Memecoins leave retail investors with $4B in losses

Memecoins, initially perceived as community-led digital assets, are increasingly being exploited to extract value from retail investors through scams and failed celebrity-backed tokens.

The $4 billion collapse of the Libra token, endorsed by Argentine President Javier Milei, exemplifies this trend.

Eight insider wallets cashed out $107 million in liquidity, causing a 94% price decline within hours of its launch.

Anastasija Plotnikova, CEO of Fideum (CRYPTO:FI), stated that memecoins have shifted from social experiments to a "chaotic landscape dominated by value extraction from retail investors."

She added that insider rings and pump-and-dump schemes have replaced the original nature of memecoins, creating an unhealthy environment.

Investors should differentiate between genuine collectibles and fraudulent activities like rug pulls, which should fall under law enforcement, according to Plotnikova.

The Libra token's collapse revealed that it was an open secret in memecoin insider circles, and some members of the Jupiter (CRYPTO:JUP) decentralised exchange knew about the launch beforehand.

Dmitrij Radin, founder of Zekret and CTO of Fideum, believes that while memecoin meltdowns negatively affect investor sentiment, they may not impact long-term cryptocurrency regulation.

He noted that crypto legislation has a long-term perspective and that David Sacks, the US crypto czar, views memecoins as more of a collectible, meaning coins like TRUMP (CRYPTO:TRUMP) and MELANIA (CRYPTO:MELANIA) might be viewed differently than Libra (CRYPTO:LIBRA).

Nicolai Sondergaard, a research analyst at Nansen, suggests that the impact of memecoin scandals will be uneven, potentially deterring newcomers who now view crypto as a space rife with manipulation and scams.

While some argue memecoins attract new participants to crypto before they migrate to more legitimate projects, emerging data suggests most retail traders never see profits, with their capital absorbed by insiders.