Pump.Fun's $1 Billion Token Sale Raises Liquidity Concerns for Memecoin Universe
(Bloomberg) -- Pump.fun's decision to raise $1 billion is sparking concern that a token sale by the most popular platform for creating memecoins risks siphoning demand away from the hundreds of coins issued daily through the website.
The platform, which is based on the Solana blockchain, is still in the early stages of the token offering, according to a person familiar with the plans who asked not to be named discussing private company information, Bloomberg News reported Tuesday. Alon Cohen, co-founder of Pump.fun, didn't respond to requests for comment.
While details of the sale are not clear, the offering would rank among the largest ever in crypto. The last major token sale was the January debut of the Trump memecoin, which instantly generated billions of dollars in trading volume within a few days. The broader memecoin sector saw a drop in trading when the Trump token was launched, as speculators sold other crypto assets to buy President Donald Trump's official token.
Pump.fun 'could be a drain on liquidity,' said Ryan Watkins, co-founder of crypto investment fund Syncracy Capital. 'The raise will take place over the course of a month. And I think during that month, any asset in the Solana ecosystem is vulnerable to being sold to fund that purchase.'
Pump.fun, which has been compared to the edgy 4chan social media network, allows users to quickly create, promote and sell memecoins, a type of token that has no intended utility but is often associated with jokes, memes and celebrities.
The platform has been one of the biggest drivers of the explosive growth in memecoins and the attendant burst in activity on the Solana blockchain in the past year. Retail and professional investors alike have poured billions of dollars into the sector, and their quests for quick profits are seen as generating a lucrative stream of fees for Pump.fun's founders.
Other market participants also questioned the relatively high valuation of Pump.fun based on the token sale, which is set to be at a $4 billion fully diluted valuation, or FDV. The measure equals the current price times the total number of tokens expected to ever be in circulation.
'I would consider investing at $50 million FDV,' said Christine Fang, managing partner at Hong Kong-based crypto hedge fund PSE Trading. 'Not sure if the $4 billion valuation is justified, especially with the lack of liquidity overall in altcoins.'
But with few details about the token sale, others said it's too early to make a conclusion.
'People are overly bearish on this, specifically because they don't know the details,' said Mert Mumtaz, co-founder and chief executive officer of Solana infrastructure project Helius.
'Pump is the main name behind memes today,' Mumtaz added. 'So if they raise a bunch of extra money from investors instead of users, I don't see why they wouldn't invest this money to grow the market beyond what exists today. I mean, their entire business relies on this.'
More stories like this are available on bloomberg.com
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