Author: Nancy, PANews

The cryptocurrency market is deep in a bear market, with many projects facing significant income declines, even withdrawing from the market, but Pump.fun remains one of the few leading protocols that maintain strong profitability.

Recently, after a significant unlocking of the Pump.fun token PUMP, the price rose despite expectations of a drop, while facing new competition from Robinhood Chain, with the platform's users and market share not showing significant loss, once again drawing market attention.

Why did PUMP rise against the trend after a large unlocking?

According to market expectations, large-scale token unlockings usually bring selling pressure, but PUMP has shown the opposite trend.

Since the large unlocking of PUMP in mid-July, its price has risen instead of falling. CoinGecko data shows that over the past 30 days, PUMP's maximum increase was approximately 47.9%.

The price increase of PUMP is partly due to the alleviation of selling pressure from the large unlocking. On July 14, PUMP conducted its first large-scale token unlocking for the team and investors after the TGE, releasing a scale exceeding $86 million. Prior to this, the market was generally concerned that large-scale unlockings might trigger investor sell-offs.

However, according to the latest analysis from Lbexplorer, among Pump.fun's 79 investor wallets, only 3 wallets have sold their allocated shares. Among them, the largest sale came from a wallet holding 625 million PUMP, cashing out approximately $1.2825 million; the other two wallets sold a total of slightly over $100,000. Over the past 13 days, investors have sold a total of about 770 million PUMP, valued at approximately $1.574 million. Currently, about 92% of the investor allocated tokens remain unsold.

At the same time, the buyback and burn mechanism is also an important factor supporting PUMP's price. The Pump.fun official website shows that as of now, the platform has cumulatively burned over 15.45 million PUMP, worth more than $416 million, accounting for about 15.4% of the total PUMP supply. In the past 7 days, Pump.fun has bought back and burned approximately 2.236 billion PUMP, valued at about $4.359 million. However, although the buyback mechanism can provide short-term price support, its long-term uplifting effect still depends on the platform's income growth capability.

In fact, Pump.fun's recent buyback efforts have clearly declined. Data shows that its daily buyback funds have decreased from a previous high exceeding $3.06 million to currently about $690,000, a drop of approximately 77.5%.

The shrinkage of buyback funds is partly related to Pump.fun's adjustment of token economic models several months ago. Previously, the platform announced that the income scale used for buying back and burning PUMP would be reduced to 50%. On the other hand, it also reflects that the market downturn is impacting the platform's income performance, with its daily income falling from a historical high of nearly $5.2 million to currently around $1.608 million, a decrease of approximately 69.1%.

Still a profitable machine in a bear market, but income growth cannot escape cyclical fluctuations

Compared to most cryptocurrency protocols, Pump.fun still maintains strong profitability and has become one of the few leading protocols with stable cash flow in a bear market environment.

Data from DeFiLlama shows that as of July 30, Pump.fun's annualized income has reached about $450 million. Its daily income ranks only behind Tether, Circle, and Hyperliquid, accounting for nearly 4.2% of the overall cryptocurrency market income. Since the beginning of this year, Pump.fun's monthly income has remained above $30 million.

Recently, Pump.fun's income even briefly surpassed that of the leading Prep DEX Hyperliquid. In this regard, Pump.fun co-founder Sapijiju stated that Pump.fun's long-term potential market size (TAM) will exceed that of the global perpetual contracts market in which Hyperliquid operates, claiming that it is "much larger...just not validated yet."

In addition to continuously generating income, the Pump.fun team has also reaped substantial fee income. Since the beginning of 2024, Pump.fun has cumulatively sold about 4.812 million SOL in fee income, valued at over $810 million, primarily from 1% trading fees.

However, Pump.fun's current performance still shows a significant gap from its peak period. Dune data shows that as of July 30, Pump.fun's weekly trading volume is only about 17% of its historical peak, and the number of daily active addresses has also decreased to 38.1% of its peak period. The decline in trading enthusiasm directly impacts the platform's income performance. Dune data shows that Pump.fun's current daily income is only about 30% of its historical peak period. This means that Pump.fun's business model still greatly depends on market sentiment and the enthusiasm for Meme coins, with income growth showing strong cyclicality.

It is worth mentioning that Pump.fun is currently facing a collective lawsuit, accused of involving internal preferential trading, manipulating the Meme coin market, selling unregistered securities, and violating relevant RICO laws. In response to potential compliance risks, the parent company of Pump.fun, Baton Corporation, announced at the end of June this year that it would hire a Chief Legal Officer at a high salary, with a base salary range of $1 million to $5 million, responsible for regulatory affairs, product consultation, corporate governance, cross-border compliance, and other matters.

Robinhood makes a strong entry, Pump.fun faces direct competition

In addition to the bear market pressure, the recent strong push from Robinhood Chain has also brought new competitive pressure to Pump.fun.

According to Dune data, the trading volume on Robinhood Chain's Launchpad last week reached $1.23 billion, higher than Pump.fun's $447 million during the same period, and close to Pumpswap's $1.22 billion. In terms of active addresses, Robinhood Chain's Launchpad had about 191,000 active addresses at the same time, while Pump.fun, dominant in the Solana ecosystem, had about 141,000.

However, as of now, Robinhood Launchpad has not significantly eroded Pump.fun's market share. In terms of trading volume and active address numbers, Pump.fun has still maintained a growth trend recently. However, apart from market environment factors, it remains uncertain how long Pump.fun can maintain its leading position in the Meme launching market against the backdrop of continuous competitor entries.

To enhance competitiveness, Pump.fun has also started to adjust its product strategy. Recently, Pump.fun launched a new standard launch mechanism called BOOST, aiming to address the significant dead liquidity issue that arose during the previous migration of tokens from the joint curve to the liquidity pool. According to its co-founder Alon Cohen, this mechanism can add about 20% liquidity for each newly migrated token without changing the trading experience of the joint curve or liquidity pool, injecting hundreds of millions of dollars into the ecosystem over time.

After the introduction of the new mechanism, Pump.fun's market activity has seen a notable improvement. Dune data shows that the platform's weekly token graduation rate has climbed to 3.7%, up from only 0.67% at the beginning of the year; the average daily token creation volume has also exceeded 36,000, approaching a new high in nearly four months.

However, some community users have pointed out that this mechanism effectively provides a free buying pressure and deflation effect for tokens about to graduate, significantly reducing the binding costs and incentivizing traders to push the market. Developers may take advantage of this mechanism to package soon-to-graduate bundled tokens, attract retail investors through the manufacture of liquidity and trading enthusiasm, and profit easily from it, thereby giving rise to more low-quality tokens dependent on bundling and short-term speculation.

Overall, Pump.fun's income flywheel is still built on the heat of the Meme market and the flow of speculative funds. While this model can bring substantial cash flow during market booms, it also means that the platform's income and PUMP price performance remain vulnerable to cyclical fluctuations in the market.

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