In a sweeping analysis released on November 4, 2024, Binance Research, the research arm of the world’s largest cryptocurrency exchange, uncovered stark realities within the meme coin market.
The report titled Understanding the Rise of Memecoins, led by Binance’s Macro Researcher Josh Wong, reveals that a staggering 97% of meme coins have experienced severe drops in trading volume, a testament to their volatility and susceptibility to market manipulation.
According to Wong:
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“The majority of memecoins born from the frenzy of 2023 and 2024 have proven to be fleeting. A full 97% have already died, reaching near-zero trading volumes.”
For many of these tokens, the rapid rise and subsequent collapse reflect the market’s fascination with quick gains and speculative trading, often at the expense of retail investors.
Meme coins high volatility
The report shared with Finbold highlights how meme coins, due to their simplicity and accessibility, proliferate at an unprecedented pace.
Over 75% of these tokens emerged in the last year alone, allowing them to capture market interest and build communities far faster than traditional technology-backed altcoins.
Wong explains:
“The time-to-convert for a memeccoin consumer is much shorter than that for a technology-focused altcoin investor, leading to a rapid propagation of their narratives.”
This fast-paced environment has led to capital flowing into memecoins at breakneck speed. Comparisons are striking: the memecoin WIF reached a $1 billion market cap in just 104 days, while Shiba Inu (SHIB) took 279 days and Dogecoin (DOGE) —a meme market veteran—required eight years.
The ease with which new memecoins can be created has led to a continuous stream of novel tokens, each vying for attention and investment in an ever-competitive market.
While the majority of memecoins struggle to maintain relevance, a select few, such as DOGE and Shiba Inu, have shown longevity. Dogecoin, now over a decade old, and SHIB, at four years, remain the rare exceptions in a market dominated by ephemeral tokens.
Their success, however, underscores the broader trend: for most meme coins, the survival rate is remarkably low, with only a handful capable of building sustainable ecosystems and dedicated communities.
Risks of Pump-and-Dump schemes
Despite the allure of quick gains, Binance Research warns of significant risks.
“The rapid rate of growth and speculation makes memecoins an investment vehicle with high potential for outsized returns,” Wong noted, “but their heavy reliance on market sentiment, with little else to support their valuations, also makes them an extremely risky asset class.”
Moreover, the report acknowledges that the meme coin market is rife with exploitation tactics, particularly pump-and-dump schemes designed to create exit liquidity for early adopters and insiders at the expense of retail traders. While meme coins offer enhanced transparency and ease of access, these attributes have not entirely shielded investors from predatory practices.
As new memecoins continue to flood the market, investors are advised to tread cautiously, recognizing that the potential for outsized gains comes with equally outsized risks. For every DOGE or SHIB that defies the odds, dozens of tokens fade into obscurity.
