Solana News Today: Celebrities, Crypto, and Collapsing Trust: The YZY Warning

YZY, a new memecoin launched by rapper Kanye West (now known as Ye), has become the subject of scrutiny from analysts who are linking it to the $21 million LIBRA extraction scheme, a controversial rug pull event that has drawn attention globally. The YZY token, deployed on the Solana blockchain, saw its market capitalization surge to $3 billion within 40 minutes of its launch in late March, according to data analytics platform Nansen. However, the token has since seen a sharp decline, with its market cap dropping below $1.05 billion at the time of analysis [1].

The rapid rise and subsequent fall of YZY have led to speculation about insider trading and front-running by wallet holders. On-chain analytics firm Lookonchain noted that the token's liquidity pool only included YZY tokens, allowing developers to sell at will by adjusting liquidity. Moreover, it was revealed that 94% of the token supply was held by insiders, with a single multisig wallet accounting for 87% of the supply before distribution. This has raised concerns about the fairness and transparency of the token’s initial distribution [1].

These patterns bear resemblance to the LIBRA token scandal, where investors lost over $107 million after a sudden collapse of the project. In that case, Argentine President Javier Milei promoted the token on social media, only to face backlash and a subsequent ethics investigation. A U.S. judge recently unfroze $57.6 million in stablecoins tied to the Libra token scandal, allowing memecoin promoter Hayden Davis and others to access the funds. While the court expressed doubts about the success of the class-action lawsuit against the defendants, the incident highlights the broader risks associated with celebrity-backed memecoins [3].

In the case of YZY, the token employs a unique anti-sniping mechanism, deploying 25 contract addresses and selecting only one as the official token. This was designed to deter traders from exploiting launch price gaps. However, the mechanism did not prevent several instances of insider trading and front-running, including a reported $710,000 loss by an investor who mistakenly bought the wrong token [1]. Despite these issues, some well-known crypto traders have still invested in YZY, including James Wynn, who cited the success of other celebrity-backed tokens like TRUMP as a reason to buy.

Celebrities and politicians have played an increasing role in the crypto space, with mixed results. For example, Argentina’s President Javier Milei’s promotion of the LIBRA token initially drove it to a $4 billion market cap, but the price crashed after he deleted his post amid community backlash. Similarly, U.S. President Donald Trump’s TRUMP memecoin saw a 4x increase in 28 hours, according to reports. These cases illustrate the volatile nature of celebrity-driven tokens, where social influence can rapidly amplify or deflate a project’s value [1].

The YZY and LIBRA cases underscore the growing concern among regulators and investors about the risks of memecoins backed by high-profile figures. The lack of regulatory oversight, the prevalence of insider trading, and the potential for rug pulls have raised calls for stricter safeguards in the space. As the market continues to evolve, the line between speculative opportunity and organized fraud remains blurred, requiring both market participants and regulators to stay vigilant.

Source:

[1] Kanye West memecoin pumps $3B, but falls after insider concerns (https://cointelegraph.com/news/kanye-west-memecoin-pumps-3b-launch-then-falls-amid-insider-concerns)

[2] Kanye West drops YZY meme coin on Solana (https://cryptobriefing.com/yzy-meme-coin-solana-launch/)

[3] Judge unfreezes $57M in stablecoins linked to Libra token scandal (https://cointelegraph.com/news/judge-unfreezes-over-57m-stablecoins-libra-token-scandal)