There's a thin line between love and hate. VC tokens crossed it in record time. Projects with billion-dollar valuations but no working products. Tokenomics built in spreadsheets instead of economic reality. The market didn't just accept these rules, it fell head over heels. Traders and funds fought for allocations, drunk on prestigious names and polished pitch decks.
One year later, the honeymoon was over. VC tokens became toxic assets: perpetual dumps, endless unlocks, shattered expectations. The pain united everyone in loss. Retail investors cursed the day they bought the top. Fund managers quietly buried their losses, hoping nobody would notice the carnage.
Against this backdrop of disappointment, memecoins began gaining strength. For many, this sounds absurd: joke coins versus venture capital? I ask you, dear reader, to suspend your disbelief for the duration of this chapter. Revolutionary ideas always sound stupid at first. That's how it was with Bitcoin, that's how it was with DeFi. That's how it is with memecoins.
What makes a token "VC-backed"? Not the technology. L2 solutions, bridges, restaking protocols, DeFi, Web3: behind different labels hides the same scheme. Closed rounds for the chosen few and billion-dollar valuations at launch. Meanwhile, all growth potential has been squeezed out and divided among insiders. The retail investor gets just one privilege: buy the top and hold the bag to the bottom.
Take Arbitrum, March 2023: launching with a $10 billion market cap. Seed investors got in at $0.005, first exchange price was already $1.20. A 240x gain before any retail investor saw the token in a listing. In two years, the project transformed from an idea into a paper unicorn. Paper unicorn indeed. While early investors counted millions in profits, retail buyers became hostages to endless unlocks and a falling price.
This absurdity became the norm. Starknet valued itself at $30 billion, equal to half of Solana's market cap, which had been operating for four years and processing millions of transactions daily. zkSync wanted $3 billion, LayerZero demanded $4. Projects without products, without revenue, often without a working testnet, received valuations that traditional tech giants need decades of profitable operations to achieve.
To understand the scale of degradation and how we got here, it's better to go back to the origins. Ethereum's ICO in 2014: anyone could buy ETH at $0.30. No privileges, no closed rounds. The project raised $16 million, which was a huge sum at the time. Those who bought at the ICO and those who bought on exchanges a month later were in roughly equal conditions: price difference of just 1.5x. The market itself determined fair value through natural price discovery. Yes, those who held until four-digit prices got thousands of X in returns. But that opportunity was available to everyone: from whale investors to students with a hundred dollars.
By the third cycle, the rules of the game began changing. The SEC declared war on ICOs, pushing projects into the gray zone of private rounds. Solana became the example of the new model: seed investors got tokens at $0.04, first exchange buyers got them at $0.50. A 12x advantage from the very start for private round participants.
But the balance still held. Early investors got their bonus for risk, but retail didn't get left holding the bag. Those who held SOL to $260 took home their 500x. The project grew from $200 million to $68 billion, creating wealth for everyone. This was still the good old crypto: risk was rewarded, patience paid off, and there was room under the sun for everyone.
The fourth cycle completely broke this balance. Now projects weren't launching with valuations in the tens of millions, but straight into billions. All the potential growth that once belonged to the market was now being absorbed by venture funds. Cobie, the prominent trader and crypto analyst, gave this phenomenon a precise name: "private capture." Complete seizure of profits by insiders. Retail investors were left with only crumbs from the master's table1.
The path of such a VC project was predictable and scripted down to the minute. First, the founder would pitch to crypto's holy trinity: Paradigm, Polychain, a16z. The Seed round would bring in the first $5-10 million at a $50-100 million valuation. All this for a project with nothing but an idea and ambition.
Next came the testnet/mainnet launch with hints at a future airdrop. Officially, the team promised nothing, with the SEC watching every move. But the hints were clear: "We value our early community," "Active participants are important to us." Airdrop farmers immediately descended on every task like locusts on a harvest. Within months, the project could boast "organic" growth: 500,000 wallets, $100 million TVL, millions of daily transactions.
A year later, sometimes sooner, the project would level up: Series A of $50-100 million at a billion-plus valuation. This handed Seed investors a 20x return, albeit only on paper. Founders began believing in their own genius. Meanwhile, the market eagerly awaited the token, not suspecting that all the profit had already been divided.
Up to this point, the VC project's journey mirrored any Silicon Valley startup. From here, the paths split completely. In traditional startup land, the finish line for investors and founders is the IPO. It's a grueling path: due diligence, audits, roadshows, regulators. A NASDAQ listing is a 5-to-10-year marathon. The acquisition alternative takes similar time and delivers far less.
Crypto hacked the system. In the second and third cycles, projects didn't even bother: they'd get investment and launch tokens on exchanges within a month. The product existed only in promises. A white paper and a pretty website were enough for million-dollar valuations.
By the fourth cycle, regulators tightened the screws, and projects had to put on a show of real development: two years to launch mainnet, then the token. But even these two years looked like a sprint next to the decade-long marathon to IPO. Crypto remained a shortcut, unburdened by bureaucracy.
The fourth cycle completely closed any opportunity for retail investors to profit. Tokens launched on exchanges already at peak valuation. Price discovery worked in only one direction: down. And the tokenomics guaranteed this fall: team 20%, investors 25%, treasury 30%, airdrop 10-15%, everything else to exchanges and market makers.
Of course, tokens weren't dumped on the market all at once, otherwise the price would go to zero in seconds. That's why they invented vesting: investors get 10-20% immediately, the rest unlocks monthly over one to two years. But the math was so tilted in favor of insiders that even selling 10% covered all investments with profit. Meanwhile, seed investors hedged their risks with open shorts, since exchanges launched futures even before spot listings. So even an 80% drop left them in profit.
Now let's calculate what the ordinary investor got. Buying a token at $1.50 with a $10 billion total valuation, just to double your money, the project needs to grow to $20 billion, which is already bigger than an old-timer coin from the top 20. Forget about the 10x gains that were normal in the 2017 and 2021 alt seasons. But in reality, coins didn't show even minimal growth. Just to maintain the price, the market had to absorb hundreds of millions in tokens. But there were too many sellers. Teams were paying mortgages and buying Teslas. Investors were locking in 200x profits. Advisors dumped their free tokens on day one.
The result was predictable. Arbitrum, the community favorite with a working product, lost 80% from its peak. Optimism, its main competitor, fell 85%. And second-wave projects of 2024 showed even more dismal results: Blast collected $2 billion in TVL, but after launch the token only fell, reaching bottom at minus 93%. Pixels and Portal, gaming protocols with real products: minus 90% each. Every new VC launch became progressively more catastrophic.
Statistics confirmed the obvious. Keyrock Trading's research: 88% of tokens with airdrops in 2024 lost most of their value in the first month. The majority crashed within the first two weeks2.
Ordinary investors finally realized: they were nothing but exit liquidity in this pyramid. VC funds expected the retail army to buy up their dozens of projects with billion-dollar valuations. But even the naive retail investor can learn. After getting burned by several "revolutionary" projects losing 90% of value faster than cesium-137's half-life, they understood a simple truth. As crypto X/Twitter put it: 'New shiny VC coin became not a good investment anymore'.
Next to capitulate were the airdrop farmers. Years of working on project metrics, thousands of transactions, hundreds of wallets. The reward: crumbs that depreciated faster than they could sell them. Mass dumping in the first minute of trading became the general rule. Even institutionals began whispering about the "venture bubble" and quietly reducing positions.
The myth of venture funds' omnipotence collapsed completely. Previously, participation by Paradigm or a16z guaranteed success. The community believed: big funds would coordinate, hold back sales, support the price. Reality proved more prosaic. Each fund thought only of itself.
Funds dumped all their assets at once with huge discounts, often locking in losses. And though they did this secretly and hastily, trying to shield the market from bad news, the truth always surfaces. Besides, how could you keep a secret when every week brought new projects whose tokens needed mass liquidation.
The paradox is that many fund managers perfectly understood the system's flaws. The industry structure created a complex dilemma: holding funds in stablecoins looked like an admission of having no ideas. This pushed them toward investments in overvalued projects, hoping to exit profitably before potential liquidity problems. The system worked against its own participants.
And when the music began to slow, everyone rushed for the exit at once. Everyone needed liquidity, everyone needed buyers. But the buyers had run out. Prices plummeted, and fund portfolios melted faster than they could find buyers. The attempt to play hot potato, where everyone hoped not to be last, failed. When the music stopped completely, everyone was left holding the potato.
The VC model committed classic suicide by greed. The goose that laid golden eggs, slaughtered for one big score. Funds took all the potential growth for themselves, leaving the market only risks. Who would buy a token with no upside? Who would hold an asset with guaranteed decline from monthly unlocks? The answer was obvious.
While venture funds were burying billions in their "unicorns," the market found salvation in the most unexpected place. Joke coins that had been considered garbage for years suddenly became the alternative. Memecoins brought back the honesty of the ICO era to the market: no private rounds, equal opportunities for all, and transparent distribution. The bubble remained a bubble, but at least it became transparent again. The fourth cycle's outcome is absurd: managers of billions lost to jpegs with puppies.
Memecoins traveled a long road from joke to phenomenon. Like Bitcoin in 2009, they began as entertainment for geeks. Years later, Bitcoin became digital gold and a store of value. That niche was occupied forever. Memecoins had to find another mission. And they found it: to become the most honest game in the most dishonest casino.
December 6, 2013, Billy Markus and Jackson Palmer launched DOGE. The project was born as a joke: they took a popular meme with a Shiba Inu dog and made it into a cryptocurrency. The dog's name was Kabosu. She died in 2024 at age 18, but her image became an immortal symbol of an entire industry. DOGE did the impossible: it turned lack of ambition into an advantage. While other projects promised a financial revolution, DOGE honestly admitted: we're just a meme. It was precisely this honesty that won over the community.
Technically, DOGE was a textbook example of fair launch. No premine, the creators kept not a single coin for themselves. The fast start excluded insider token accumulation. The creators emphasized the importance of an honest and transparent launch. For the first year, they set a random block reward from 0 to a million DOGE. Then switched to a fixed 10,000. Complete transparency, complete equality. The antithesis of future VC launches where 100% of tokens are already divided before launch.
For seven years DOGE slumbered. No crazy rises and crashes. Sure, speculators pumped and dumped the coin, but the scale was laughable. DOGE became the stablecoin of the meme world. And that was a miracle in itself. In a world where 99.9% of memecoins die in the first year, DOGE stubbornly lived. The initial hype passed, attention switched to new tokens, but a small community held on. Seven years in crypto is like seventy in real life. Those who survive that long are already immortal.
Survival was ensured by unexpected technical advantages. DOGE proved to be a fast and cheap way to transfer between exchanges. While Bitcoin charged $20 per transaction and made you wait an hour, DOGE transferred for cents almost instantly. The stable price became a plus, not a minus. Traders used DOGE as a workhorse for real deposit transfers between exchanges. Nobody was thinking about massive gains. Everyone just used a convenient coin.
Years of natural selection left only the believers. By 2020, DOGE had become a compressed spring. Seven years of accumulating energy, waiting for a spark. The spark was Elon Musk. December 2020, a three-word tweet: "One word: Doge"
DOGE flew to Mars. Literally. A thousand dollars invested after Musk's first tweet turned into $120,000 in five months. The peak at $0.73 meant a 285x rise from the bottom. Even after crashing 92% from the top, DOGE remained 23 times more expensive than its starting point. The coin returned from orbit, but not to its old swamp. A new floor was established at levels that were once only dreams.
And here I'll make a heartfelt confession. I, like thousands of others, missed this moment. Not because I didn't know about DOGE. On the contrary, I actively traded it. I even downloaded my exchange transaction history to figure out what went wrong. And there I saw the history of my own stupidity. Buys, sells, transfers between exchanges. Hundreds of transactions and tens of millions of DOGE passed through my hands, but by the start of the rally not a single token remained in my account.
I traded DOGE for questionable speculative profits, which I ultimately lost anyway. In all this hustle, I didn't see the big picture and missed a fortune. DOGE taught me a lesson that crypto repeats over and over: hodl beats trading, patience beats hustle. I tried to outsmart the market every day and lost big. Those who forgot about their DOGE for seven years won the jackpot. Of course, this rule doesn't apply to the entire market. But if you're holding a diamond, you better grip it with all your strength.
DOGE taught a lesson to the entire industry: community beats capital, faith beats technology, honesty beats cunning. Seven years of patience and faith defeated billions of dollars in venture investment. A meme coin surpassed hundreds of "revolutionary" protocols for one reason: it was backed by real people, not funds.
But the market considered DOGE an anomaly. A lucky accident that only happened thanks to Elon Musk's tweets. And instead of learning from this example, everyone rushed into the embrace of VC tokens, shiny new toys with big-name investors.
It took surviving the crash of dozens of "unicorns" and losing billions for the simple truth to reach consciousness. The market had turned into a casino. And in a casino, psychology beats technology. And it's better to bet on strong communities here.
The VC token crisis tore off the masks. Now there was no need to pretend the alt market was anything but a degen casino. The smart talk about the superiority of different L2s was over. All the fancy talk from trendy funds about technology, utility, and innovation turned out to be theater. Honest launches and community strength came to the forefront. Memecoins simply acknowledged the rules of the game while others pretended otherwise.
The entire history of crypto is a history of communities. Yes, technology is undoubtedly important, but people have always been paramount. Bitcoin survived thanks to an army of cypherpunks willing to endure years of mockery for the idea of digital gold. DOGE was held for seven years by eccentrics who liked the dog. Community cohesion is both a superpower and kryptonite. While faith lives, the project is unkillable. Once faith wavers, the project ceases to exist.
Every new memecoin goes through a trial by faith. Launch, hype, first correction. Here the tourists are filtered out. Second correction, minus 80%. Speculators leave. Death valley, minus 95%. Only the crazies remain. If they hold on, the world witnesses a new miracle. 99.9% die on this path. But the 0.1% that survive change the rules of the game.
A memecoin's community works like a distributed content factory. Nobody waits for instructions from above. Artists produce fresh meme art. Video makers create TikToks. Degens churn out memes with fresh catch phrases. Phrases like "wen lambo," "to the moon," "diamond hands" become cultural code, uniting thousands of strangers into a single tribe. Decentralized marketing works more effectively than any agency.
The main weapon in the battle for attention: success stories of different calibers. Beginners rejoice at turning $100 into $1,000. Mid-level players brag about how $500 became $25,000. Legends show screenshots where $100 turned into $100,000. Each level creates its own FOMO wave, attracting new players with different wallet sizes.
An army of followers is built on the mathematics of greed. These stories are real, the math guarantees them. A token starts with a $50,000 market cap and soars to $10 million. That's 200x for early buyers. The memecoin race winners even reach billion-dollar valuations. This gives huge growth potential even for those who bought in the middle of the ascending parabola.
Example from the meme trenches: an ordinary soldier throws $250 into a fresh token at a $50k cap. Holds through the entire initial growth and subsequent correction of minus 95%. Months of FUD, and suddenly a miracle happens: the coin comes alive and soars to a $10 million market cap. That $250 became $50,000. A real story, and there are hundreds, even thousands like it. But the problem is that for every winner there are a thousand losers who bought at the top.
The fourth cycle proved it: memecoin math works. PEPE, yet another Pepe the frog, grew from absolute zero to $1.8 billion in a month in April 2023. First buyers turned $300 into $300,000. WIF, dogwifhat, grew from a $100,000 market cap to $4.8 billion. Those who risked buying on day one saw 48,000x.
BONK chose a different strategy. In December 2022, tokens were distributed free to active Solana users. Free tokens that everyone considered garbage. A year later, the market cap exceeded a billion. Those too lazy to sell the "useless" airdrop woke up with $50,000 in their wallets. Laziness proved more profitable than active trading.
Even conservative Bitcoin caught memecoin fever. The Runes protocol allowed minting tokens directly on the main blockchain. DOG became the flagship of the movement: a massive airdrop to everyone who held at least three ordinals. A reward for curiosity and willingness to experiment with the network's new capabilities. Bitcoin maximalists were in shock: memecoins had reached the holy of holies. But this new milestone in Bitcoin's development deserves its own chapter.
Fair distribution determines a memecoin's fate. Seems like a small detail, but it's the foundation. Without a fair start, a community won't form at all. There will only be a crowd of speculators ready to outrun their neighbor and sell at the first correction. Everyone knows: the game is rigged, so you need to exit first.
A transparent launch changes the psychology. Mining or airdrop, 100% of tokens immediately in the market, no hidden team wallets. Holders are calm: there won't be sudden dumps from insiders. Time becomes an ally, not an enemy. The longer a coin trades and the more redistribution cycles it goes through, the stronger its potential. DOGE is the perfect example here: honest mining distributed the first coins among the community. Seven years of natural selection left only believers. This can't be faked with marketing or bought with venture millions.
Fixed supply became the religion of memecoins. All tokens immediately in the market, no emission, no inflation. Pure deflation through lost wallets and burned tokens. Bitcoin taught the market to hate money printers. Memecoins pushed this idea to its extreme.
Fair economics created the foundation, but the real explosion in memecoin popularity is explained by something bigger. They became a cultural phenomenon, the language of a generation raised on the internet. Memes transformed into a mirror of the digital age, irony became armor against chaos, and cryptocurrencies the only way to escape the rat race. Memecoins combined all three elements into the perfect product of our time.
Memecoins are paradoxical. On one hand, pure speculation and thirst for quick money. On the other, a manifestation of digital culture where memes have become language and irony a survival mechanism. Thirty years ago, the idea of buying tokens with puppies would have sounded insane. Today it's a multi-billion dollar market and cultural phenomenon simultaneously.
Technological discussions about rollups and sharding are understood by few. Memes are understood by everyone. Which is cuter, the puppy or the frog? Everyone has an opinion. And even the tech geeks acknowledge the truth: in the battle for mass adoption, culture beats code. Not transaction speed, but speed of spread on social media. Memecoins understood this before everyone else.
Memes have taken over everything. Politicians post Pepe frogs, brands hire meme managers, and Elon Musk built his reputation as a genius on jokes and trolling. If a good meme can make you laugh and lift your spirits after a hard day, then its function is truly in demand. Memes became the currency of attention in the digital age. Crypto simply digitized this currency in the literal sense.
In crypto chats, memes serve as collective therapy. Portfolio down 90%? Traders crack jokes about McDonald's. Another scam? Sad Pepes. Black swans? Bought the bottom and got a second one for free. It's through memes that traders relieve stress and support each other during the market's darkest days. And on this fuel, the crypto community can run for years, waiting for the next alt season.
One of the main evangelists of memecoins is Murad Mahmudov, trader, analyst, and perhaps the most charismatic preacher of the new era. His hour-long conference talks attract thousands in person and millions more online. Murad doesn't just analyze memecoins, he believes in them fanatically. His "Memecoin Supercycle" concept states: memecoins will become the dominant asset class because they're more honest, fun, and humane than any VC projects.
"Technology doesn't matter," Murad repeats at every talk. "Culture matters. What people are willing to hold matters." And thousands of his followers nod their heads, clutching their bags of PEPE, WIF, and BONK. For them, Murad isn't just an analyst but a symbol of resistance to greedy capitalism in crypto, the voice of those tired of endless token unlocks and empty promises. Memecoins gave everyone new hope: honest memes versus lying venture capital.
Murad practices what he preaches. His portfolio: tens of millions of dollars in SPX, GIGA, and other memes. No diversification, no hedges. Pure faith multiplied by millions. Critics scream about conflicts of interest: how can you trust someone pumping his own bags? Murad just laughs. For him, this isn't a bug in the system but its main feature: buying publicly and holding till the end.
Memecoins transcended their token status. They became identity markers, tribal badges, inside jokes shared by thousands. Every holder becomes a co-creator in this decentralized performance art.
Behind venture projects stand millions in funding, paid CEX listings, and hired influencer armies. Yet none of this manufactured hype can replicate authentic community passion. Memecoins don't win on technology. They win because people genuinely want to hold them. Real people with real hopes, real dreams, and a shared sense of humor power these movements. This makes memecoins more honest and human than the "serious" projects selling technological revolution.
Buying memecoins is far from a walk in the park. But with the right tools and proper risk management, meme trading no longer resembles Russian roulette with a fully loaded revolver where the only chance of survival is a misfire. The old DeFi-era scams, honeypot tokens and rug pulls, are mostly gone thanks to new memecoin trading platforms.
The first such platform was the legendary Pump.fun, which revolutionized meme launches. Unified contracts, rug pull protection, transparent pools. The platform became a memecoin factory: 15,000 coins daily, 4 million launches per year. The statistics are brutal: 99% die within hours, 0.9% linger for a week, 0.1% rocket to millions. This is where the fourth cycle's most successful memecoins emerged.
Old scams died. But new ones immediately appeared with an upgraded pump-and-dump 2.0 scheme where sniper bots play the starring role. They're pre-loaded with future scam token data: launch time, name, contract address. Bots monitor the network 24/7 and the moment the contract publishes, they buy 10-30% of supply in milliseconds. To ordinary traders this looks like early buyer luck: someone smart managed to invest $200 and grab 1% of all tokens. In reality, it's an organized group with dozens of bots and wallets.
Then the manipulation machine kicks in. Bots generate fake volume, simulate organic growth, create FOMO. The chart paints a perfect rocket: $10k → $100k → $1M → $10M → $100M market cap in hours. Real buyers see the surge and pile in at the top. Their money becomes the scammers' profit. At the peak, organizers dump everything simultaneously from all controlled wallets. The chart turns into a sheer cliff. Those who bought the top lose 99.9% in minutes. Classic scheme, now powered by algo trading and AI.
But not all projects with token reserves are scams. The difference is transparency. Scammers hide their supply across dozens of "independent" wallets, creating the illusion of decentralized ownership. Legitimate projects openly declare their reserves for listings, marketing, development. Public addresses, trackable expenses.
But even such transparency doesn't solve the fundamental problem. A project with reserves, even open ones, is still the same centralized model. Budgets, KPIs, hired influencers. The VC approach in a meme wrapper. And while this is better than hidden manipulations, in the long term such projects lose to fully decentralized memes like DOGE. The community senses the difference between an organic movement and a managed project. You can't manufacture what must grow organically.
The fourth cycle rewrote the rules of the game. The VC model with billion-dollar valuations and endless unlocks proved morally bankrupt, even if not yet financially. Memecoins won not through technology or capital. They won through honesty, community strength, and willingness to play by the same rules for everyone.
It really was a thin line between love and hate. The market needed just one year to go from worshipping VC tokens to complete rejection. Venture funds, accustomed to dictating the rules, suddenly found themselves on the losing side. And memecoins transformed from objects of mockery into almost the only hope for a fair game.
This is perhaps the most ironic revolution in crypto history: joke coins turned out to be more serious than the most "serious" projects. DOGE with its $20 billion market cap is worth more than hundreds of "revolutionary" protocols combined. The market made its choice. The question is only for how long. After all, in crypto, as we know, everything is cyclical. And who knows, maybe the next cycle will bring venture capital's revenge. Or the birth of something completely new.
1 Cobie, "New Launches (Part 1): Private Capture" - detailed analysis of the transformation from public ICOs to closed rounds, showing how venture funds captured all potential upside. Cobie's Substack
2 Keyrock Trading analyzed 62 major airdrops from 2024 and found that 88% of tokens lost most of their value within the first month of trading, with the majority crashing within the first 15 days. X (Twitter), September 25, 2024