Trading cute and silly meme coins may fun, but the platforms these crypto lottery tickets trade on are often infested with dangerous sharks. Blockchain analytics firm Webacy specializes in sniffing out meme coin scams. Below are their top three warning signs:
Concentrated Holders
If the top 10 wallets in a meme coin own more than 20% of the total supply the risk of rug pull is extremely high, according to Maika Isogawa, CEO of Webacy. There are numerous examples of tokens crashing in a matter of hours after getting posted on a top decentralized exchange such as Raydium. Isogawa points out a meme coin called Pong as a recent example. It went from a market capitalization of more than $80,000 in early November on Raydium to zero shortly after it began trading (see chart below).
Concerns about concentrated holdings also exist for some major tokens. The top 10 wallets on Neiro, a $1.1 billion (market cap) meme coin on Solana, hold 70.82% of its outstanding tokens.
Shady Influencers
Unscrupulous pitchmen, paid to pump tokens, abound on meme coin markes. Isogawa says that X personas @CryptoGodJohn, @TheCryptoKazi, @crypto_TomTom, and @cryptostasher have a history of pumping up tokens and then selling their entire stakes into the rally.
Special Powers
Meme coins issued on Pump.fun have a maximum circulating supply of about 800 million tokens. Other platforms allow issuers to create an unlimited supply of tokens post-launch, potentially diluting investors. This problem is rampant on $12 billion (market cap) TON blockchain. Isogawa says meme coin investors need to make sure that an issuer has completed a step known as “renouncing the contract”, which indicates that they no longer control the code that would allow them to issue more tokens. Tokens can come with other smart contract risks as well. Two examples according to crypto security firm GoPlus are Bananacat (BCAT) and Tamadoge (TAMA), whose creators have the ability to lock holders out from selling their tokens.
Do Your Own Research
One way to protect yourself against meme coin risks is to use safety screens and risk scores on analytics sites such as Webacy, Rugcheck, GoPlus and DEXSCREENER. “Memecoin markets are easy to manipulate and hard to assess,” says Isogawa, ” It’s a scammer’s paradise.”