Trending meme tokens hide risks of insider wallet clusters

New meme tokens launch every day and often end up among trending assets or the day’s big gainers. However, some of those tokens hold hidden risks of insider holdings. 

Meme projects are usually community-driven. However, those assets are often closely tied to their creators, who try to remain anonymous. On-chain data reveal that some tokens are not fairly distributed and contain suspicious wallet clusters. 

Read: The Complete Guide to Crypto Memes: Understanding Meme Coins

Some wallet clusters form naturally, when a user or an exchange like Raydium distributes tokens to more than one address. Others point to a single large entity holding a big part of the supply. The presence of big wallet clusters suggests there are insiders who may aggressively sell the token.

Wallet cluster tied to total loss for $RIZZ

One of the most dramatic examples of a wallet cluster is for RIZZ, a newly launched Solana-based meme token. After Bubblemaps revealed the wallet clusters during a RIZZ livestream, the price crashed, as ween on the chart, erasing 99% of the token’s value on June 21. 

The RIZZ token crashed while its creator was livestreaming, after revealing a suspicious cluster of connected wallets. Source: Dextools

The selling pressure was not directly tied to the wallet clusters. Bubblemaps is still investigating wallet patterns that may indicate a problem with the token’s holding structure. It is possible that some clusters are meant to auto-snipe the token early on and create the image of active trading. 

The PEPE token bubble map shows a more fair distribution compared to RIZZ. The only high-activity cluster belongs to a known exchange wallet. TRUMP tokens, trending as of June 24, show activity with small clusters, which nevertheless reveal high transaction volumes . The wallets of those clusters are also smaller, but they are used in almost constant activity.

The trending MAGA token on Ethereum also shows a cluster of interconnected wallets , which seem to be transacting between each other, circulating the tokens. MOG, on the other hand, is among the trending tokens with a distribution looking more equal and almost no clusters outside exchanges. 

APE, a newly trending Ethereum token, is forming a cluster with more than 11% of the supply. The wallets move coins in a circular fashion and are not identified as belonging to an exchange. 

Also read: Creator of DJT exposed for insider trading and connection to Barron Trump

Trump Coin (DJT), launched by Martin Shkreli, is a prime example of a token with the potential for large-scale insider scaling. 

TrumpCoin still contains clusters that control a large percentage of the supply. Source: Bubblemaps

Clusters are also temporary and may alter a coin’s holding structure. In the early days, DJT tokens were all part of one cluster, as the assets were distributed through Raydium trading. Other worrying patterns when visualizing the token may include a multitude of similar-sized wallets, even if unconnected, as well as large single-owner wallets. 

In some cases, the clusters form soon after a token’s launch, when early snipers buy up a large part of the supply. Some clusters may not be insiders but early snipe purchases that then aim to shift the supply distribution.

Older tokens also go through suspicious activity

Suspicious wallet clusters do not only appear for newly launched tokens. Even older, established Solana meme tokens like Book of Meme (BOME) go though cluster formation. One large-scale wallet formed that holds more than 53% of all BOME. 

The BOME wallet cluster most likely belongs to an unidentified exchange. Source: Bubblemaps

In this case, the mapping does not reveal the identity of the wallet, as it could be an untagged exchange. The wallet has also been set apart for having a high transaction volume with connected wallets. In the case of BOME, the big wallet most probably belongs to Binance2, based on Solscan communication with smaller wallets. Yet this also reveals the concentration of BOME and the potential readiness to sell on a centralized exchange.

Single-user wallets should also be considered. Even for DogWifHat (WIF), wallets are equivalent to all ByBit exchange holdings. WIF is also highly concentrated on the Binance exchange. 

The type of wallet distribution can show what kind of selling pressure a token may experience. Some of the meme tokens are highly liquid, based on a high percentage of exchange wallets. Others have insiders waiting on the sidelines with significant holdings. Trending tokens are not immune to immediately reversing their trends and wiping out their value.

Cryptopolitan reporting by Hristina Vasileva