Written by: GEORGII VERBITSKII, Cointelegraph Translated by: BitpushNews

Over the past year, memecoins have dominated the narrative in the cryptocurrency space, sparking a series of high-profile events in which most traders lost money while insiders profited. Libra tokens alone have led to $4.4 billion in public losses, according to some estimates. Unlike previous cryptocurrency cycles, when broad market growth rewarded holders, today’s memecoin speculation has created an environment where the average trader has little chance of success. How exactly have memecoins driven the market into a dead end? And will this situation end?

Investment or speculation?

Investing and speculation are essentially two completely different games with different rules. Investing is not about making money quickly, but about buying the right assets to protect capital in the long run. Typically, investors do not wait for the so-called "entry time", but buy assets that can be held for a long time. These assets will appreciate relative to fiat currencies based on fundamental factors. For example, stocks, gold, and Bitcoin are all appreciating relative to the US dollar, which faces unlimited issuance and inflation.

Some assets have additional growth drivers, such as growing real estate demand, increasing corporate profits, or even government adoption of Bitcoin, but these are bonuses. The key is that your investment should not completely lose value relative to fiat currency. Investors follow long-term macroeconomic trends, which helps them maintain purchasing power.

On the other hand, speculation is a zero-sum game where a few skilled people profit from the ignorance of the majority. Usually, these people are chasing quick profits. This is what happened with memecoins. Unlike traditional investments, memecoins lack intrinsic value, dividends, or interest returns. In the case of Bitcoin, when traders sell, the "greater fools" who buy in may be companies that adopt the Bitcoin standard, and later, other countries that build strategic Bitcoin reserves after the United States. However, for tokens like LIBRA, the so-called "greater fools" are those who buy after Javier Milei's announcement on the X platform. So far - there are no more buyers.

Unregulated gambling

Memecoins operate similarly to online casinos. They offer entertainment and promise quick profits, but only those who create and promote them benefit. Unlike regulated gambling, where the risks are well known, memecoins are often hyped by influential figures—from famous crypto influencer Murad to the President of the United States—and thus spark discussion on social media. The harsh reality is that, just like in a casino, the odds of winning overwhelmingly favor insiders and early adopters, while the majority suffer losses.

The memecoin craze clearly relies on speculation and psychological stimulation - it is a game that arouses emotions and leaves players with empty wallets. Platforms like Pump.fun, which facilitate the issuance of memecoins and make huge profits from them, prove that selling shovels is the best way to make money in the "gold rush". However, opening a casino requires a license and must operate in a strictly designated area, but why can anyone issue their own memecoin?

That may soon change.

Will this situation ever end?

The lack of regulatory oversight has allowed memecoins to explode. How did we get here? Let’s review the activities of the U.S. Securities and Exchange Commission (SEC) in recent years, namely filing lawsuits against major decentralized finance (DeFi) protocols and large cryptocurrency companies that tried to act fairly. Another serious move was Operation Chokepoint 2.0, launched by the previous U.S. administration, which targeted the entire crypto industry. All of these moves not only stifled honest companies that created meaningful things in the crypto space, but also indirectly triggered a counterforce, namely other players who took advantage of the unclear rules to profit.

As a result, cryptocurrency exchanges have recently listed memecoins almost immediately after they were released. The regulatory chaos has turned the crypto industry into a giant global casino. Before, everyone hoped to win in this gamble, but now, as losses emerge, it seems that general disappointment is spreading.

There is a glimmer of hope, though. The current U.S. government can undoubtedly be described as crypto-friendly, which means we are likely to see significant progress on the regulatory front this year. This is particularly important for the Bitcoin decentralized finance (DeFi) sector, which has long found product-market fit and is growing rapidly, taking market share from traditional finance (banks, brokers, and other intermediaries).

It is vital to rewrite outdated financial regulations as quickly as possible. The old rules were designed for a system based on trust in centralized intermediaries, and the new framework must incorporate smart contracts - in other words, executable blockchain code. A stronger regulatory framework may introduce stricter requirements, including mandatory disclosure of token issuance, requiring the identity of creators to be made public, and restrictions on listing on centralized exchanges.

However, even without direct external intervention, market participants may learn from their own costly mistakes and become more cautious when investing in memecoins. After a series of harsh but thought-provoking memecoin "runaway" incidents, the Web3 community must have gradually realized that such projects rarely reward risk-takers. If someone still insists on taking the risk, they should treat it as a trip to the casino: only bring the part of the funds that they can afford to lose, and enjoy the fun of the process.

For those who have no interest in such risky practices, and for those who truly want to build wealth and pass it on to future generations, the steady, regular purchase of Bitcoin is welcome. The market seems to be only beginning to realize this more sound way of managing money.