Pump.fun’s Downfall: A Critical Moment for Solana

Moments ago, Pump.fun co-founder Alon confirmed that the official X account of Pump.fun was hacked, leading to the issuance of a fraudulent token named “PUMP”. Users were warned to remain vigilant.

As Solana’s most active meme token launchpad, Pump.fun became a retail investor’s gold rush through its two-phase launch model. First, tokens accumulated liquidity on the platform using a Bonding Curve mechanism. Once trading volume exceeded $69,000, the token was automatically transferred to Raydium, where it entered the wider market and fueled speculative trading. This highly engineered system drove a market frenzy throughout 2024.

Between April 1, 2024, and today, tokens launched from Pump.fun contributed $346 billion in trading volume to Raydium, making up half of the DEX’s total traffic. Meanwhile, Pump.fun collected $197 million in platform fees, with $104 million directly sourced from its token ecosystem.

However, when celebrities like Donald Trump entered the scene with flash-trend tokens (e.g., TRUMP, MELANIA), the underlying predatory mechanics of this game became apparent. On-chain data shows that over 70% of meme tokens peaked the moment they hit external markets, with an average lifespan of less than 48 hours.

An even more ominous sign is the massive liquidity drain across Solana. On February 24, only one token from Pump.fun’s graduated projects barely surpassed a $1 million market cap, indicating that the on-chain speculation frenzy had nearly frozen. Raydium’s meme token trading depth shrank by more than 90% from its peak, while Solana’s total stablecoin market cap saw a net outflow of over $1 billion in the last 30 days, marking the largest capital exodus since the FTX collapse.

This meltdown is not a coincidence. When project teams, trading platforms, and influencers form a “rug-pull triad,” and when Bonding Curve models are exploited as extraction tools, retail investors’ confidence is inevitably eroded by repeated “launch-and-dump” cycles. The failure of Pump.fun is not just a reflection of Solana’s liquidity crisis—it is also a brutal reckoning for the entire crypto industry’s meme economy. As the bubble bursts and the frenzy dies down, the lingering question remains: who will be left to clean up the wreckage of this capital-driven collapse?

SOL Plunges Over 50%—Is Solana’s Momentum Fading?

After a stellar 2024, Solana became one of the year’s top-performing blockchain tokens, fueled by the Pump.fun craze and meme coin speculation, rallying nearly 200% over the year. However, since Trump’s token launch on Solana on January 18, the hype cycle seems to have run its course. SOL hit an all-time high of $295 on January 19 but quickly reversed course, tumbling over 50% in the weeks that followed.

Now, a major event looms just three days away—the largest token unlock in Solana’s history. 11.2 million SOL worth $2 billion is set to enter circulation, with most of these tokens originating from FTX’s auction purchases at a cost of $64 per token. This could introduce heavy selling pressure.

Beyond its price decline, on-chain data reveals deeper cracks in the ecosystem. According to DefiLlama, Solana’s total value locked (TVL) has fallen from a peak of $12.19 billion to $7.22 billion, while daily transaction fee revenue continues to dwindle.

Moreover, Solana’s 24-hour net inflow data shows that $260 million exited the ecosystem in just two days (January 18 and 19). Since then, capital inflows have significantly slowed, failing to match the hype-fueled Pump era.

Adding to the concerns, other key indicators paint a grim picture. The past week’s performance of major Solana-based protocol tokens also reflects widespread weakness:

Chart: Solana Ecosystem Performance (Source: Rootdata)

Overall, the ecosystem appears to be unraveling, with projects and capital rapidly fleeing the network.

This raises an inevitable question: Has the Solana story come to an end?

Solana Labs Co-Founder Toly is Also Worried About a Collapse!

With SOL’s price crash looming, the Solana ecosystem is experiencing its worst fear, uncertainty, and doubt (FUD) since the FTX collapse. Analysts have estimated that throughout the meme coin speculation cycle, scammers have siphoned off over $10 billion.

In response to these undeniable issues, many community members have spoken out.

As Solana Labs’ co-founder, Toly has always advocated for sustainable technological development and innovation. He has repeatedly called on builders to focus on creating high-quality projects. While he has avoided direct criticism, his conversations on X with other community members often hint at his dissatisfaction with Pump.fun. Facing questions from long-time supporters, he responded bluntly: “The assholes that mess with markets to max extract can go f’ themselves.” The target of his frustration was clear.

Crypto KOL @cobie has also pointed out the flaws of the PVP (player vs. player) model. He stated:

“Right now, market participants are rushing into these scams like moths to a flame. Most of them know these are scams, but their goal is simply to sell at 3x the price to the next buyer. They don’t want to get rich in 2-4 years, they want it in 2 weeks. Every player is just hoping to hit the jackpot in the next cycle.”

Despite the turmoil, the community is attempting self-rescue. On February 26, Solana proposed SIMD-0228, setting a 50% staking rate target. If staking exceeds 50%, issuance would decrease and yield would drop; if below 50%, issuance would increase and yield would rise. The minimum inflation rate is set at 0%, while the maximum inflation rate follows the current issuance curve. The goal of the proposal is to transition SOL issuance to a market-driven model.

Additionally, a Solana spot ETF has emerged as a potential lifeline. According to the prediction platform Polymarket, the market sees an 85.4% probability of ETF approval before 2025 and a 34% chance of approval by June. If successful, considering the $100 billion inflows into Bitcoin ETFs and billions into Ethereum ETFs, Solana could see a multi-billion-dollar liquidity injection.

However, Solana’s crisis is not unique—it reflects a broader industry trend where speculation overtakes innovation.

As KOL @0xNing0x summarized:

“This is the settlement phase of the current cycle. The true MVPs are the Pump.fun traders, with Solana, Pump.fun, and Jupiter as the best supports, while TRUMP, AI16Z, and JLP holders effortlessly reaped rewards. The losers? SVP (Base & Virtual), and Ethereum, Arbitrum, Optimism, ZkSync, Starknet—each playing the role of a sidelined solo laner, mid laner, jungler, and support.”

At this crossroads, Solana has only two options:

1. Rely on external capital injections like an ETF, which could prolong its survival but further entrench its casino-like financial model.
2. Undergo a painful reset, as Toly suggests, sacrificing short-term gains to rebuild developer confidence.

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