Lawmakers and market analysts are raising concerns about the state of the cryptocurrency industry, as investor sentiment shifts in response to recent developments. In New York, legislators have introduced a bill aimed at curbing rug pull scams, introducing new criminal penalties for deceptive practices in the crypto space. At the same time, the meme coin market has experienced a significant downturn following a series of failed launches and insider-driven collapses, raising questions about the long-term viability of speculative digital assets.
Meme Coin Mania Faces Harsh Reality as Investor Enthusiasm Wanes
The once-thriving meme coin market appears to be facing a major downturn following a series of failed launches and high-profile rug pulls that have drained investor confidence. According to Bobby Ong, co-founder of CoinGecko, meme coin activity has taken a nosedive as traders reconsider their positions in the wake of these events.
Ong’s latest report, published on March 6, highlights how the disastrous launch of Libra (LIBRA), a token supposedly associated with Argentine President Javier Milei, sent shockwaves through the market. Pump.fun, a prominent token launchpad, saw its metrics plummet immediately after LIBRA’s collapse, with the number of newly created and daily graduated tokens on the platform dropping over 90% since their February peak.
The early-year meme coin craze reached unprecedented heights with the launch of TRUMP and MELANIA, meme coins themed around US President Donald Trump and his wife. These tokens attracted massive attention, but Ong suggests they also marked the peak of the frenzy by diverting liquidity away from other projects.
The effect of these launches on Pump.fun was staggering. In mid-January, the platform recorded an all-time high of $3.3 billion in weekly trading volume, reflecting widespread investor excitement. However, by February, trading volume had plunged by 63%, signifying an abrupt shift in sentiment. CoinMarketCap data further shows that the overall market capitalization of meme coins, which hit an all-time high of $124 billion on Dec. 5, has since plummeted to $54 billion—shedding nearly 57% of its value in just a few months.
While TRUMP and MELANIA’s launch signaled the peak of meme coin enthusiasm, Ong argues that LIBRA’s failure was what truly shattered the illusion of fairness in meme coin investing. The token’s launch was marred by insider manipulation, with early investors and insiders cashing out over $107 million within hours, causing the token’s value to crash by 94% almost immediately.
The fallout from LIBRA’s collapse has fueled skepticism over meme coins, leading many investors to question whether these projects offer genuine opportunities or are simply tools for quick profit at the expense of retail traders. The erosion of trust has been particularly damaging for platforms like Pump.fun, which had thrived on the rapid creation and trading of new meme coins.
A Cyclical Market: Can Meme Coins Survive?
Despite the recent downturn, Ong remains confident that meme coins will persist in some form, though he acknowledges they are “seasonal” assets subject to wild market cycles. Historical trends suggest that while most meme coins will fade into obscurity, a select few may endure and carve out a lasting presence in the crypto ecosystem.
Onchain analytics platform Santiment has also noted a shift in investor interest away from meme coins and back toward established assets like Bitcoin (BTC), Ethereum (ETH), and other major layer-1 blockchains. This transition could signal a return to fundamentals as traders seek more stability in their portfolios after the chaotic meme coin run.
Ong speculates that the market might be heading toward an “extreme case of power law,” where 99.99% of meme coins ultimately fail, while a handful manage to rise above the rest. Established meme coins like Dogecoin (DOGE), Shiba Inu (SHIB), and Bonk (BONK) have demonstrated resilience through past market cycles, offering insights into what makes a meme coin sustainable in the long run.
According to Ong, the meme coins that have survived market downturns share a common trait: deeply engaged communities. Unlike speculative projects that thrive on hype and vanish just as quickly, DOGE, SHIB, and BONK have cultivated loyal followings that continue to support and promote their respective tokens, even during bear markets.
“The most successful memes are those that have managed to build cult-like communities who are extremely passionate about a cause, who won’t sell, and who can create content or stories organically,” Ong explained. This level of community involvement provides stability, enabling some meme coins to persist while countless others fade away.
While the recent collapse in meme coin trading volume suggests a shift in investor sentiment, history indicates that speculative assets often experience cycles of extreme growth and decline. The meme coin space may be facing a harsh correction, but its most dedicated participants are unlikely to disappear entirely.
For now, traders appear to be refocusing on more established cryptocurrencies, seeking stability amid the chaos. However, should the right mix of hype, community engagement, and market conditions emerge, meme coins could once again capture the spotlight—albeit with fewer participants willing to gamble on the next speculative frenzy.
Only time will tell whether this downturn marks the end of the meme coin era or just another phase in its ever-evolving cycle.
New York Lawmakers Introduce Bill to Crack Down on Crypto Rug Pulls
In other news, New York lawmakers are taking decisive action against fraudulent cryptocurrency schemes with a new bill aimed at curbing rug pulls—scams where project insiders suddenly abandon a project and abscond with investor funds. The move comes amid growing concerns over investor protection in the rapidly evolving digital asset space.
Assemblymember Clyde Vanel, chair of the New York Assembly’s Banks Committee, introduced Bill A06515 on March 5. The proposed legislation seeks to establish criminal penalties targeting deceptive cryptocurrency practices, reinforcing investor confidence and deterring bad actors.
The bill introduces new criminal charges for offenses involving “virtual token fraud,” explicitly classifying rug pulls and similar schemes as criminal activities. Under the legislation, “virtual tokens” include security tokens and stablecoins, while “security tokens” refer to any form of fungible or non-fungible computer code stored on a blockchain that verifies ownership through peer-to-peer transactions.
By creating legal definitions and penalties specifically addressing digital asset fraud, the bill provides law enforcement agencies with more clarity and authority in prosecuting offenders.
The timing of the bill aligns with heightened concerns over meme coin scams following the high-profile collapse of the Libra token. The token’s launch, which was promoted within insider circles, saw early investors siphon over $107 million in liquidity before the token crashed by 94% within hours, wiping out nearly $4 billion in investor capital.
Libra’s rapid demise sent shockwaves through the cryptocurrency community, particularly on Solana, which has been a hub for meme coin activity. February saw significant capital outflows from the network, with more than $485 million withdrawn as investors sought safer assets in the wake of growing scams.
Meme Coin Mania: A Regulatory Headache
The rise of meme coin-related scams presents significant challenges for regulators. Many of these projects operate in a legal gray area, making it difficult to hold perpetrators accountable. Anastasija Plotnikova, co-founder and CEO of blockchain regulatory firm Fideum, argues that enforcement against insider fraud and rug pulls should be a higher priority for regulators.
The problem is exacerbated by the nature of blockchain technology, which allows for pseudonymous transactions that can be difficult to trace without sophisticated tools. While some decentralized platforms have implemented measures to enhance transparency, enforcement remains a challenge in cases where fraudsters quickly move stolen funds across multiple chains and platforms.
If passed, Bill A06515 could set a precedent for other states looking to regulate cryptocurrency fraud more aggressively. New York has long been at the forefront of cryptocurrency regulation, previously introducing the BitLicense framework, which mandates strict compliance requirements for crypto businesses operating in the state.
However, the challenge remains in balancing consumer protection with the industry’s decentralized ethos. While legitimate projects may welcome regulations that weed out bad actors, excessive restrictions could stifle innovation and push projects offshore to jurisdictions with looser oversight.
The bill’s introduction also comes amid speculation that US regulators, including the Securities and Exchange Commission (SEC), may begin scrutinizing celebrity-endorsed meme coins more closely. The recent surge of Trump-themed cryptocurrencies has raised concerns that political figures and their affiliates could become involved in similar scandals, drawing further regulatory attention.
This article was originally Posted on Coinpaper.com
