Who really benefits from Meme Coin? Galaxy asserts that it is not the traders.

A recent research report by Galaxy shows that the main beneficiaries of meme coins are not traders, but rather infrastructure providers.

Platforms like launchpads, decentralized exchange (DEX), and automated trading bots are generating significant revenue. Meanwhile, the majority of participants often incur losses in a zero-sum game with an expected value of (EV) being negative.

The Paradox of Meme Coin: Wide Participation, Concentrated Profits

Meme coin is often described as tokens created from internet jokes or cultural trends that have no practical value, which have emerged over the past decade. In particular, the increase in popularity and ease of creation has led to a large-scale frenzy. Millions of new tokens have flooded the market in recent years.

Many traders are attracted to this field by the promise of quick profits. However, Galaxy Digital has pointed out that:

"The trading of meme coins is less related to fundamental factors and more about a concept we call 'cultural arbitrage': anticipating or getting ahead of attention cycles, such as buying tokens for a viral trend on TikTok before the market realizes it is gaining popularity. In the long run, most market participants ultimately incur losses when trading meme coins, and in many respects, this is simply gambling."

The Ecosystem Structure of Meme Coin | Source: Galaxy DigitalIn the latest report, Galaxy Digital's research analyst, Will Owens, explained that the meme coin ecosystem operates as a multi-layered structure. Here, the flow of funds is primarily concentrated on the infrastructure platforms that support the creation and trading.

At a basic level, blockchains like Solana are dominating. Solana is currently hosting over 32 million tokens, an increase of more than 300% since the beginning of 2024. This blockchain accounts for 56% of the total 57 million meme coins across major chains, including Ethereum, Base, and BNB Chain.

"Base and BSC also have significant activities, while Ethereum primarily houses larger tokens and has a less intense competitive culture," the report said.

With low transaction fees and high processing speed, Solana has become a preferred location for meme coins, accounting for about 20%-30% of DEX trading volume, down from 60% in January.

Next, launchpads play an important role, allowing for the rapid deployment of tokens. Pump.fun from Solana, launched in early 2024, is a typical example of this trend, industrializing the process through linked curves that ensure liquidity at minimal cost.

This platform has created about 12.9 million tokens, accounting for 40.31% of the total 32 million tokens of Solana. The tokens launched on Pump.fun have a full market capitalization of (FDMC) exceeding 4.8 billion USD, although it peaked above 10 billion USD at the beginning of the year.

"The distribution according to the power law of value among tokens on Pump.fun is truly remarkable. Among nearly 12.9 million tokens launched on the platform, only 12 tokens account for more than half of the total FDMC value. These tokens represent 2.69 billion USD, equivalent to 56% of the total FDMC value of 4.8 billion USD, while the remaining 44% is shared among millions of other tokens," Owens noted.

Furthermore, Pump.fun has generated significant revenue from creation and trading. In the summer of 2024, the platform temporarily lost its position to competitors like LetsBonk. However, Pump.fun has regained its advantage through innovations such as Project Ascend, introducing dynamic fee models for creators and integrating with streamers for interactive launches.

Meanwhile, DEX aggregators and automated market makers (AMM) such as Jupiter, Raydium, Orca, and PumpSwap continue to extract value by processing transactions right after launch. These platforms benefit from high trading volumes, with meme coins driving user acquisition and ecosystem development.

Trading bots, including Axiom, BONKbot, and Trojan, further enhance this capability by allowing sniping—buying tokens as soon as they launch—and executing trades quickly, creating a fiercely competitive environment among traders.

"Axiom, for example, has achieved cumulative revenue of over 200 million USD with a team of fewer than 10 people," the report emphasizes.

Finally, token deployers, insiders, and key opinion leaders (KOL) also reap rewards. Developers and insiders often retain a large portion of the supply in hidden wallets, selling into the liquidity of retail sellers for profit. KOLs on platforms like X amplify stories through coordinated campaigns.

"Communities on X and Telegram groups amplify memes and coordinate promotional campaigns. Communities are encouraged to drive the price of their tokens higher, with collective belief replacing fundamental factors. KOLs are a big part of this layer," the analyst wrote.

Important cryptocurrency KOLs on X | Source: Galaxy Digital## Retail traders: The biggest losers in the meme coin frenzy?

On the contrary, most traders face structural disadvantages. The report indicates that the average holding time for Solana meme tokens is only about 100 seconds, a significant drop from 300 seconds a year ago.

"This means that the average participant does not 'hold' a token for many hours, let alone many days. Instead, they are quickly turning over, making a few percent profit compared to other traders in a PvP trading game," Owens explained.

The risks in this market are very large, including honeypots—(bait – tokens that allow purchases but block sales)—(rug pulls, where insiders withdraw liquidity), and vamping(imitation, where copycats drain value from the original tokens). Notable incidents, such as the LIBRA token incident, have led to millions of USD in losses for traders while insiders profited.

The paradox of this ecosystem highlights a broader trend: while meme coins serve as gateways into cryptocurrency, attracting new users to wallets and DEX, the speculative frenzy primarily enriches a small group of infrastructure owners.

For most participants, trading remains a negative EV. Therefore, meme coins may look like a casino, but it is the house — not the players — that always wins.

Mr. Teacher