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1st April 2024 > > Memecoin madness II.

Updated: Apr 2


More observations on the memecoin madness we started investigating yesterday.

Market Snap

Market Wrap

After a strong finish to the month – BTC was at $71.3k at midnight in New York – there was a sudden dip this morning, probably attributable to Easter holiday liquidity issues and an over-hyped story about a weakness in the SHA-256 cryptographic algorithm. If the story had legs, its impact on TradFi and Web2 would be devastating, but cryptos could deal with it.

Last week saw a net inflow of nearly $1bn into the spot BTC ETFs hoovering up over 14,000 coins. Either the ETFs stop buying, or the price of BTC must react strongly. Which of these outcomes is the more likely scenario is what you must judge for yourself, and act accordingly.

For the techies out there, I note that BTC has closed both the week and the month at its highest level ever, and – for the very first time – above the previous cycle’s peak. Given that this situation has never been predicted by anyone who isn’t a fundamentalist, how does your technical analysis cope with this brave new world?

Curious Cryptos’ Commentary – Addendum to memecoin madness

Apart from those tips in yesterday’s CCC for all potential meme degens – particularly the burning of LP tokens – this is a great website that I suggest you use before buying any Solana coin of any description:

Chuck in the contract address and you may get some very useful information.

But before we do that, let us look at a live example. I randomly chose a new coin called SBFwifhat on Sunday morning that appeared on DexScreener. We join the action just four minutes in:

Anyone paying attention to the CCC (oh dear, that’s not very many raised hands, please try harder in future) already know that the lack of burnt LP tokens, allied with no social media presence, tells us the chance of a rug-pull happening any time soon is very high. Both those red flags are screaming out at us in the picture above, if you know where to look (see yesterday’s CCC, pay more attention at the back of the class, blah, blah, blah).

In this case, the initial LP was of a decent size of over $240k, so I think this one might run for a little longer than some of the other case studies we have looked at. Perhaps one or two early investors might get lucky before it crashes and burns when the liquidity is inevitably removed.

But you could sidestep all of that by using the rug check tool above which has this opinion of this coin:

One of the wonders of blockchain technology is the transparency of it all.

It takes very little work to find out that the creator of SBFwifhat had also created two other memes the very same morning. If you were going to guess that the names of the other two coins were Bidenwifhat and Trumpwifhat, well done. You win the first prize of a bucketload of worthless coins.

The Biden version was created and rugged, the Trump version followed, and the SBF iteration won’t live for long.

Despite all that, it strikes me that there is a potential play here.

The coin creator has added $120k of value in SOL to the pool for SBFwifhat (the other $120k of liquidity we saw in the initial screen grab is the fantasy market cap of this coin), far more than he put in for his first two experiments of Biden and Trump. That’s a decent slug so one might assume that he is looking for maybe $30k or $40k to be added to the pool in SOL before rugging.

Now twelve minutes in only $4k has been added to the SOL side of the balance sheet. One could buy now and probably sell for a 20% gain in a short period of time, long before the expected rug.

The key issue is the assumption about the size that the pool is allowed to grow before the rug. Get that assessment right, and this is a license to print money. Maybe there is no right answer, but I think a bit of mathematical analysis on this point has been added to my task list.

And here it is, the rug at 13.36 after $25k of liquidity (i.e. buys of a worthless coin) has been added to the pool:

For the record, if you had near perfect timing, you could have doubled your money and then some. I think a target of 20% return in situations like this, where there is a decent commitment to the liquidity pool, looks very doable.

It is hard to execute these trades in size, but if a 20% return in less than ten minutes is feasible, then I think there is scope to do something with that. Unfortunately, because of the limit on trade size, one cannot call upon the Eighth Wonder of the World (compound interest). But perhaps we can develop a variation on that theme that may prove lucrative.

But let us also not forget the kicker that comes with basing your trades in SOL. That kicker probably means the returns are 5x or 10x the original return, or much more, when redenominated in fiat within a couple of years at most.

I will let you know how I get on.

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