite difficult to distinguish memes from non-memes on a larger scale. After careful consideration, the method used in the comprehensive data set planning is to collect information on all Raydium Liquidity pools with non-zero liquidity (as of November 25, 2024), excluding official token lists and legitimate projects on CoinGecko. The remaining 493,203 pools contain 474,161 unique address tokens, which will be the basis for this section’s analysis.

At any point during the lifespan of most tokens, even very low levels of activity tend to form distinct peaks within the range of $10,000 to $100,000, with a gradually smooth downward tail evident in the chart - highlighting the few tokens with high valuations, which is expected as maintaining a moderate market cap in such an attention environment is challenging. Although this example encompasses the entire dataset, it is also worth exploring the potential structural distribution differences between tokens originating from pump.fun and those 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.

（1）pump.fun

Please note that pump.fun Token needs to exceed a certain Market Cap threshold to gain access to the Liquidity pool. As they provide more Liquidity during the issuance, their value is usually higher, ranging from $5000 to $15000. This indicates that most Tokens released cannot sustain or exceed the Market Cap before migrating to Raydium. These Tokens also have many in the mid-range (from hundreds of thousands to a few million), as the deployment pipeline filters out unattractive memes to some extent and allows the community to leverage the reputation or traction gained on the platform as a catalyst for rise.

(2) Direct Deployment

In the lower market capitalization swing trading, there is still a significant density, which indicates that many smaller and less ideal tokens are difficult to attract significant interest. Part of the reason may be due to saturation, poor timing of the introduction of these tokens to the market, or a clear lack of narrative, originality, and appropriate publicity. Although not obvious, the high market capitalization meme density listed on multiple centralized exchanges is more concentrated, these memes appeared long before the appearance of pump.fun.

In our dataset, the aggregation around low market capitalization tokens confirms the above points. While the depletion of trends and the inevitable bursting of speculative bubbles are significant obstacles for any token, inconsistent incentives have largely led to the collapse and subsequent demise of many meme moments. Anonymous scammers mislead their users, while those with ulterior motives, so-called ‘developers,’ have made open fraud the norm in the field, resulting in the immediate demise of many seemingly promising concepts. Upon careful examination, it is found that a large portion of tokens have intentionally set up a failed outcome in order to obtain maximum value from unsuspecting speculators, which remains an ongoing threat to those who dare to take risks behind the scenes.

In just the past 30 days, nearly two-thirds of Tokens have been slaughtered within the first 24 hours, with over 90% of available Liquidity evaporating. Recovering from such a catastrophic event is often impossible during the birthing period, but occasionally disgruntled Token holders will attempt to regain lost momentum by creating new social media accounts for community takeovers. This is done out of stubbornness or resentment in some cases, and the outcome is predictable, but if done well, it can give supporters a dignified exit.

4. Conclusion

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