Last week, the crypto meme coin market was rocked when a meme coin endorsed briefly by Argentine President Javier Milei, soared to a $4.6 billion market cap, before it plummeted, resulting in massive losses.
This led to Melei coming out to say, “I didn’t promote, I just shared it”. But that hasn’t stopped Argentine authorities investigating his involvement.
So, what happened?
From $4.6 billion to $200 million in a few hours…
It all began when President Javier Milei with the help of Kelsier Ventures launched a meme coin, Libra, “for the growth of their economy”.
Within an hour, Libra rocketed to a $4.6 billion market cap on huge trading volumes. Then Libra insiders began cashing out. The token peaked above $4.50 but plunged more than 95% over the next few hours. Today the meme coin’s market cap is just $200 billion.
According to crypto researchers Nansen, 86% of Libra investors were wiped out, while insiders walked away with around $124.6 million in profits.
This led Milei to later delete his post and deny having any business link to the meme coin. However, the story kept unfolding. And it was later revealed the mastermind behind Libra and CEO of Kelsier Ventures is a man named Hayden Davis, who pretty much admitted to the rug pull.
Even worse, he also admitted he was behind the launch of the $MELANIA meme coin, which was promoted last month by US first lady Melania Trump.
That token initially surged to as high as $13.05 before crashing to around $3.49 hours later. Today, it trades for just $1.27.
So, what are meme coins and why are some so popular?
Meme coins are crypto tokens named after popular internet trends or people. While most never take off, some do – typically with the help of an influencer or famous person.
Probably the most famous and arguably successful example is dog-themed Dogecoin, which soared when billionaire Elon Musk began tweeting about it in 2020. Today, it’s the eighth-biggest cryptocurrency by market cap.
But as I said, most meme coins end up as a rug pull. That means that a trading token has all liquidity pulled from its trading liquidity pools. That is often by the original token creators, who sell everything and make off with all the funds that have been made as unsuspecting token holders buy and buy as the value of these meme coins rise.
Typically, it’s the small retail investors who lose all their money.
Sure, getting ahead of the price rally and getting out before you’re “rugged” is possible. You are ultimately extracting profits from someone – remember that there’s always two sides to a trade – but the reality is that money is mostly being made by those launching coins and other insiders (including the celebrity or influencer that promotes it).
More often than not, when you see these meme coins, you should run for the hills. Many make no sense and are ultimately worthless. So, it’s best to just stay away from them. And if you are interested in crypto investing, rather focus on alt coins or bitcoin.
If you want to know what the top 3 crypto we’re investing in at South African Investor, you can find out how to get the details here.
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