Pump.fun's Rapid Growth and Protocol Revenue Hit $700 Million
Pump.fun's meteoric growth and $700 million protocol revenue demonstrate the project's solid foundation.
Can retail investors benefit from PUMP?
Pump.fun, a crypto meme-making platform launched in early 2024, has taken off by simplifying the process of creating and trading tokens, without requiring extensive technical knowledge.
The team is currently planning to issue its own token called PUMP with a valuation of $4 billion, aiming to raise $1 billion. This move is ambitious but also controversial.
Critics argue that the high price limits the potential for real returns, especially for retail investors who buy in at the top. So could the PUMP launch be a high-risk game where retail investors are vulnerable to liquidation?
Who really benefits?
Initially, Pump.fun simply competed with large DeFi platforms that profited from staking pools. Users typically locked their tokens in pools to earn returns over time.
Pump.fun, however, takes a different approach. The platform allows anyone to quickly create and trade memecoins. The platform charges a small fee for each purchase. And the results are impressive.
In less than 6 months, Pump.fun has supported the launch of over 11 million tokens and generated nearly $700 million in protocol revenue, placing it in the top 5 crypto platforms by 30-day returns.
Source: Dune
This is the optimistic view of PUMP.
If Pump.fun implements a profit sharing mechanism, where 25% of protocol revenue is used to buy back PUMP or serve new Token issuance, this could maintain constant buying pressure.
Accordingly, each time a Token is issued or traded, a small portion of the fee is collected, which can be used to support PUMP. If the platform continues to make money, the price of PUMP is likely to increase with that cash flow.
However, it is not all positive. Early investors can capture the majority of the profits, while retail investors can be left behind, keeping only a small portion of the total profits.
Risks for retail investors as Pump.fun explodes
PUMP's tokenomics exposes many potential risks. The token sets a total supply of 1 trillion, of which 10% (100B) is reserved for airdrops, primarily targeting early adopters.
Nearly 25% (250B) is reserved for the public sale, which aims to raise $1B at a potential $4B market cap. However, the entire 25% will unlock on day one with no lock-up period or cliff.
This can lead to strong selling pressure after the launch, as many investors want to sell quickly for quick profits. Token prices can spike and then crash quickly, destabilizing the market.
Therefore, many experts warn that this valuation is too high, and the biggest risk will fall on small investors, who are vulnerable to losses when money suddenly flees.
Source: https://tintucbitcoin.com/pump-fun-dau-tu-4-ty-usd-vao-pump/
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