TLDR
- Memecoin trading activity has plummeted following the Libra token scandal, with new token creation down over 90%
- CoinGecko’s Bobby Ong reports memecoin market cap has fallen from $124B to $54B since December
- The LIBRA token launch, allegedly connected to Argentina’s president, saw insiders extract $107M before value crashed 94%
- Only memecoins with dedicated communities like DOGE, SHIB, and BONK have proven able to survive market cycles
- US regulatory uncertainty may have driven developers toward memecoins instead of utility tokens
The memecoin sector is experiencing a severe downturn following several controversial token launches and apparent scams. Trading volumes and new token creation have collapsed, according to data from CoinGecko.
Token launchpad Pump.fun has seen daily activity drop by more than 90% since February. This comes after the Libra (LIBRA) cryptocurrency incident that shook investor confidence across the sector.
The Libra token launch, which claimed association with Argentine President Javier Milei, ended in disaster when insiders extracted over $107 million. This caused the token’s value to crash by 94% within hours.
“LIBRA was the final nail in the coffin,” said CoinGecko founder Bobby Ong in his March 6 report. He described how the incident revealed that many memecoin launches weren’t actually fair but instead benefited “cabals and insiders.”
This collapse follows what had been a memecoin boom triggered by the January 18 launch of the TRUMP token. That event helped push Pump.fun to record weekly trading volume of $3.3 billion.
But the platform’s activity has since fallen dramatically. Trading volume dropped 63% from January to February as investors pulled back from the sector.
The broader memecoin market shows similar decline. Total market capitalization has fallen from a December peak of $124 billion to just $54 billion today.
The Death and Rebirth Cycle
Ong believes memecoins follow a seasonal pattern of booms and busts. However, he notes that certain tokens have managed to survive multiple market cycles.
“The likes of DOGE, SHIB, and BONK have weathered market cycles and offer lessons for memecoin creators,” Ong wrote. These survivors share common traits that have helped them endure.
Successful memecoins typically build “cult-like communities” around a shared cause or identity. These engaged supporters create content organically and hold through downturns.
The future memecoin landscape will likely follow what Ong calls a “power law” distribution. He predicts 99.99% will fail while a tiny fraction survive and thrive over the long term.
Regulatory factors may have fueled the memecoin explosion. Without clear guidance for launching utility tokens, many developers chose memecoins to avoid securities law complications.
“Part of the blame should also go to regulators, particularly in the US,” Ong explained. The lack of frameworks for compliant token fundraising pushed projects toward memecoins that “promise holders nothing.”
The memecoin crash has occurred during broader market turbulence. Bitcoin has fallen more than 20% from its recent high above $100,000 to around $87,000.
Similarly, traditional markets have struggled. The S&P 500 has declined approximately 5% over the past month amid economic uncertainty.
Despite these challenges, Ong maintains optimism about crypto’s overall direction. “I do believe we are still in the midst of a bull cycle, and we are just experiencing a short-term shake-out,” he stated.
The pace of token creation remains extraordinary despite the memecoin slowdown. GeckoTerminal now tracks over 5.5 million tokens, with more than 600,000 added in January alone.
At the current rate of growth, Ong forecasts the market will contain over one billion tokens within five years. This creates extreme competition for investor attention and capital.
Some market analysts see further downside ahead. Arthur Hayes has suggested Bitcoin could dip to $70,000 during this correction phase.
However, institutional support for Bitcoin remains strong. Major financial firms like Standard Chartered and Bitwise had recently projected prices reaching $200,000 during this market cycle.
The tokenization trend is expanding beyond memecoins into new categories. AI agent launchpads, DAO creation tools, and real-world asset (RWA) platforms are gaining traction.
Traditional finance firms are increasingly entering the RWA space. While US Treasury-backed tokens have dominated so far, the sector is expected to expand into higher-yield products.
Ong concludes that attention will be the scarcest resource in this crowded market. “There’s going to be a whole lot of tokens and projects vying for our attention,” he wrote, predicting that only high-quality offerings will stand out long-term.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
