Binance: 97% of meme tokens launched in 2022-2023 have zero trading volumes

What’s new? Analysts at Binance, the world’s largest centralized (CEX) crypto exchange, have released a report on the state of the meme token market. The report noted that this asset type acts as a high-risk and high-return investment instrument, and seeks to embody the fundamental principles of the crypto industry: fairness, transparency, and decentralization.

Binance report

What else is known? At the same time, meme tokens reveal another side of the industry, showing a clear focus on financial gain and less attention to technological progress, Binance Research writes.

Between 2022 and now, meme tokens’ share of Total 3 (the total crypto market capitalization excluding bitcoin, Ethereum, and stablecoins) has nearly tripled (from 4% to 11%), but it still remains below its peak of 12% set during the 2021 bull market. Back then, the capitalization of the largest humorous coins Dogecoin (DOGE) and Shiba Inu (SHIB) exceeded $80 billion and $39 billion, respectively.

The recent growth, according to analysts, has been largely driven by factors such as accessibility, transparency, and the fair launch model offered by most launchpads for meme tokens. Under this model, all coins are released into circulation at once, without a lock-in period for certain groups of investors.

Looking at the economic prerequisites for the sector’s growth, analysts pointed out that during the COVID-19 pandemic, central banks around the world increased the supply of fiat money at an unprecedented rate. Between 2020 and 2022 alone, the total global M2 money supply increased by more than 25%, from $81 trillion to $102 trillion, driving up the prices of goods and services.

Ever-increasing inflation combined with the inaccessibility of investing in real estate as one of the most stable assets contributes to the fact that the younger generation is losing faith in traditional financial systems, Binance notes.

Thus, 94% of cryptocurrency buyers are in the age group of 18 to 40 years old. As journalist Andrew Edgecliffe-Johnson noted back in 2022 in an article for the FT on financial nihilism: “It’s hard to fault people for wanting to get rich quick if they have lost faith in their ability to get rich slow.”

According to Binance Research, the story of Gamestop shares soaring in 2021 as a result of their massive coordinated purchase by small investors reflected the changing attitudes of younger market participants who were beginning to question traditional financial structures.

This story demonstrated the ability of a financial asset to create a social and cultural movement, which is also likely to drive meme coin activity.

Both the Gamestop phenomenon and meme coins can be seen as a primitive use of public markets as a voting mechanism, where participants vote with their capital against existing traditional fiat and broader socio-economic systems.

Meme tokens can be seen as an entirely new asset type that is internet-centric, aligned with internet culture, and completely disconnected from the traditional financial system. In many ways, this is similar to the perspective that the crypto industry offered to retail participants during the initial coin offering (ICO) boom in 2017.

Back then, support came from countless new teams claiming to create revolutionary blockchain products. At the time of the token sale, many projects had no product and were essentially selling investors a roadmap.

At the same time, any crypto wallet owner back then could buy a new popular altcoin: there were no private seed rounds or exclusive venture rounds, which appeared now.

Due to the shift to a different funding model, projects now face the challenge of low coins in circulation with a high fully diluted valuation (FDV). Projects attract huge sums of money from investors in return for providing them with native tokens, which are not available for sale immediately and are released from the blockchain in batches over a period of several years.

As a result, such projects are already valued at huge sums by the time of launch, but unlocking large amounts of coins in the future can lead to a collapse in value. Thus, retail buyers of such coins on the public market, unlike private investors of closed rounds, are unlikely to benefit from their growth in the future.

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This tokenomics problem, which has arisen due to the widespread availability of private tokenization rounds, may be another factor contributing to the growing popularity of transparent meme token launches under the fair launch model.

Another important factor is accessibility. It is easier for unsophisticated retail investors to understand a humorous project than technically complex altcoins for Layer 2 (L2) networks or decentralized finance (DeFi) protocols backed by venture capital firms.

It also accelerates the spread of information about meme coin to potential buyers, allowing them to build communities and stimulate speculation much faster than with other altcoins.

As a result, market dynamics and the rate of adoption of new and popular meme coins is accelerating. Capital is flowing into new meme coins faster than ever before. For example, the dogwifhat (WIF) coin, launched in 2023, took 104 days to reach a capitalization of $1 billion. SHIB, launched in 2020, took 279 days and DOGE, which recently celebrated its 10th anniversary, took 8 years.

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New meme coins are also being created faster than ever before. Thanks to their simplicity and accessibility, they can appear and spread at a faster pace than previous token types.

However, this asset type also has some significant drawbacks, one of which is its low “survival” rate. Most meme coins that flourished in 2023 and 2024 were short-lived, with 97% having zero trading volume.

“The rapid rate of growth and speculation makes memecoins an investment vehicle with high potential for outsized returns, but their heavy reliance on market sentiment, with little else to back them in way of fundamental valuations, also makes them an extremely risky asset class with high risk of losses,” the analysts write.

In addition, exploitation of retail traders is taking place in the meme token market. Scammers seek to use them for liquidity by implementing a Pump&Dump scheme.

While blockchains provide transparency by allowing users to see which addresses hold certain tokens, it is still difficult to identify the individuals controlling those addresses. A single organization can easily create multiple addresses, giving traders the illusion that an asset is widely distributed among multiple holders.

Scammers may pay influencers to promote coins, stimulating hype and speculation on social media and creating the illusion of organic growth for the project.

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Analysts cited the lack of technological advancement and innovation as another drawback. The overemphasis on meme coins, which are largely not focused on advancing technological development, may reduce incentives for qualified developers to join the crypto sphere and create new products and innovative use cases.

In the long term, the most successful altcoins will need to create and maintain useful, sufficiently differentiated software products that are relevant to the real market. In parallel, the most successful meme coins may need to create and perpetuate differentiated, unique narratives and ideas that will appeal in the long term to a sufficiently large group of consumers.

“The rise of memecoins is an exciting new trend that, if nothing else, serves as a compelling demonstration of blockchain technology’s capacity to unite individuals globally and foster organic communities around tokenized assets, a capability that appears to be more robust than ever,” the report concludes.