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The LIBRA Memecoin Scandal: A Net-Negative Wealth-Generating Event

The recent LIBRA memecoin scandal that rocked Argentina over the weekend has left millions of dollars in investor wealth in shambles, according to research by Nansen.

On-Chain Data Reveals Devastating Losses

On-chain data tracked by Nansen shows that 86% of traders lost a total of $251 million, while the winners secured just $180 million in profits. In other words, it was a “net-negative wealth-generating” event that potentially sucked out liquidity from the market.

The Event: A Stark Reminder of the Risks of Memecoins

The episode is a stark reminder that tokens associated with political figures can be just as risky as random memecoins and celebrity cryptocurrencies in making or breaking fortunes within minutes.

LIBRA’s Rise and Fall

LIBRA debuted on Meteora, a Solana-based decentralized exchange, last Friday and quickly surged to a market cap of over $4.5 billion after Argentina’s President Javier Milei said on social media that the project backing the coin would “focus on encouraging the growth of the Argentine economy, funding small businesses, and Argentina ventures.”

Over 40,000 crypto addresses piled into the token, fueling a surge in price. The bullish excitement, however, was short-lived. The balloon popped as insiders offloaded massive numbers of tokens, tanking the market cap by 90%.

Milei’s Response and the Consequences

Milei eventually deleted his social media post, saying he was “not aware of the details of the project” and, now informed, has chosen not to continue promoting it. By then, though, the damage was done.

The opposition called the whole affair an international embarrassment and threatened to impeach Milei.

Nansen’s Analysis: A Closer Look at the Data

“70% of wallets trading $LIBRA from February 16th to 18th ended with realized losses as many likely attempted to profit off of the additional retweet from Javier Milei,” Nansen said in a report shared with CoinDesk.

The number of unique holds of the token fell to 35,770 on February 18 from over 50,000 on February 14. Meanwhile, two wallets that bought the token at 22:01 UTC and sold by 22:44 UTC on February 14 made just over $5.4 million in total profit, the report noted.

Conclusion

The LIBRA memecoin scandal serves as a stark reminder of the risks involved in investing in tokens associated with political figures and the volatility of the cryptocurrency market. As investors, it is crucial to be aware of these risks and to conduct thorough research before making any investment decisions.

FAQs

Q: What is a memecoin?
A: A memecoin is a type of cryptocurrency that is often associated with internet memes or entertainment personalities, and is not necessarily backed by a real-world project or use case.

Q: What is the purpose of the LIBRA token?
A: According to the project’s backers, the LIBRA token is intended to “focus on encouraging the growth of the Argentine economy, funding small businesses, and Argentina ventures.”

Q: What happened to the price of LIBRA?
A: The price of LIBRA surged initially, but eventually tanked by 90% after insiders offloaded massive numbers of tokens.

Q: What is Nansen’s analysis of the situation?
A: Nansen’s on-chain data suggests that 86% of traders lost a total of $251 million, while the winners secured just $180 million in profits, resulting in a “net-negative wealth-generating” event.

Q: What is the significance of the LIBRA memecoin scandal?
A: The scandal serves as a stark reminder of the risks involved in investing in tokens associated with political figures and the volatility of the cryptocurrency market.