Solana protocol offers way to short $53b memecoin market — and it’s teasing an airdrop

A new protocol allows traders to profit from plunging memecoin prices by shorting them.

Most memecoins are available only for spot trading. But major tokens like Dogecoin, Pepe, Shiba Inu, and Brett have market values large enough for centralised exchanges to offer leveraged futures trading.

Centralised exchanges allow traders to borrow funds at a leverage ratio of the margin they put up as capital. The borrowed sum can then be used to enter into long or short bets on crypto tokens.

The new protocol, Dumpy.fun, says it wants to make shorting memecoins easier — and plans to enable permissionless listing of all memecoins.

For now, the protocol is in beta launch, and only users on the waitlist have access to the protocol.

Shorting memecoins may prove profitable. Crypto’s two largest memecoins, Dogecoin and Shiba Inu, are down some 80% from their peak prices.

While some memecoins trigger frenzied trading activity, most gains are ephemeral — a likely target for would-be short traders.

In June, celebrity memecoins were the rave with many notable personalities such as Iggy Azalea and Caitlyn Jenner launching tokens. Those memecoins initially soared upon listing but have since plummeted. Azalea’s is down 79% while Jenner’s has plummeted 75% from their peak prices

Tuesday’s launch features leveraged trading on only one memecoin, Catwifhat, a $36 million token launched early this year. The token is down 52% from its June peak.

Dumpy.fun traders will be able to vote on new listings with the protocol promising to add one token each day during the beta phase. The platform did not announce the date for the full roll out.

Early traders will also be rewarded with airdrops, although the protocol did not elaborate on the reward mechanism for its token distribution.

The protocol’s name appears to be a play on the popular Solana memecoin generator pump.fun that has been integral to the Cambrian explosion of memecoins on the blockchain.

Solana accounts for 85% of all newly created tokens, many of them memecoins, that are traded on decentralised exchanges. The blockchain’s DEX trading activity has eclipsed that of Ethereum and its layer 2 networks combined.

This year, memecoins have attracted significant attention in crypto, with the sector growing to a $53 billion market value, CoinGecko data shows.

That figure, however, only accounts for so-called top memecoins catalogued by crypto market tracking platforms such as CoinGecko.

It pales in comparison to the true size of the memecoin market as dozens of new tokens are launched every day across different blockchains.

Pump.fun alone has created over 1.5 million memecoins since its inception early this year.

Slorg, the pseudonymous business expansion manager at Solana DEX aggregator Slorg recently catalogued the 30 celebrity memecoins launched on Solana last month.

The best performance is by a token linked to internet personality Andrew Tate which is down 73% from its peak price.

The performance of these memecoins is in keeping with a recent study that said although such tokens promise big crypto gains on the back of their celebrity backers, the reality is that most are doomed to fail in the long run.

And that’s what the Dumpy.fun developers say is the rationale behind creating a protocol for shorting memecoins.

Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.