Welcome back to the second part of our series on the manic season of meme coins! If you haven’t read Part I, you may want to take a peek there before diving into this piece. In the previous part, we touched on an Ethereum-based meme token that’s been making hot and cold waves in the crypto market. Today, we’re going to delve deeper into the frenzy surrounding this coin, the intricate dance of supply, demand, and market manipulation at play, and the cautionary tale it presents.
Gambling on the Blockchain
Pepe Coin’s story is one of meteoric rise and rollercoaster volatility that embodies the spirit of a casino. It’s a game of high stakes where fortunes can be made or lost in a matter of seconds. Since its launch on April 17, 2023, around 120,000 people traded the coin, catapulting it from zero to a staggering $1.5 billion market cap by May 5, 2023.
The coin had no discernible utilities, yet the market cap accelerated in a span of two weeks. The sudden rise in value might seem tantalizing, but let’s not forget the old adage: “What goes up must come down.” By May 11, the market cap had declined to $677 million. If you had bought Pepe at its peak on May 5, you’d be nursing significant losses.
The Invisible Hand of MEV Bots and Market Manipulation
What propelled this whirlwind journey of Pepe Coin? The answer lies in the world of MEV Bots. An analysis showed that around 122,000 distinct wallets were driven by MEV Bots. One such bot, operated by the user jaredfromsubway.eth, was involved in some serious shenanigans, conducting what’s known as sandwich attacks.
The bot paid an astonishing $34 million in gas fees, with 98.3% of its transactions being sandwich attacks. In this form of attack, the bot places a buy order, waits for others to follow suit (thus driving up the price), and then quickly sells at a profit. It’s a form of front-running that takes advantage of the predictability of human behavior and the transparency of the blockchain.
The Dangers of Jumping on the Bandwagon
The frenzy surrounding meme coins, as exemplified by the rapid rise and fall of Pepe Coin, serves as a stark reminder of the inherent risks of trading these volatile assets. The illusion of easy money, coupled with the fear of missing out (FOMO), can be a compelling reason for traders to “ape” into these tokens, especially when their values appear to be skyrocketing. However, this can lead to substantial losses for those who enter the market late, buying at peak prices only to witness a swift decline soon after.
This pattern of quick buying and selling not only underscores the dangerous allure of meme coin trading but also reveals how it resembles a form of gambling in a grand casino, where the house—in this case, the Miner Extractable Value (MEV) bot operators—almost always wins. When everyone rushes into such assets without considering the potential consequences, they can quickly become super illiquid, leaving late traders, particularly those who have invested large amounts of money, bearing the brunt of the losses. The Pepe Coin saga thus serves as a sobering cautionary tale, highlighting the high-risk nature of meme coin trading and the potential for substantial financial loss when buying in at peak prices.
A Word of Caution
While the world of meme coins can be exciting and potentially profitable, it’s crucial to approach it with caution. The volatile nature of these tokens, combined with the potential for market manipulation, means that they can quickly lose value. It’s easy to get caught up in the hype, but it’s essential to remember that these coins are not a stable or sustainable investment.
Instead of chasing after the latest meme coin trend, consider investing in more long-term, sustainable assets. Look for projects with a solid foundation, a clear vision, and a strong team. These types of investments may not offer the instant gratification of a skyrocketing meme coin, but they’re much more likely to provide stable, long-term returns.
The story of Pepe Coin serves as a cautionary tale in the world of meme coin trading. While the potential profits can be enticing, it’s essential to remember that these are highly speculative investments that come with substantial risk. Approach with caution, do your research and always remember: if something seems too good to be true, it probably is. – written by Melvin Hoyk
