A new report from Binance Research has issued a serious warning about the potential risks in the memecoin market, revealing that 97% of these tokens have failed or become inactive shortly after their launch.

The report also exposes widespread manipulation in the market, as tightly organized groups conduct pump-and-dump campaigns, causing substantial losses for retail investors.

Although memecoin promises attractive returns, the report emphasizes that these volatile assets often carry many dangerous pitfalls.

The explosion of memecoin

A report analyzing the rapid rise of memecoin stems from economic pressures, particularly among the youth facing stagnant wages and rising living costs.

According to Binance Research, rising inflation and housing prices in recent years have prompted millennials and Gen Z to seek new financial opportunities outside traditional markets.

The COVID-19 pandemic and its aftermath have accelerated this trend, as more investors are willing to bet on speculative assets like memecoin in search of quick profits.

Memecoin, with its fair image and community participation, creates a sense of accessibility and closeness for new investors stepping into the financial world.

However, the report warns that this allure is merely an illusion, as most memecoins lack intrinsic value or innovative technology, primarily relying on internet virality and speculative frenzy.

Digital identity and risks

Not only limited to financial aspects, memecoin has also become a cultural symbol, representing online identity and community connection.

The report compares their appeal to the GameStop phenomenon of 2021, noting that memecoin has become a social statement resisting traditional financial systems. Driven by internet culture, these tokens allow investors to participate in a digital revolution, thereby enhancing their strong dissemination.

However, the report also warns that the explosive growth of memecoin could lead the community to overlook projects focused on advancing blockchain technology.

Accordingly, the memecoin trend, while showcasing the power of blockchain in connecting global communities, may overshadow significant innovations for the future of the crypto industry. Projects with real technological value are at risk of being sidelined as they compete with assets that prioritize cultural appeal over utility.