Pump.fun, the Solana crypto platform to launch tokens, continues to make headlines

According to a recent evaluation, the company that manages it could have a possible market value of 1.5 billion dollars.

Crypto platform Pump.fun continues to make headlines, with the latest being a possible market valuation of $1.5 billion for the company that operates it.

The valuation was derived from a news article by SecondLane.

On its official Telegram channel, SecondLane posted yesterday that the FDV of Pump.fun is $1,500,000,000.

FDV stands for Fully Diluted Valuation, a metric used to gauge the future potential of a crypto project.

It is calculated by multiplying the price of a token by its total supply, assuming that all its tokens are in circulation.

While market capitalization is calculated by multiplying the price of a token by the number of tokens actually in circulation (circulating supply), FDV is obtained by multiplying it by the total number of tokens.

For example, Bitcoin currently has a circulating supply of around 19.8 million BTC, and at a price of about $95,000, its market capitalization is around $1.9 trillion.

However, as we know, its total supply is 21 million BTC, so its FDV would be almost $2 trillion.

In other cases, such as XRP or TON, the difference is greater, as their total supply is much higher than their circulating supply.

However, Pump.fun does not yet have its own token, so such calculations cannot be made.

It should also be noted that these calculations are purely theoretical and arithmetical, and do not have any real-world significance.

That said, market capitalization is also calculated in the stock market by multiplying the number of outstanding shares by the price of a single share.

The calculation of Pump.fun's FDV was done precisely by hypothesizing the total number of outstanding shares.

The starting figures for this calculation are derived from the listing on SecondLane of 1% of Pump.fun's outstanding shares for $15 million, from which it is easy to calculate an FDV of $1.5 billion.

However, it is possible that Pump.fun will launch its own token on the crypto markets before the bull run ends.

Launching a token on Solana is currently easy, fast, and cheap.

Anyone can do it, but the token usually starts out with a value of zero at the time of its creation.

As a result, those who launch a token that can be easily created from nothing in this manner often feel the need to "pump it," and Pump.fun serves this exact purpose.

It is important to note that Pump.fun is not intended to add value to a token but rather to temporarily inflate its price on the crypto markets, particularly on DEXs where anyone can list a token.

The tokens that are launched through Pump.fun typically follow a pump&dump scheme, which consists of an initial launch phase, in which the price is artificially inflated by increasing buying pressure, and a second phase, in which the dump inevitably occurs as profits are realized and buying pressure stops growing.

This phenomenon is well-known to many participants in these initiatives, though unfortunately not to all, and it usually takes the form of a competition in which the winner buys very early and sells before the dump, and the loser buys too late and is unable to monetize before the dump.

Furthermore, approximately 98% of the tokens launched through Pump.fun fail.

It is possible, therefore, that the success of Pump.fun will be limited to the current bull run and that it will fade away once the next bear market begins.

However, it is worth noting that Pump.fun has so far generated $86 million in revenue from user fees, which represents the platform's true current commercial value.

The memecoin

The tokens that are launched on Pump.fun are essentially memecoins.

The issue with memecoins is that they are tokens that are directly tied to memes, and memes are inherently ephemeral phenomena that experience one or more (typically brief) moments of popularity followed by a period of obscurity.

These initiatives can be likened to a gambling race to anticipate the pump, with the risk, however, that the pump may not materialize.

Occasionally, they are even outright scams, particularly when the creators themselves encourage others to buy while they are dumping the memecoins in the markets.

The key to avoiding losses is to capitalize on the pump by selling when the price has risen rather than waiting for the price to rise in order to buy. Those who are purchasing during the pump are essentially giving money to those who anticipated it.

It is crucial to restate that in the vast majority of cases, the pump never begins, rendering the majority of tokens generated in this manner ultimately unsuccessful.