New Protocol Dumpy.fun Lets Users Short Memecoins as Market Value of the Sector Drops to $53B

Most memecoins are available only for spot trading. But major tokens like Dogecoin, Pepe, Shiba Inu, and Brett have market values large enough for centralised exchanges to offer leveraged futures trading.

A new protocol has emerged, aiming to simplify the process of shorting memecoins and offering a new avenue for traders to capitalize on the plunging prices of these tokens.

Most memecoins are only available for spot trading due to their small market values. However, major memecoins like Dogecoin, Pepe, Shiba Inu, and Brett have market values large enough for centralized exchanges to offer leveraged futures trading on these tokens.

Centralized exchanges allow traders to borrow funds at a leverage ratio of the margin they put up as capital. This borrowed sum can then be used to enter into long or short bets on crypto tokens.

The new protocol, called Dumpy.fun, says it wants to make shorting memecoins easier — and plans to enable permissionless listing of all memecoins.

For now, the protocol is in beta launch, and only users on the waitlist have access to the protocol. Those interested in using the protocol to short memecoins can sign up on the Dumpy.fun website.

Shorting memecoins may prove to be a profitable strategy, especially given the recent performance of memecoins.

Crypto’s two largest memecoins, Dogecoin and Shiba Inu, are down some 80% from their peak prices. While some memecoins trigger frenzied trading activity, most gains are ephemeral — a likely target for would-be short traders.

This year, celebrity memecoins were the talk of the town with many notable personalities launching their own tokens, ranging from athletes to musicians and reality TV stars. Those memecoins, however, quickly become a prime target for traders looking to quickly flip a profit.

In June, those celebrity memecoins were all the rage with many notable personalities, such as Iggy Azalea and Caitlyn Jenner, launching tokens. Those memecoins initially soared upon listing but have since plummeted. Azalea’s is down 79% while Jenner’s has dropped 75% from their peak prices

Tuesday’s launch features leveraged trading on only one memecoin, Catwifhat, a $36 million token launched early this year. The token is down 52% from its June peak.

Dumpy.fun traders will be able to vote on new listings, and the protocol will add one token each day during the beta phase. The platform did not announce the date for the full roll out.

Early traders will also be rewarded with airdrops, though the protocol did not elaborate on the reward mechanism for its token distribution.

The protocol’s name appears to be a play on the popular Solana memecoin generator pump.fun that has been integral to the Cambrian explosion of memecoins on the blockchain.

Solana accounts for 85% of all newly created tokens — many of them memecoins — that are traded on decentralised exchanges. The blockchain’s DEX trading activity has eclipsed that of Ethereum and its layer 2 networks combined.

This year, memecoins have attracted significant attention in crypto, with the sector growing to a $53 billion market value, CoinGecko data shows.

That figure, however, only accounts for so-called top memecoins catalogued by crypto market tracking platforms such as CoinGecko. It pales in comparison to the true size of the memecoin market as dozens of new tokens are launched every day across different blockchains.

Pump.fun alone has created over 1.5 million memecoins since its inception early this year, and Slorg, the pseudonymous business expansion manager at Solana DEX aggregator Slorg, recently cataloged the 30 celebrity memecoins launched on Solana last month.

The best performance is by a token linked to internet personality Andrew Tate, which is down 73% from its peak price.

The performance of these memecoins is in keeping with a recent study that said although such tokens promise big crypto gains on the back of their celebrity backers, the reality is that most are doomed to fail in the long run.

And that’s what the Dumpy.fun developers say is the rationale behind creating a protocol for shorting memecoins.

Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.