It seems that the delineation between Bitcoin and cryptocurrencies continues.
The latest blow to the altcoin market comes from another dubious memecoin called LIBRA, birthed on the general-purpose blockchain Solana, known for its fast performance and low transaction fees. As with many memecoins, LIBRA suffered a “rug pull” event, having reached a market cap of over $4 billion on Saturday, only to collapse to $0.3 billion by Monday.
As of press time, LIBRA trading activity surged, pushing its market cap above $500 million. Image credit: DexScreener
But this time around, the memecoin collapse story is unusual for multiple reasons. First, Argentine President Javier Milei, known for his libertarian roots and cutting down government waste, promoted LIBRA from his official X account on Friday.
At first glance, this stands to reason as LIBRA is linked to Viva La Libertad (Long Live Freedom), the main theme of Milei’s presidential campaign. Within 4 hours, however, Milei posted that he was unaware of the token’s origin, having deleted his endorsement tweet.
This was the period that boosted LIBRA value, triggering the subsequent rug pull. Most recently, President Milei ordered the Anti-Corruption Office to investigate LIBRA launch for alleged fraud. This was after Milei’s political opponents called for his impeachment over the weekend, amid fraud complaints.
But this may be just the start of the scandal. The second reason why the LIBRA scandal is so unusual is that its creators may be the same ones behind MELANIA and other memecoins.
Memecoins: Coordinated Wealth Extraction Scheme?
In collaboration with popular crypto investigator Stephen Findeisen, aka Coffeezilla, and Bubblemaps platform, there appears to be onchain evidence that links MELANIA with LIBRA creators.
The baseline for that assertion comes from this wallet address (OxcEA), previously associated with MELANIA memecoin. Another address sent funds to that wallet, but from an activity called sniping. This is when an asset is bought using bots at its lowest price just prior to potential value surge.
From sniping, funds funnelled between the two addresses account for over $2.4 million. Coffeezilla and Bubblemaps charted the onchain pathways between the MELANIA sniper and LIBRA creator across multiple transactions and exchanges.
Onchain mapping of LIBRA’s capital retreat. Image credit: Bubblemaps
As shown on the chart, the aforementioned OxcEA wallet is funding DEfcyK wallet, tied to LIBRA launch. On Saturday, Bubblemaps had already reported that the LIBRA team is cashing out by draining USDC and SOL tokens from liquidity pools, worth $87 million at the time.
Spanning out from the scope of MELANIA and LIBRA, onchain trails also point out to other pump and dump memetokens: KACY, VIBES, TRUST and HOOD (NASDAQ:HOOD).
In this evolving story, Coffeezilla (rebranded to voidzilla) most recently interviewed Hayden Davis, one of LIBRA creators, together with Julian Peh (Kip Protocol), Mauricio Novelli (Tech Forum Argentina) and Manuel Godoy (Tech Forum Argentina).
Hayden Davis appears to claim that this was not a rug pull but “a plan gone miserably wrong”. Most importantly, Davis claimed emphatically that President Milei is not going to make money from LIBRA launch, which Milei retweeted.
In the meanwhile, although it seemed that KIP Protocol was tightly involved, as the Web3 facilitator, the clarification from KIP Protocol paints a different picture.
“KIP did not initiate the project, it did not manage or direct the token launch process, and it did not receive any tokens pre or post launch, and it did not profit from the token launch.”
Rather, the responsibility for the LIBRA token launch is in the hands of Kelsier Ventures and Hayden Davis.
Lessons from Another Failed Memecoin
As Hayden Davis put it in the interview with voidzilla, “it’s a memecoin, if you are turbo-nuking your whole portfolio into a memecoin…it’s foolish,”
The underlying assumption behind this is that memecoins hold unsubstantive, ephemeral value. Voidzilla further pointed out that there is a blurry line between “unfair value extraction” and rug pulls, given that people knowingly engage with an asset of such low quality.
In a nutshell, this entire dynamic can be summed as follows:
- Unlike Bitcoin, which is grounded in the proof-of-work mining network, memecoins and most altcoins can be created ad-infinitum and ex-nihilo.
- Given the near-zero cost of creating more crypto coins, this only serves to further dilute the altcoin market. In turn, there is more traction for short-lived pump and dump efforts.
- This creates a layer of traders who treat the entire crypto space as lottery-sniping opportunities, with wealth extractors on the top.
Suffice to say, this is completely divergent from the entire point of blockchain and decentralized money.
Milei: Scathed but Successful
Now that libertarian President Javier Milei is tainted with memecoins, it is likely that memecoin mania will take a few steps back. For Milei, this is doubly embarrassing since he has been the chief promoter of sound money and free enterprise, having called the Central Bank of Argentina as “one of the greatest thieves in the history of mankind.”
As with memecoins, central banks create money from nothing, causing inflation as the currency erodes into oblivion. Comparatively, US Dollar is the least eroded one owing to its status as a global reserve currency. Since President Milei took office, Argentina’s inflation fell to the lowest in five years, to 2.2%.
In conjunction with massive spending cuts and eliminating subsidies, Milei made many enemies. The calls from impeachment should be viewed from that angle, rather than an honest attempt at tackling potential corruption.
Nonetheless, even the hint of Milei impeachment dropped Argentina’s benchmark S&P Merval (IMV (OTC:IMVIF)) nearly 5% on Monday. That’s because the previous ruling class, one that drained Argentina’s currency and economy, is a known quantity. Therefore, a return to the old rule would be a return to poor economy.
Ironically, this market signal is likely to further drive support for Milei’s presidency, regardless of the LIBRA scandal. At the end of the line, it may turn out that LIBRA surges again if the investigation result is framed as natural market forces. But even if that is shown, traders would be better off staying away from market forces circling such weak fundamentals.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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