Solana has become a fertile ground for the 'cabals' manipulating memecoin.

The memecoin craze that originated on the Solana blockchain two years ago initially seemed organic. However, since then, Solana has attracted many high-profile figures, including American President Donald Trump, First Lady Melania Trump, and Argentine President Javier Milei.

These figures have driven the memecoin boom on Solana, leading to the emergence of a significant number of private groups controlling a considerable portion of the multibillion-dollar memecoin market.

This creates a significant advantage for insiders, enabling them to execute highly profitable trades, while the majority of retail investors must bear losses.

The repeating cycle of the cryptocurrency market

Memecoin first appeared a few years after Bitcoin was created, when developers began turning Internet memes into cryptocurrencies as a joke.

The first memecoin to achieve relative success on Solana is Bonk, launched right after the collapse of FTX and the empire of Sam Bankman-Fried. At that time, desperate investors were searching for quick money-making opportunities following the market crash.

Since then, Solana – which has been promoted as faster and cheaper than Ethereum – has become the preferred blockchain for launching memecoins. Both Trump and Melania chose Solana to launch their official memecoin, but both have significantly lost value since their launch.

Libra, a politically controversial memecoin supported by Milei, is also issued on Solana.

According to Bloomberg, there are increasingly more controversial memecoins being launched on Solana due to the existence of a closely knit network among those behind the creation, issuance, and trading of tokens. Market observers believe this is a repetition of previous cryptocurrency cycles.

Advantages of Insiders

Retail investors pay a heavy price when they participate too late in the market. For example, Trump's memecoin has lost nearly 85% of its value, dropping from around 74 USD before the inauguration to about 11 USD.

Similarly, Melania's memecoin has dropped nearly 95% from its peak of about 13.5 USD. Libra also lost a significant portion of its value shortly after its launch. These losses primarily affect late investors.

Jordi Alexander, the founder of Selini Capital – a company specializing in trading digital assets, including memecoin – shared with Bloomberg:

"The launch of memecoins was once promoted as a counter to 'utility' tokens that venture capital funds could buy at prices 100 times cheaper before selling them back to retail investors... But in reality, the launches of memecoins also have - if not more - advantages for insiders."

Some characters in this event are referred to as KOLs, who are often celebrities on social media with a large following. They publicly participate in memecoin projects before launch and are often given a large amount of tokens or purchase them at extremely low prices in exchange for promotion and attracting investors.

Although many memecoin projects claim to implement a "fair launch" model (fair launch), where all tokens are sold at the same time, this rarely happens, according to Mohamed Ezeldin – head of tokenomics at Animoca Brands.

Market Manipulation Tricks: 'Cabals' Groups

‘Cabals’ is a term referring to groups that specialize in releasing memecoins. These groups serve as a connection between KOLs and the creators of memecoins. According to Joseph Edwards, head of research at Enigma Securities, cabals are often involved in price manipulation to profit from investors.

Specifically, the cabals create memecoin following the pump-and-dump model (, inflating the price and then dumping it ), attracting buyers right at launch but causing the token to lose value almost immediately. Kelsier Ventures of Hayden Davis, the entity behind Libra, is a typical example. Edwards commented:

"Many market makers have done similar things in 2021 – secret liquidity groups… They support the launch of these tokens and every time it is a pump-and-dump."

One of the most common strategies that cabals use to defeat retail investors is 'sniping' – using trading bots to buy memecoin as soon as it launches and quickly sell to profit from short-term volatility.

When Trump's memecoin launched, some wallets were able to purchase tokens at an extremely low price and quickly sold them off, causing the price to drop sharply.

Moreover, the emergence of platforms supporting the creation and issuance of memecoin on Solana further exacerbates the issue. The most notable platforms are Pump.fun and Meteora – both memecoins of Trump, Melania, and Libra were launched through Meteora.

Ezeldin of Animoca Brands commented:

"The emergence of platforms like Pump.fun has created an environment where people only care about short-term profits rather than the actual value of the project."

Lessons for Retail Investors

In February, the United States Securities and Exchange Commission (SEC) announced that it does not consider memecoins to be securities, meaning that memecoin projects do not have to register with the SEC. This also means that memecoin investors do not benefit from the protections of federal securities laws.

Cathie Wood, CEO of Ark Investment Management, believes that:

"The message from the regulators is very clear. Retail investors will have to learn from their losses on their own. Nothing teaches people better than losing money."

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Disclaimer: The article is for informational purposes only and is not investment advice. Investors should do their own research before making any decisions. We do not take responsibility for your investment decisions.

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