99% of meme trading is destined for losses, while the big winners are the market makers

Author: Foxi (DeFi / AI)

Compiled by: Deep Tide TechFlow

My Meme trading account is currently down -60%. Am I a terrible trader? Yes, I certainly am. But it's not just because of bad decisions; I prefer to believe that I'm not worse than an average gambler. So, where exactly is the problem? Inspired by the data from @0xngmi (who pointed out that the returns from playing Memecoins are even worse than at a casino), I decided to delve deeper to see what the root of the issue really is.

First, I admit: I am a terrible Meme trader

Like many newcomers, I was led by the market hype and emotions, chasing highs and selling lows, frequently trading leading to slippage, and even unknowingly handing my money over to insider traders in the market.

Although this is not my first time participating in the cryptocurrency market, this experience made me feel like I was playing an unfair game. Worse still, the rules of this game seem to change every moment and always favor those who have more information.

@0xngmi calculated the expected return (EV) of playing roulette at a casino compared to the expected return of Meme speculation (based solely on the fees paid).

(Source image from @0xngmi, compiled by Deep Tide TechFlow)

* Small transaction fees are 2.5%, and Raydium's fees are 0.25%. Each speculation requires two trades, so the fees need to be multiplied by 2.

** Moonshot's default slippage is set at 5%, taking half of that as an average sandwich attack estimate.

*** It's hard to estimate precisely, as there are significant differences between different tokens, assuming a cost of 2.5% per trade.

This made me start to think: How does Meme speculation compare to actual gambling? Are their odds equally bad? Or even worse? More importantly, are Meme traders just casino gamblers disguised as "investors," or is there a more complex and hidden mechanism at play? According to @0xngmi, putting money into a casino seems to be wiser than playing Meme coins.

The Real Odds: Memecoins vs. Casinos

We need to talk about Expected Value (EV), which is a core concept in gambling and trading. It tells us, on average, how much you can expect to win or lose with each bet over time.

Casino games mathematically have a "fair unfairness." In the long run, you can always predict how much you will lose. Let's take a closer look:

(Source image from Foxi (DeFi / AI), compiled by Deep Tide TechFlow)

In traditional gambling, casinos extract profits in a slow and predictable manner. Whether it's each spin of the roulette wheel or each pull of the slot machine, they follow a known probability model. For example, in American roulette, if you bet on red, you have a 47.37% chance of winning and a 52.63% chance of losing. Over time, the casino will always win, but it does not cheat—it simply uses probability to its advantage. However, to protect gamblers, some jurisdictions mandate a minimum return percentage. For instance, in Ontario, the RTP (Return to Player) of slot machines must be at least 85%, meaning the casino's edge (the house cut) is at most 15%.

Why 99% of People Lose Money in Memecoin Trading

Unlike casinos, Memecoin trading seems like a "game of chance," but the problem is, you don't even know who the real players are. While the Memecoin market doesn't have a clear "house edge," your funds are still slowly consumed through trading fees, slippage, insider trading, and market manipulation. Moreover, this loss is often hidden and hard to quantify.

Here are the three main reasons why Memecoin investors generally lose money:

• Trading Fees

• Slippage

• Market Manipulation

1. Trading Fees: The Hidden "House Cut"

Every trade incurs a fee. Whether you are on a centralized exchange (CEX, like @bitgetglobal or @MEXC_Official), a decentralized exchange (DEX, like @RaydiumProtocol), or using trading bots (like @gmgnai, which most people use), these fees gradually erode your profits.

• CEX Fees: About 0.1% per trade (buy + sell = 0.2% round-trip fee)

• DEX Fees: About 0.3% per trade, plus gas fees (which can be $5-$50+ per trade)

• Trading Bot Fees: About 1% per trade, plus priority fees (which can be 4 times the regular DEX fees)

• Meme Coin Tax: Some projects take 5%-10% from each trade as part of redistribution or burn mechanisms. For example, @aipool_tee charges a 10% fee on sell trades.

These trading bots are making a significant amount of money from the underlying users. Although the number of people trading Memes has decreased as of February 17, daily revenues can still exceed $700,000.

On the surface, 0.2%-1% trading fees may not seem high, but when you trade frequently every day, these fees can quickly accumulate. If you make 10 trades in a day, you could consume 2%-6% of your principal, which is even worse than losses from playing European roulette.

2. Slippage (MEV Costs)

Slippage refers to when you place an order at one price, but due to market fluctuations, the actual execution price is worse than expected. In Memecoin trading, slippage is particularly severe, especially in cases of low liquidity or high market volatility.

• Example: You try to buy a Memecoin for $100, but due to low liquidity, you only receive tokens worth $95, losing $5.

• Similar situations occur when selling. You plan to sell for $200, but slippage causes you to only get $190.

• Total slippage loss: About 10% of round-trip trading costs.

@0xngmi mentioned that about 2.5% of trading fees can be consumed by MEV (sandwich attack costs), and on the BNB Chain, this cost can exceed 5% due to its poor infrastructure.

A better blockchain infrastructure can significantly reduce MEV costs. This is also why many believe Solana is superior to BNB Chain (which I completely agree with). If @cz_binance wants to promote Meme culture on the BNB Chain, the top priority should be to reduce MEV costs to enhance the expected value (EV) for Memecoin players.

However, even on Solana, 2.5%-5% MEV costs are still more severe than losses from casino games. If you found that the house cut on a slot machine was as high as 10%, you would likely be outraged. But in the Memecoin market, that's not even the worst part.

3. Insider Trading and Market Manipulation

This point hardly needs elaboration. Unlike casinos, which have clear rules, the Meme market is completely biased towards insiders. There is no regulation to prevent team wallets, developers, or influencers from "pumping and dumping" to harvest retail traders. For example, consider the following cases:

• $LIBRA: Absconded with over $107 million worth of tokens

• $MELANIA: Is it related to Meteroa?

• $CAR: African Rugged incident

• $CUBA: Another country's Rugged incident

• $GANG: @mrpunkdoteth cashed out $10 million through fans

• $Broccoli: Manipulated and profited by scammers and insiders

These are just the tip of the iceberg. It can be said that if you are not an insider like @frankdegods, you have almost no advantage in participating in these Memecoins. In a casino, at least you know what the house cut is, but in the Memecoin market, you don't even know who the house is, but they are definitely taking your money.

Final Comparison: Memecoin Speculation vs. Gambling Expected Value (EV)

Casino games slowly drain your funds over time, while Memecoin speculation is much more brutal. One wrong trade can wipe out weeks of gains in an instant. The only motivation to keep participating is the occasional 100x return. But in reality, the probability of achieving a 100x return is about 1 in 25,000, which is even lower than winning the lottery.

People often believe they are "special" or "skilled" (yes, I am that self-righteous guy), but in the end, they still get harvested.

Memecoins are not like gambling because they give a false sense of control—the illusion that you can make money through research, timing, and skill. Indeed, some traders can profit, but they are just a minority, like professional poker players. Most traders, like most gamblers, ultimately end up losing.

Advice for the Chain

If you want to attract users and increase on-chain trading volume, ensure that traders' MEV costs are low enough and try to reduce trading fees through collaborations or fund subsidies. The reason casinos can operate long-term is that gamblers are willing to keep participating.

Advice for Investors

If you are speculating in Memecoins, remember that the house always wins. And you will only realize who the house is when it's too late. If you realize you can't walk away, you may already be in a state of gambling addiction.