Analysis of the Pump Fun Phenomenon

In the recent cryptocurrency market, Pump Fun has emerged as a representative of the new generation of Meme token issuance platforms, sparking an unprecedented wave of speculation. Everyone dreams of exchanging 0.02 SOL for multiple returns, even realizing the dream of getting rich. This article will analyze the phenomenon of Pump Fun, its profitability, and its future. We will also focus on the Sun Pump project on the XRP chain, exploring whether it can replicate the success of Pump Fun. From a personal perspective, when money becomes the core driving force, it will be relatively difficult to build a community that truly represents Meme culture.

1. Analysis of the Pump Fun Phenomenon

Background of the Pump Fun Project and Its Rise in the Market

The rise of Pump Fun is closely related to the rapid development of Solana. As the public chain for this year's Meme gold dog, Solana has shown rapid growth, and its high speed and low fees provide an ideal environment for Pump Fun to thrive.

The success of Pump Fun can be attributed to several key factors:

1) Low participation threshold: Launching a project on Pump Fun requires only 0.02 SOL, significantly lowering the entry barrier, allowing even retail investors to join.

2) Source of liquidity: The liquidity on Raydium directly comes from purchases made on Pump Fun. This means that even if a project goes to zero, the "developers" face relatively limited losses.

3) Quick listing advantage: Unlike traditional projects that require long-term operations and high costs to enter major exchanges, Pump Fun projects can quickly enter Dex Raydium once they reach a market cap of $60,000, with the first batch of buyers already achieving multiple returns.

Of course, this is only from the perspective of developers or project parties. For ordinary retail investors, the appeal of Pump Fun mainly lies in the following points:

1) Recognition of Meme culture: These tokens represent the Meme culture favored by mainstream users today, forming a stark contrast with traditional VC projects.

2) Wealth creation myth: The scarcity of liquidity in the secondary market creates opportunities for huge profits, with numerous legendary stories of investors turning 1 SOL into hundreds of times their investment, greatly stimulating market enthusiasm.

Similarities and Differences with Traditional Inscription Projects

In essence, the tokens deployed on Pump Fun and Bitcoin inscriptions both belong to the Meme category. However, compared to traditional inscription projects, Pump Fun has a lower operational threshold and higher user-friendliness, which has garnered broader attention in a short period. However, this explosive growth also means that its popularity may come quickly and go just as fast, while inscription projects may have a longer lifecycle.

Community Response and Market Acceptance Analysis

Let's take a look at the data from Pump Fun. From market data, the popularity of Pump Fun continues to rise. Since March of this year, its daily deployment volume has consistently increased, reaching an astonishing 1.82 million by August. This indicates that existing funds are still very interested in the investment model of small bets for large returns, even though successful cases from Pump Fun to Raydium are few and far between.

Image Source: Dune @hashed_official

However, with the rise of Sun Pump in the XRP ecosystem, users of Pump Fun seem to be shifting their focus. In just seven days, 25,000 new token deployments were added on Sun Pump, showing strong momentum. This not only boosted the popularity of Sun Pump but also indirectly pushed the price of XRP from $0.55 to $0.61, an increase of 10%.

Image Source: Dune @Maditim

The success of Sun Pump seems to be replicating the wealth creation myth of Pump Fun. There are even rumors in the market of traders starting with 1,690 yuan and achieving floating profits as high as 20 million yuan. Although such extreme cases need to be approached with caution, they indeed further stimulate investors' imagination and participation enthusiasm.

From a personal perspective, whether it is Pump Fun or Sun Pump, when money becomes the core driving force, building a truly meaningful Meme community will face significant contradictions. The future development of these projects depends not only on market enthusiasm but also on finding a balance between speculation and value creation.

2. Profit Model of Pump Fun

Analysis of Token Economic Model

In fact, the Meme tokens launched on the Pump Fun platform do not have traditional token economics. The token creation process on the Pump Fun platform is unique. When developers create tokens on pump.fun, these tokens can initially only be traded within the platform and cannot be directly circulated on Raydium. The trading mechanism within the platform follows the conventional supply and demand principles: buying pushes up prices, while selling lowers them.

In the initial stage, the market cap of pump.fun tokens is about $4,000. As trading progresses, when the token market cap reaches approximately $60,000, the pump.fun platform automatically terminates internal trading and migrates the tokens to Raydium. This process represents the minimum market cap required for the token to migrate to Raydium.

Migrating to Raydium is a critical node in the token's lifecycle. At this point, the tokens are exposed to a broader range of investors, significantly increasing the number of potential buyers. However, this is often the moment when early investors cash out. Many investors who bought in at the low market cap stage on pump.fun will realize considerable gains at this time.

Image Source: The Block

Comparison with Other Meme Coin Projects

On the surface, the design of Pump Fun seems simple and intuitive; however, to profit on this platform requires a high level of market insight and operational skills. The platform's closed-source code further increases the operational difficulty, putting ordinary investors at an information disadvantage. Pump Fun's only advantage lies in its foundation on the Solana chain, where transaction costs are extremely low, creating favorable conditions for frequent trading. Therefore, the opportunities for profit are much lower compared to other secondary market Meme coin projects.

Potential Risks and Sustainability Challenges

The activities on the Pump Fun platform exhibit a high degree of speculation, thus accompanied by high risks. Currently, the biggest risk on the platform is the prevalence of soft rug pulls, with two common types being:

1) Direct selling by developers:

On Pump Fun, developer wallets are publicly visible. Some irresponsible developers take advantage of this by selling off small portions of their holdings (generally below 8%) before or just after the tokens reach Raydium. This behavior often triggers a chain reaction, causing other holders to rush to exit, evolving into a "first to exit wins" competition.

2) Pump Fun bundled wallets:

This is a more complex fraudulent tactic. Developers use multiple wallets to buy in large amounts during the project's early stages, then use 2-3 wallets to continuously drive up the price. They may sell off all their holdings before the tokens reach Raydium, or if community sentiment is bullish, they might wait until after the Raydium listing to sell.

Overall, while the Pump Fun platform offers investors potential high-return opportunities, it also harbors significant risks. It is estimated that about 95% of the projects on the platform may involve some form of fraud. In this high-risk, high-reward environment, rationality and caution are crucial.

3. Analysis of the Sustainability of Meme Coin Market Trends

Correlation Between Meme Coins and the Overall Cryptocurrency Market

There exists a certain degree of positive correlation between the Meme coin market and the overall cryptocurrency market. While it cannot fully represent the entire crypto market, Meme coins are currently seen as a barometer of market sentiment. As the saying goes, "the spring river water warms, the duck knows first," Meme coins are now the "duck" that can sense changes in market sentiment first.

However, this relationship is not a simple positive correlation. The activity level of the Meme coin market is particularly prominent in the current market environment. While other sectors remain relatively quiet, the Meme coin market exhibits greater volatility and reacts more swiftly, whereas other crypto assets may show more stable trends. In the current altcoin "bear market," Meme coins can be said to be the last active area in the cryptocurrency secondary market. Therefore, the performance of Meme coins cannot be directly equated with the overall health of the cryptocurrency market.

Investor Psychology Analysis: From FOMO to Rational Decision-Making

The investor psychology surrounding Meme coins has undergone significant evolution. The FOMO phase lasted from early 2024 to April, represented by the Pepe coin, which skyrocketed from $0.01 to $0.16, a 16-fold increase. Subsequently, Meme coins like WIF, BOME, FLOKI, and BONK exploded in succession, triggering a nationwide frenzy for Meme trading. Investors were generally driven by FOMO psychology, rushing to enter the market. Afterward, as Meme coins continued to perform well, some traditional investment institutions (commonly referred to as "old money") began to pay attention and gradually entered the Meme coin market, bringing more funds into the market. By June 18 and July 5, after experiencing a frenzied rise followed by a subsequent correction, the existing funds in the market began to view the Meme coin market more rationally. They no longer blindly chased after rising prices; many started adopting more cautious investment strategies, such as setting stop-loss points and diversifying their portfolios, leading to the emergence of low-cost Pump Fun Meme launch platforms.

4. Evolution of Trends in the Cryptocurrency Market

The evolution of the cryptocurrency market reflects the vitality and innovative spirit of this industry. From inscriptions to Meme coins, and potentially to a VC coin boom, we have witnessed a continuous shift in market focus. In 2023, we witnessed the rise of Bitcoin inscriptions, which brought new application possibilities to the Bitcoin network and thus became a hot investment topic for the year. However, as we enter 2024, the Meme coin market has become the focus due to its high growth potential, showcasing remarkable vitality and attracting both retail and institutional investors, shifting from value coins to Meme tokens.

Looking ahead to 2025, some predict that VC (venture capital) supported cryptocurrency projects may become the next investment hotspot. This is because the cryptocurrency industry is moving towards greater maturity and standardization, and the market may see an increased demand for projects with more substance and long-term development potential.