Meme coins seem fun, but they are extremely volatile, even for cryptocurrencies. Even worse is the risk of being scammed.
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Trading cute and silly meme coins can be fun, but the platforms where these crypto lottery tickets are traded are often infested with dangerous sharks. Blockchain analytics company Webacy specializes in detecting coin scams. Below are their three main warning signs:
Concentrated holders
If a meme coin’s top 10 wallets own more than 20% of the total supply, the risk of a draw is extremely high, according to Maika Isogawa, CEO of Webacy. There are many examples of tokens being crashed within hours of being released on a leading decentralized exchange such as Raydium. Isogawa points to a coin called Pong as a recent example. It went from a market cap of over $80,000 in early November on Raydium to zero shortly after it began trading (see chart below).
Pong collapsed as soon as it was put online on Raydium
DEXScreener
Concerns about holding concentration also exist for some major tokens. The top 10 wallets on Neiro, a $1.1 billion (market cap) meme coin on Solana, hold 70.82% of its circulating tokens.
Shady influencers
Maika Isogawa, CEO of Webacy
Webacy
Unscrupulous launchers, paid to pump tokens, abound in coin tokens. Isogawa says that
Special powers
Meme coins issued on Pump.fun have a maximum circulating supply of approximately 800 million tokens. Other platforms allow issuers to create an unlimited supply of tokens after launch, which could dilute investors. This issue is plaguing the $12 billion (market cap) TON blockchain. Isogawa says meme coin investors must ensure that an issuer has taken a step known as “forfeiting the contract,” which indicates that they no longer control the code that would allow them to issue more coins. tokens. Tokens may also carry other smart contract risks. According to crypto security company GoPlus, Bananacat (BCAT) and Tamadoge (TAMA) are two examples, whose creators have the ability to prevent holders from selling their tokens.
Do your own research
One way to protect yourself from coin risks is to use security screens and risk scores on review sites like Webacy, Rugcheck, GoPlus, and DEXSCREENER. “Memecoin markets are easy to manipulate and difficult to value,” says Isogawa, “It’s a scammer’s paradise.”