How a Crypto Investor Turned $250 into a Million-Dollar Meme
Have you ever dreamed of becoming a millionaire overnight? Well, that's exactly what happened to one lucky crypto investor who swapped a small amount of Ethereum for a massive stash of PEPE tokens. But there's a catch: they may not be able to cash out their fortune anytime soon. 😱
In this article, we'll explain how this incredible story unfolded, what PEPE tokens are, and why liquidity issues could prevent the investor from selling their tokens. We'll also share some tips on how to spot and avoid potential pitfalls when investing in memecoins. 🚀
What are PEPE tokens?
PEPE tokens are based on Pepe the Frog, a popular internet meme created by artist Matt Furie. Pepe the Frog has been used in various contexts and subcultures, including crypto and blockchain communities. 🐸
PEPE tokens are part of a project called PepeCash, which aims to create a decentralized platform for artists and collectors to create and trade digital artworks featuring Pepe the Frog. PepeCash claims to be the first meme-based NFT platform, and has its own marketplace called Rare Pepe Wallet. 🖼️
According to its website, PepeCash is “meant to be the currency of the Pepesphere.” It has a fixed supply of 701 million tokens, which can be used to buy and sell Rare Pepes, as well as to tip artists and curators. PepeCash is also compatible with Counterparty, a protocol that allows users to create and trade custom tokens on top of Bitcoin. 💰
How did the investor make a million dollars?
The investor, who goes by the username Ahmet909 on Reddit, posted their story on the r/CryptoCurrency subreddit on April 19, 2023. They claimed that they swapped 0.125 ETH, then worth $250, for 5.9 trillion PEPE tokens four days ago on Uniswap, a decentralized exchange that allows users to swap any ERC-20 token for another. 🔄
At the time of the swap, PEPE tokens were trading at a very low price of $0.000000000042 per token. However, shortly after the swap, PEPE tokens skyrocketed in value by over 24 million percent, reaching a peak price of $0.00000102 per token on April 19, 2023. This meant that the investor's 5.9 trillion PEPE tokens were worth over $6 million at that point. 😲
The investor said that they were shocked and excited by this unexpected windfall, and decided to sell some of their PEPE tokens to lock in some profits. They managed to sell about 10% of their tokens for around $600,000 worth of ETH, which they transferred to their Coinbase account. They said that they planned to use some of the money to pay off their debts and invest in other projects. 🎉
But can they sell the rest of their tokens?
Unfortunately for the investor, selling the rest of their PEPE tokens may not be as easy as it sounds. That's because PEPE tokens suffer from a serious lack of liquidity, which means that there are not enough buyers and sellers in the market to facilitate smooth and efficient transactions. 🙁
Liquidity is crucial for any asset or token, as it determines how quickly and easily it can be converted into cash or other assets without affecting its price. Low liquidity can lead to high volatility, large price spreads, and slippage (the difference between the expected price and the actual price of a trade). Low liquidity can also make it hard or impossible to exit a position without crashing the market or losing money. 😥
Why are PEPE tokens so illiquid?
Secondly, PEPE tokens have a very uneven distribution of supply and demand. According to Etherscan, there are only 1,057 holders of PEPE tokens, and the top 10 holders own over 99% of the total supply. This means that most of the tokens are concentrated in a few hands, and there are not many active traders or buyers in the market. 🤔
Thirdly, PEPE tokens have a very low market capitalization and trading volume. According to CoinGecko, PEPE tokens have a market cap of about $1.5 million and a 24-hour trading volume of about $2,000 as of April 20, 2023. These numbers are very small compared to other popular memecoins, such as Dogecoin, which has a market cap of over $10 billion and a 24-hour trading volume of over $2 billion. 🐶
All these factors make it very hard for the investor to sell their remaining PEPE tokens without causing a massive price drop or losing a lot of money in fees and slippage. In fact, according to Uniswap's interface, selling just 1% of their tokens would cause the price to drop by over 50%. Selling all of their tokens would reduce the price to almost zero. 😱
What can the investor do?
The investor has a few options to try to sell their PEPE tokens, but none of them are ideal or guaranteed to work. Here are some of them: 🤷♂️
- Wait for more liquidity and demand to enter the market. This could happen if more exchanges or platforms list PEPE tokens, or if more people become interested in buying them. However, this could also take a long time or never happen at all. 😴
- Sell their tokens gradually and strategically. This could involve selling small amounts of tokens at different times and prices, using limit orders or stop-loss orders, and avoiding peak hours or periods of high volatility. However, this could also take a long time and incur high fees and slippage. 😓
- Donate or burn their tokens. This could involve sending their tokens to a charity or a dead address, effectively removing them from circulation. This could increase the scarcity and value of the remaining tokens, and also generate some positive publicity or goodwill for the investor. However, this could also mean giving up their potential profits and losing their tokens forever. 😭
What can we learn from this story?
This story is a fascinating example of how crypto can create incredible opportunities and challenges for investors. It shows how memecoins can generate huge returns in a short period of time, but also how they can be very risky and illiquid. It also shows how important it is to do your own research and due diligence before investing in any token or project. 🧐
Some questions you should ask yourself before investing in memecoins are: 🙋♂️
- What is the purpose and utility of the token? Does it have a clear use case or value proposition?
- Who is behind the project? Do they have a credible team, vision, and roadmap?
- How is the token distributed and governed? Is it fair and transparent?
- How is the token traded and supported? Is it available on reputable exchanges or platforms? Does it have enough liquidity and volume?
- What are the risks and challenges involved? Is it vulnerable to hacks, scams, regulation, or competition?
By asking these questions, you can avoid falling for hype or scams, and make more informed and rational decisions about your investments. Remember: don't invest more than you can afford to lose, diversify your portfolio, and always do your own research. 💯