The Rise and Fall of Memecoin Trading on New Blockchains: A Temporary Surge or a Sustainable Trend?

Memecoin Trading Surges on Robinhood Chain, But the Boom is Short-Lived

September 2023 — The world of cryptocurrency is witnessing a remarkable resurgence in memecoin trading, but this time on a new blockchain with a twist. Robinhood Chain, launched by the fintech giant Robinhood this summer, has seen a meteoric rise in trading activity, particularly in memecoins and stock tokens—digital assets designed to mirror the share prices of individual companies.

In a striking turn of events, daily trading volume for memecoin-stock-token pairs skyrocketed from virtually zero in July to an impressive $443 million by early September, according to data from CryptoQuant. However, this surge was fleeting, with trading activity plummeting by a staggering 96% shortly thereafter.

The September frenzy also sparked an explosion in token creation, with approximately 26,000 new tokens launched daily on Robinhood Chain. On September 8 alone, the daily total reached nearly 45,000. Yet, the majority of these tokens have since languished, achieving little to no trading volume and now worth almost nothing—a fate all too common in the volatile world of cryptocurrencies.

Robinhood Chain isn’t alone in this recent trading boom. In mid-September, Circle, the issuer of the USDC stablecoin, launched Arc, a blockchain tailored for Wall Street banks and large institutions. On its inaugural day of public trading, memecoin launchpads on Arc generated over $336 million in trading volumes.

This pattern of speculative trading is reminiscent of previous crypto trends, where new blockchains and decentralized exchanges attract attention through memecoin speculation. Solana’s Pump.fun platform in 2024 and TRON’s SunPump launchpad are prime examples of this cycle, which often ends in a rapid decline in activity.

Experts are cautious about the sustainability of this latest memecoin boom. Julio Moreno, head of research at CryptoQuant, noted, “It’s a way for blockchains and/or new apps to attract money/activity into them, but it is not sustainable. Most of these assets/memecoins will trend to zero.”

Jim Thorne, chief market strategist at Wellington-Altus, likened the memecoin frenzy to trading Pokémon cards, emphasizing that while the speculative nature of these trades may be fleeting, the underlying technology of tokenization is here to stay. “Memecoin trading is an unfortunate distraction from the power of tokenization,” he stated.

The September boom coincided with significant developments in U.S. crypto regulation. On September 15, the Senate failed to advance the CLARITY Act, a bill aimed at establishing nationwide rules for crypto markets. In the days that followed, trading on Robinhood Chain and Arc surged as traders speculated on a potential return to a less regulated environment.

However, the excitement was short-lived. The Securities and Exchange Commission soon issued a five-year exemption allowing certain platforms to test blockchain-based trading of tokenized stocks under specific rules, leading to a swift decline in trading activity.

As the memecoin craze fades, the crypto community is left to ponder the future of digital assets. While the allure of quick profits may draw in retail investors, experts warn that the long-term viability of most memecoins remains in question.