Solana's Memecoin Debacle Is Its Worst Round of Controversy Yet

Solana's terrible, no-good, rotten run seems to know no end. SOL plummeted another 9% on Monday, to just under $153. The cryptocurrency has tumbled

Solana (CRYPTO: SOL) continued to slide on Monday, with its price down another 9% in the last 24 hours, to just under $153.

The token has now tumbled more than 37% in the last 30 days, compared to a 19% decline in Ethereum (CRYPTO: ETH) over the same period, according to CoinGecko.

Solana's struggles come as the cryptocurrency used to be a strength — memecoins — has now turned against it.

By embracing memecoins, Solana's market value shot up ahead of its rivals in 2024, leading to speculation once again that it could leapfrog Ethereum.

Now, a string of scandalous memecoin releases have drawn serious blowback.

Outrage: On February 14, the Libra memecoin promoted by the crypto-loving president of Argentina, Javier Milei, cratered shortly after insiders made a killing in the setup.

The episode triggered outrage in the South American nation and the crypto market at large. And Solana, as it’s done numerous times in the past year, hosted Libra.

Even so, some analysts expect Solana to weather the storm.

Carlos Guzman, an analyst at market-making firm GSR, expects other applications on Solana to thrive, including offerings in the payments, decentralized finance (DeFi), and artificial intelligence sectors.

“There are additional reasons to be optimistic about Solana, including a possible SOL ETF and coming regulatory clarity, which are likely to boost investor confidence,” Guzman told DL News.

“Claims of Solana’s demise due to this debacle are exaggerated. Memecoin mania would eventually die down given its zero-sum nature and the fact that most participants lose money.”

To be sure, there's no getting around the fact that Solana is enduring its worst round of controversy since the network suffered a number of outages in 2022 and 2023.

Solana did not respond to a request for comment.

In January, critics lambasted President Donald Trump and his wife, Melania Trump, after they launched memecoins on Solana. Both the Trump and Melania coins skyrocketed before cratering.

Hawk Tuah effect: The token launched by Haliey Welch in December, the internet celebrity behind the raunchy “Hawk Tuah” meme, met a similar fate.

“When Melania launched after Trump, it brought the realization home that some teams were purely extractive and really stole the thunder of the Trump launch,” Chris Chung, founder of Solana trading platform Titan, told DL News.

“The last wave with the Libra coin was the nail in the coffin.”

Solana’s dependence on Pump.fun, a memecoin factory that makes it easy to launch the tokens, isn't helping.

When memecoins surged on January 23, tokens launched on Pump.fun made up more than 75% of all the tokens introduced on the entire Solana network, according to data from Solscan and Dune.

Many crypto investors are not amused at the cascading losses memecoins are generating.

More than 86% of wallets that bought Milei’s memecoin, for instance, ended up losing money, according to research from Nansen.

“Memecoins penetrated the mind share that was previously attributed to real projects,” Ivan, the pseudonymous co-founder of the Gearbox Protocol, told DL News.

“A permissionless market is one thing, but validating scams kills the other asset classes.”

Solana's leaders are scrambling to make adjustments. Mert Mumtaz, CEO of Solana developer platform Helius, announced he was hiring a forensic researcher to help prevent fraudulent activity just days after Libra crashed.

Coinbase (NASDAQ:COIN) CEO Brian Armstrong said on X after the Libra plunge that “some memecoins have clearly gone too far,” and called on the industry to “purge the bad actors.”

Similarly, Edward Wilson, the marketing lead at OneBalance, said cleaning up crypto's act from chaotic memecoin launches must come from within the industry.

“There needs to be very strong pushback against these ideas and these products,” said Wilson. “They really do prey and are predatory.”