Memcoins aren’t bros?
Over the past few weeks, we have seen a new wave of memecoins flooding the market. Trading volumes on these meme pools are skyrocketing, APRs are hitting the roof, and CT is full of $PEPE stories and life-changing cases. But how does this affect our DeFi market?
Our view is simple — memecoins aren’t bros. Here’s why…
1. Meme coins and liquidity. The DeFi market is still relatively small and faces problems related to low liquidity. When the hype around meme coins grows, liquidity begins to shift from “solid” projects to these meme coins. This can result in profit-taking in altcoins, decreased trading volumes, reduced profitability for liquidity providers, and even the appearance of impermanent losses larger than expected.
2. Lack of value. This is a fundamental problem with meme coins. By sucking up liquidity, meme coins do not create any value for the industry. They do not generate new projects, technologies, development teams, or expertise. Meme coins simply create memes, hype and fomo.
3. FOMO growth. The meme coin hype creates excellent conditions for new scams to emerge. Numerous honeypots, phishing scams, and social media spam start to appear. In addition, there are numerous negative cases emerging, which worsen the overall perception of the crypto among people.
4. Meme coins are a zero-sum game in which liquidity flows from small retail investors to large ones, creating potential for further manipulation.
In conclusion, we believe that meme coins are not a suitable investment for DeFi. Although they may seem fun and exciting, investing in them can lead to significant losses and hinder the development of more meaningful projects in the industry.