Analysis of the Pump Fun Phenomenon

In the recent cryptocurrency market, Pump Fun, as a representative of the new generation of Meme token issuance platforms, has set off an unprecedented speculative craze. Everyone fantasizes about exchanging 0.02 SOL for multiple returns, or even realizing the dream of getting rich overnight. This article will analyze the phenomenon, profitability and future of PumpFun. We will also pay attention to the Sun Pump project on the XRP chain to explore whether it can replicate the success of Pump Fun. In my opinion, when money becomes the core driving force, it will be more difficult to build a community that truly represents Meme culture.

1. Analysis of the Pump Fun Phenomenon

Pump Fun Project Background and Its Rise in the Market

The rise of Pump Fun is closely related to the rapid development of Solana. As the public chain of this years Meme Golden Dog, Solana has a rapid development momentum, and its high speed and low fee characteristics provide an ideal living environment for Pump Fun.

Pump Funs success can be attributed to a few key factors:

1) Low threshold for participation: It only takes 0.02 SOL to start a project on Pump Fun, which greatly lowers the threshold for participation, and even retail investors can join.

2) Liquidity source: Liquidity on Raydium comes directly from purchases on Pump Fun. This means that even if the project goes to zero, the losses of developers are relatively limited.

3) Advantage of fast listing: Compared with traditional projects that require long-term operation and high costs to enter large exchanges, the Pump Fun project can quickly enter Dex Raydium as long as the market value reaches 60,000 US dollars. The first batch of buyers have already obtained several times the profit.

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

1) Meme culture identity: These tokens represent the meme culture currently loved by mainstream users, in sharp contrast to traditional VC projects.

2) The myth of wealth creation: The scarcity of liquidity in the secondary market creates opportunities for huge profits. There are many legendary stories of investors making a hundred times profit after investing 1 SOL, which greatly stimulates market enthusiasm.

Similarities and differences with traditional inscription projects

In fact, the tokens deployed on Pump Fun and Bitcoin inscriptions are essentially memes. However, compared with traditional inscription projects, Pump Fun has a lower operating threshold and is more user-friendly, which has made it gain wider attention in the short term. However, this explosive growth also means that its popularity may come and go quickly. In comparison, the life cycle of inscription projects may be longer.

Community response and market acceptance analysis

Lets take a look at the data of Pump Fun. From the market data, the popularity of Pump Fun continues to rise. Since March this year, its daily deployment volume has continued to increase, reaching a staggering 1.82 million in August. This shows that the existing funds are still interested in the investment model of small-scale investment, although the cases of successful transformation from Pump Fun to Raydium are only a drop in the bucket.

Image credit: Dune @hashed_official

However, with the rise of Sun Pump in the XRP ecosystem, Pump Fun users seem to have begun to shift positions. In just 7 days, 25,000 new tokens were deployed on Sun Pump, which is a strong momentum. This not only led to the popularity of Sun Pump, but also indirectly pushed the XRP price up from $0.55 to $0.61, an increase of 10%.

Image credit: Dune @Maditim

The success of Sun Pump seems to be replicating the wealth-making myth of Pump Fun. There are even rumors in the market that a trader started with 1,690 yuan and made a floating profit of up to 20 million yuan. Although such extreme cases need to be treated with caution and dialectics, they have indeed further stimulated investors imagination and enthusiasm for participation.

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

2. Pump Fun’s profit model

Analyzing the Token Economy Model

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

Initially, the market value of pump.fun tokens is approximately $4,000. As trading progresses, when the token market value reaches a critical point of approximately $60,000, the pump.fun platform will automatically terminate internal transactions and migrate the tokens to Raydium. This process represents the minimum market value required for the token to migrate to Raydium.

Migration to Raydium is a critical point in the life cycle of a token. At this point, the token is exposed to a wider range of investors and the number of potential buyers increases significantly. However, this is also often the time for early investors to take profits. Many investors who bought in at the low market value stage of pump.fun will cash out at this time and realize considerable gains.

Image source: The Block

Comparison with other Meme Coin projects

Pump Fun’s design appears simple and intuitive on the surface, however, it requires extremely high market insight and operational skills to make a profit on this platform. The closed source code of the platform further increases the difficulty of operation, putting ordinary investors at an information disadvantage. The only advantage of Pump Fun is that it is built on the Solana chain, with extremely low transaction costs, which creates favorable conditions for frequent transactions, and therefore, the chance of profit is low compared to other Meme coin projects in the secondary market.

Potential risks and sustainability challenges

The activities on the Pump Fun platform are highly speculative and therefore carry high risks. Currently, the biggest risk on the platform is the large number of soft rug plates. The following are two of the more common ones.

1) Developers sell directly:

On Pump Fun, developer wallets are publicly visible. Some irresponsible developers will take advantage of this and sell off their small holdings (usually less than 8%) before or just after the token reaches Raydium. This behavior often triggers a chain reaction, causing other holders to rush to exit, turning into a first-to-get-out-of-the-train-wins race.

2) Pump Fun Bundle Wallet:

This is a more sophisticated scam. The developer will use multiple wallets to buy in large quantities at the beginning of the project, and then use 2-3 wallets to keep bidding up the price. They may sell all the tokens before they reach Raydium, or if community sentiment is bullish, they may wait until Raydium is listed before selling.

Overall, while the Pump Fun platform offers investors a potentially high-return opportunity, it also carries significant risks. It is estimated that approximately 95% of the projects on the platform may involve some form of fraud. In this high-risk, high-return environment, rationality and caution are essential.

3. Analysis of the sustainability of Meme coin market

Meme Coin Correlation with the Overall Crypto Market

There is a certain degree of positive correlation between the Meme coin market and the overall cryptocurrency market. Although it cannot fully represent the entire crypto market, Meme coins are currently regarded as a barometer of market sentiment. As the saying goes, the duck knows first when the river water warms in spring, Meme coins are currently the first duck to sense changes in market sentiment.

However, this relationship is not a simple positive correlation. Because the activity of the Meme coin market is particularly prominent in the current market environment. In the case of relative silence in other sectors, the Meme coin market is more volatile and reacts more quickly, while other crypto assets may show more stable trends. In the current bear market of copycats, Meme coins can now be said to be the last active area in the secondary market of cryptocurrencies. Therefore, the performance of Meme coins cannot be directly equated with the health of the entire crypto market.

Investor Psychology Analysis: From FOMO to Rational Decision-making

The psychology of Meme coin investors has undergone significant evolution. The FOMO stage is approximately from the beginning of 2024 to April. This stage is represented by Pepe coin, which soared from $0.01 to $0.16, an increase of 16 times. Subsequently, Meme coins such as WIF, BOME, FLOKI and BONK broke out one after another, triggering a frenzy of hype about Meme. Investors are generally driven by FOMO psychology and rush to enter the market. After that, as Meme coins continued to perform well, some traditional investment institutions (commonly known as old money) began to pay attention to and gradually enter the Meme coin market, which brought more funds to the market. After 6.18 and 7.5, after experiencing a crazy rise and the subsequent pullback, the current stock of funds in the market began to look at the Meme coin market more rationally. They no longer blindly chase the rise, and many people began to adopt more cautious investment strategies, such as setting stop-loss points, diversifying investment portfolios, etc., and the low-cost Pump Fun Meme launch platform was born.

4. Evolution of cryptocurrency market trends

The evolution of the cryptocurrency market reflects the vitality and innovative spirit of this industry. From inscriptions to Meme coins, and then to the possible VC coin boom, we have seen the continuous shift of market focus. In 2023, we witnessed the rise of Bitcoin inscriptions. This innovative technology brought new application possibilities to the Bitcoin network, and therefore became a hot investment in 2023. But in 2024, the Meme coin market has become the focus because of its high growth, showing amazing vitality, attracting retail and institutional investors to switch from value coins to Meme Tokens.

Looking ahead to 2025, some people predict that VC (venture capital)-backed cryptocurrency projects may become the next investment hotspot. As the cryptocurrency industry is moving towards a more mature and standardized direction, the market may increase demand for projects with more substantial and long-term development potential.