Argentina Scandal Fuels Selloff on Favorite Memecoin Platform

(Bloomberg) — The Solana cryptocurrency sank to the lowest level since early November as the president of Argentina became embroiled in a scandal involving a memecoin launched on the token’s blockchain.

Solana, the sixth-largest crypto token, has lost about 25% of its market value since Feb. 14 as Argentina President Javier Milei came under scrutiny for promoting a token called Libra on the Solana blockchain, a network that has become popular for developers of crypto memecoins due to its low fees and fast transaction fees.     

The roughly $20 billion slide has drawn attention to the sudden surges and crashes in memecoins as promoters have been issuing thousands of the tokens, which generally have no underlying value. Nearly 60,000 tokens have been launched through Pump.fun, which lets anyone issue a token on Solana, according to tracker Dune.

“The market is concerned about liability contagion,” said Henry Elder of UTXO Management. “Every hour it seems that another leader in the Solana ecosystem is implicated in Libra and other extractive token launches that have featured almost exclusively in that ecosystem for several months.”

Another high-profile meme token issued on Solana by President Donald Trump has lost nearly 80% of its value since its Jan. 19 peak, according to tracker CoinMarketCap. A memecoin tied to First Lady Melania Trump is down 70%. Libra, which has caused political turmoil in Argentina, is down nearly 90% since it came out last week, CoinMarketCap data show.

Memecoins, which aren’t usually tied to any product or service, are viewed as a cultural phenomenon in crypto. Long-time versions such as Dogecoin, which features a picture of a dog, started as a joke but has garnered a following including billionaire Elon Musk, and now has a $36 billion market value. In recent years, other memecoins have been trying to engage loyal followers as well, with the likes of Shiba Inu and Pepe making their debuts. But many memecoins’ buyers have become victims of pump-and-dump schemes and rug pulls, in which the coins’ creators run up their prices and then exit, leaving others holding the bag as the price crashes.

There could be other reasons for Solana’s price decline as well, such as potential large sales of the token by Solana investors, with about $1.8 billion worth of the token hitting the market on March 1 due to unlocks, Elder said. Some coins granted to or purchased by certain parties can’t be sold until they unlock on a certain day.

“Many investors are front-running expected sales from those that are unlocking,” said Jeff Dorman, chief investment officer at Arca. “Further, the negative sentiment created from Pump.fun” and other parties involved “in the TRUMP, MELANIA, and LIBRA tokens have weighed on price.”

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