A trader who operates in the volatile and fast-paced meme coin segment of the crypto market reportedly made a killing this week after bagging over $800,000 in a single hour. According to data from Lookonchain, the trader bought a token named $CTO that was temporarily boosted by an X post from the popular automated market maker called Raydium Protocol.

The initial investment on $CTO amounted to $8,500 (50 SOL). Just an hour later, the price of $CTO was propelled by the hype caused by Raydium’s X post. The result: The trader’s position was now worth over $900,000.

This market participant quickly liquidated most of the position and realized a profit of $802,500. Lookonchain data also pointed out that this same trader managed to turn a profit of over $100,000 in a transaction involving $PFI.

Notably, the wallet used for the $CTO trade was the third one to buy the token right after it was minted by using a platform called MakeNow.meme, which works similarly to Pump.fun.

Crypto Community Claims Insider Trading

The whole incident was picked up by the crypto community almost immediately. Some users on the social media platform X emphasized that the trade was probably the result of insider trading, meaning that a person with knowledge about Raydium’s intention to test MakeNow.meme rapidly bought the token after it was minted.

This new meme coin minting platform works even more seamlessly than Pump.fun as it creates a token out of an X post. Users just have to publish the ticker symbol of the coin, a description, and tag @makenowmeme to get their token minted.

It is worth noting that some users struggled to locate the right $CTO token when it was created. The result was that a random meme coin with that same name was quickly pumped as the true MakeNow.meme token wasn’t even launched yet.

In just a couple of hours, $CTO became worthless and many users responded to the tweet by calling it a “rug”, referring to a rug pull. This is a fraudulent coin offering where insiders profit from the initial price increase that comes after heavily promoting a crypto asset by dumping all of the tokens on investors.

What seems a bit odd is that a platform with a loyal following like Raydium would use its social media account to promote a meme coin. Right after they published the initial X post that led to the minting of $CTO, Raydium posted a second tweet saying:

“Oops, that didn’t exactly go as expected. Started with an idea to highlight a new protocol, now we’re here… With all new technology, boundaries will be pushed – or inadvertently stumbled over”

Lack of Regulation Opens Up the Door for Rug Pulls

The situation highlights the many risks of operating in this space. Users must be aware that, given the proliferation of meme coins, it is highly likely that most ticker symbols are now duplicated.

Hence, the best way to find and invest in the right token is to know its blockchain address, which is a series of alphanumeric characters that should be provided by the minting platform, so the user can find the correct token easily.

Also read: Celebrity Meme Coins Crash Badly in July – Is The Hype Over?

The incident also highlights the largely unregulated nature of the crypto space, which still allows random market participants to profit from information that is not available to the general public.

This would be unthinkable in the stock market, as it would result in an investigation by agencies like the United States Securities and Exchange Commission (SEC). Not to say that it does not happen at all, but there is a strict legal framework in place that deters market participants from engaging in insider trading.

The anonymous nature of the crypto market just makes it harder to track down who owns a certain wallet, making these kinds of crimes harder to enforce.

Looking to Profit from Meme Coins? Here’s a Few Ideas

Even though it is quite difficult to know in advance which meme coin is going to explode in the next few days, the best opportunities may be those that have already a well-established name and a robust community behind them.

Looking at the entire space, it is worth noting that meme coins have been dropping sharply in the past few days as traders may have sensed that the hype has been wearing after weeks of aggressively pumping these assets.

For example, top-ranked tokens like Dogecoin (DOGE) and Pepe (PEPE) have both faced losses of nearly 9% and 13% respectively in the past 7 days.

dogwifhat meme coin 7-day performance
dogwifhat (WIF) – Source: CoinMarketCap

Meanwhile, other tokens like dogwifhat (WIF) and Popcat (POPCAT) have seen the price of their tokens drop by over 20% during that same period.

Despite this weakness, some tokens have emerged with gains. Notably, Book of Meme (BOME), one of the most popular meme coins of this cycle, produced a positive return of 11% in the past week while a token called Neiro Ethereum (NEIRO) generated a 1,000% gain during that same period.

However, experts in the crypto space have warned that the total supply of Neiro Ethereum (NEIRO) was quickly distributed among just 80 addresses, making the token highly susceptible to price manipulation and rug pulls by insiders.

Where to look then? Given the unpredictable nature of meme coins, a systematic approach is perhaps the best alternative to identify potential winners. Here’s a list of approaches that may help investors succeed in the meme coin space:

  1. Keep an eye on social media: Social media trends have a huge influence on the price of meme coins. If a certain ticker symbol is being mentioned repeatedly by real X accounts, it has higher odds of experiencing a dramatic price increase in the short term. However, this is far from a perfect method and should only help you find coins to research further. Always watch out for bots and scams as they are extremely common on X.
  2. Look for tokens with a strong community: Well-established meme coins are often far less volatile than new tokens as they are larger and generally distributed among more people. These may be a better alternative to profit from meme coins in the long run if investors manage to get their hands on some tokens during market dips or bearish cycles.
  3. Avoid meme coins with heavy single-wallet allocations: Many potential rug pulls can be avoided if one looks at on-chain data to see how many tokens are held by individual wallets. If a single wallet or a small group holds over 30-50% of the token, they could easily crash the price of the coin to zero by selling. This kind of rug pull happens constantly every single day, especially with small and new meme coins.

The $CTO trader mentioned earlier may have profited quickly from his investment, but that does not necessarily mean that this is attainable to everyone without insider knowledge or a systematic approach.

If you have the guts to venture into the meme coin realm, keep in mind that large gains are rare and big losses happen all the time in this space. As always, when it comes to high-risk investments, make sure that you aren’t spending money that you can’t afford to lose. Speak to a financial advisor before making investment decisions if possible as well.