The rise of memecoins on the Solana blockchain has captivated both seasoned traders and newcomers alike, promising quick profits and viral popularity. However, beneath the surface of this booming sector lies a web of insider strategies and trading alliances that often leaves retail investors at a disadvantage.
Initially, the memecoin movement on Solana appeared spontaneous, fueled by community-driven launches and internet humor. Bonk Inu, Solana’s breakout memecoin, emerged in the aftermath of FTX’s collapse in late 2023, capitalizing on the demand for lighthearted tokens amidst the industry’s turmoil. Yet as the sector gained traction, especially with endorsements from figures like Donald Trump, Melania Trump, and Argentine President Javier Milei, a pattern became clear: memecoin launches were no longer as organic as they seemed.
Market participants have identified the growing influence of “cabals”—private groups coordinating the launch, promotion, and trading of memecoins. Jordi Alexander, founder of Selini Capital, noted, “Memecoin launches were being promoted as an antithesis to the ‘utility’ coins where VC insiders were able to invest at 100 times lower valuations and sell to retail after launch. In truth, memecoin launches often have as much — if not more — of an insider advantage.”
One of the key tactics used by these groups involves leveraging influential social media personalities, known as key opinion leaders (KOLs), who receive discounted tokens in exchange for promoting projects. Despite claims of “fair launches,” these pre-arranged deals often tilt the playing field. Mohamed Ezeldin from Animoca Brands observed that, “They’re just focused on ‘how can I get in as early as possible and how can I exit as close to the top?’ In doing so, we’ve created a zero-sum game.”
High-profile launches such as the Trump and Melania memecoins illustrate the volatility and risk. The Trump memecoin soared to nearly $74 before his inauguration, only to plummet by around 85%. Similarly, the Melania token has lost approximately 95% of its value since its peak, highlighting how swiftly prices can turn against unsuspecting investors.
The manipulation doesn’t stop there. Trading bots, commonly used in a practice called sniping, allow insiders to acquire large amounts of tokens at minimal cost during a launch, dumping them shortly after to secure profits. Bloomberg previously reported instances where wallets pre-funded hours before Trump’s memecoin debut were used to execute this tactic, crashing the price soon after.
Even prominent platforms like Pump.fun and Meteora, which facilitate memecoin launches, have become entwined in this ecosystem. Hayden Davis’ Kelsier Ventures, which was involved in the controversial Libra token backed by Milei, exemplifies how certain groups repeatedly appear at the center of these schemes.
Despite growing awareness, the memecoin market shows no signs of slowing. Recently, the SEC clarified that memecoins are not classified as securities, likening them to collectibles. This lack of regulatory oversight leaves retail investors largely unprotected. As Ark Invest’s CEO Cathie Wood put it bluntly, “There will be some fearsome declines in the prices of some of these meme assets. And, you know, there’s nothing like losing money for the people to learn.”
By Alejandro Silva Ramírez, Crypto Analyst & Columnist