Euphoria and Fomo by meme coins

There is an interesting one  article from 2014 about the Pump&Dump whale scheme for DOGE, of course a lot has changed since then, MM got involved, but the article is still relevant.

The gist of the article is as follows:

In financial markets, the value of shares and other financial instruments is often manipulated by the government through laws and regulations, and only insiders profit from it stable profit. In crypt there is a similar story, but instead of the government there are developers and whales.

Pump&Dump Scheme

1) Creating a position

At this stage, you need a significant market share for the pump. The most common method is micro-purchases. By placing buy orders in relatively small amounts, price increases are avoided and the presence of the whale is also masked. However, some altcoins have really low volume and will take forever to build a position through microbuys. In such cases, whales are forced to carry out a pump to attract sellers. Pump waves will gradually decrease, pushing out all sellers in order to buy market share.

2) Keeping prices down

Everyone wants their costs to be as low as possible. At this stage, whales will accumulate everything they bought in order to limit prices as much as possible through sales walls in order to buy cheaper.

3) Test pump

Before the real pump, whales tend to test the market to make sure they have absolute control. The test pump, like the shakeout, the real pump, redistribution and distribution, occurs many times throughout the pump and dump process. By performing a test pump, whales get an idea of where the next resistance will be and how many weak hands are in circulation. Whales don't like weak hands, they don't provide any support during the pump, and they always look to get rid of them early, no matter how long it takes.

4) Real pump

Weak hands are forced to leave, and the whales get the market share they expected and are ready to act.

5) Shakeout

Shakeout is a deliberately induced price reaction, the purpose of which is to stimulate public selling to facilitate the accumulation of speculative positions. This is the most aggressive part in the process of getting rid of weak hands. Sometimes during shakeout, whales can act so aggressively that they reduce prices to levels well below their cost of production. Losses for whales do not matter, because they are only on paper, they have enough capital to raise prices again. People who have no experience or are unable to withstand such psychological pressure usually leave the market at this stage.

6) Redistribution

This stage usually serves to rebalance the portfolio. Sometimes during a pump, by buying out their own walls and the walls of other participants, whales buy more than they expected. The whales will need to give some back to private traders. Sometimes this serves as support and reduces risk exposure or acts as a "safety trap". For example, if whales allocate some at $5 and then lower prices to $4.50, then they will know that the total number of coins allocated at $5 will not be sold at $5. Traders tend to exit the market at a profit and are unlikely to exit at the break-even price. 

7) Exit – Dump

This is the last stage when whales begin to sell their coins at significantly higher prices than those at which they bought them . This process can be immediate, causing prices to plummet, or longer, with sales spread out over time to maximize profits and minimize market impact. It is important to understand that whales use various tactics to hide their intentions until the last moment and avoid sharp price drops that could affect them themselves.

Sales usually begin after a certain target price has been reached or when signs of waning buyer interest begin to appear. Whales can use rumors, news headlines, or even social media to create positive sentiment around an asset and attract the last buyers before the dump begins.

The dump process does not always mean that the asset price will fall to its original levels. In some cases, especially if the asset has strong fundamentals or community support, the price may stabilize above the whales' initial purchase, but more often than not it will decline significantly.

Fomo sufferers in the media

Lookonchain: Not everyone can make money trading meme coins on Solana!

He seems to have wild FOMO, always buying high and selling low.

https://solscan .io/account/FvujkMiR8AtF2eDuTbpEZ5ihc3WfpjMM1vckCZ5EaCRk#splTransfers

: SLERF developer accidentally burned LP and 500 million SLERF ($274 million at current price), intended for airdrop.

Thus, all investors who participated in the SLERF presale will not receive the airdrop.

The current supply is only 500 million SLERF.

Andrew Kang: Although meme coins are usually compared to casinos/lotteries, the market for memes is probably 100 times larger. Meme coins are assets, and people are mentally capable of investing much more into what they perceive as investments/assets compared to spending on entertainment in the form of a few fun nights at the casino.

Think of it this way: the global average for spending collective individual wealth on casinos is probably <2%. Very few people actually put everything on the table. How much can someone invest in meme coins?

If you look at the world's wealth, approximately 95% is in investment assets (real estate + shares + other assets + money supply).

I've heard a lot of people talk about meme coins as a zero-sum game. This is not true. Over the next ten years, the total size of the meme market will grow.

This is the emergence of a new class of assets.

Afterword

Remember, only a few random people make money on memcoins. Finding a normal project with X growth is much easier than finding an X memcoin. Take care of your money and nerves, don’t chase helicopter money. The chance of losing is thousands of times greater than the chance of winning.