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Hello readers,
What if I told you that there was a business that was just over 2 years old and had the following features:
$1m/day revenue in a “down market.”
85% market share + strong organic distribution in one of the hottest market segments of crypto.
A legit creator economy ($350m in payouts over the last year).
A sticky product that solves real problems within a hot sector.
A founder team laser-focused on users.
A lean, efficient operation (asset light).
A token buyback yield of 37%.
And a price-to-sales ratio of 1.4x.
Sound good?
Now, what if I told you that the business catered primarily to the speculative memecoin sector of crypto?
Whoops. Did I just rile your emotions?
Because that’s the sense I get when I talk with other investors and crypto natives about the project we’re covering today: Pump Fun.
It’s quite fascinating. Discussing PUMP in 2026 with investors and crypto natives reminds me of the reactions I used to get from my “normie friends” back in 2019/2020 when the topic of BTC came up.
That’s why I want to double-click on it. In this week's report, we share the “naysayer arguments” relating to Pump Fun, memecoins, and the “consumer/social” sector of the crypto markets.
We’ll go through each one, sharing why we think many may be misguided.
*Please note that you can click the data citation note under each chart to access the supporting dashboard for this week’s report.
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Let’s go.
This is the perception. The reality, as we see it:
The Pump founding team “chewed glass” for multiple years within the Ethereum ecosystem. Iterating. Shipping. And trying to find product market fit. They then pivoted to Solana in ‘24 because they saw that’s where the users were. Learned an entirely new stack. And quickly launched what would become one of the most popular apps of the last cycle.
They did this by chasing users. By focusing on user preferences. And they did it the hard way — with direct conversations with users via direct message. Most teams in crypto do the opposite. They build for a vision that doesn’t exist. And then they are surprised when users don’t show up. We think Alon, the co-founder and “public face” of Pump Fun, laid out a masterclass for other crypto founders in his interview with David Hoffman on Bankless. We recommend checking it out.
Meanwhile, we haven’t found any evidence of “irresponsible behavior” by the team. Is it true that there are scams and unsavory behavior on the app? Yes! This is crypto, after all. Our focus isn’t so much on poor behavior from a small subset of users as on how the team responds to such behavior, particularly given the explosive growth over a short period. At one point, 80k + tokens were being launched/day. It’s our understanding that the team did have content moderation in place. It seems they just got slammed with explosive growth. Overall, we think the approach they’ve taken to moderation is correct — do everything you can to protect users. But also allow permissionless experiments and let growth emerge from that. In our opinion, moderation can be adjusted as the platform grows (as we’re observing). More on the livestreaming component later in the report.
Again, this is the perception. We think it primarily comes from the view that “memecoins are inert.” Or they “add no value.”
We agree! But we can also see that many people like to launch memecoins. And lots of people like to trade them. They like the social aspects. The “game-like” aspects. They like interacting with people online while trying to make some money.
In essense, they think it’s fun. It all looks pretty silly. But who are we to judge? Lots of popular social apps look toy-like in their early years.
It’s our view that the premise of a product or service “having to add value” to the world is also one to drill down on.
Does going to a concert with friends add value to the world?
How about eating an ice cream cone or drinking a beer?
Should all experiences and products that people enjoy but “don’t add value to the world” be frowned upon?
The premise doesn’t make much sense when you apply some second-order thinking — and it’s part of why we think it’s easy to look past the potential of Pump Fun from a market/business perspective.
Another reason we think many view the platform as “extractive” is that the Pump team has not shared a token airdrop with users.
The reality is that they still have almost 25% of the tokens allocated to their “community and ecosystem.”
Pump has paid token creators more than $350 million in the last year. We’ve observed that crypto natives are shocked to see this. Which is interesting in and of itself (apparently nobody on CT is using it, which means PUMP is tapping into a larger user base).
If you squint a little bit, these numbers look like the early days of YouTube.
The Pump team used 100% of its platform revenue to repurchase tokens during the first 9 months after the ICO last July. They’ve now burned those tokens (36% of the circulating supply) and committed 50% of their revenue to PUMP buybacks over the next year.
In total, the team has repurchased $389m of PUMP since the ICO last July. The average buyback yield over the last year is 33%. Again, this is during a “risk-off” period in the market.
So, where exactly is this “extraction” everyone is talking about?
From our perspective, the Pump team seems to have thought a lot about every stakeholder within its ecosystem:
Users (tokens allocated to the “community and ecosystem”).
Creators ($350m paid out over the last year).
Tokenholders (buybacks).
Finally, some might even view the product as “extractive to users.”
Our view is that Pump’s innovation (the bonding curve) helps to solve the problem of pump-and-dump schemes. Is it perfect? No.
But consider that before Pump Fun, memecoin launches worked like this: the creator would ask people to send them $ in exchange for tokens. The creator would then launch the token, control most of the supply, create a liquidity pool, and pay influencers to market it. Influencers would receive a token allocation, often dumping it on their communities.
That’s extractive!
Pump Fun solves the inherent trust baked into this — allowing users to simply have fun launching and trading memecoins without trusting anyone. They’ve also aligned incentives with the token creator (creators do not receive tokens; instead, they are paid a % of trading fees). This incentivizes the correct behavior: for token creators to launch tokens that can accrue value and trade in perpetuity.
We see this all the time on CT. People are convinced of it. Yet, it’s simply not true. The team tokens are locked until the initial cliff unlock in July.
Furthermore, the founding team has already made 10’s of millions of dollars from the business. And based on the interview we watched with Alon (co-founder), he seems like a very competitive person focused on building a super app.
“If it turns out that Pump Fun is a one-cycle story, I think that would be pretty pathetic.”
-Co-Founder of Pump Fun
So, where does the narrative come from?
The PUMP token price is down roughly 80%, despite the team repurchasing 36% of the circulating supply.
Why?
It looks to us like retail users bought the ICO and then dumped it when the market turned.
From what we can see (using Glassnode data), roughly 24% of the circulating supply (from the ICO) was purchased at $0.006 or higher. 95% of those tokens have rotated hands/wallets.
So, it looks like retail lost money on the token. And they’re angry about it. We think this is where the narrative comes from.
What we are observing now is a steady accumulation of tokens under $0.002.
If you’re curious, the Realized Price (proxy for cost basis of all holdings onchain) for PUMP is currently $0.0046.
We’ve received significant pushback on X simply for sharing the data and revenue we're seeing from the Pump Fun platform.
“It’s all wash trading” is what we mostly hear.
Is there any merit to this claim?
Maybe. But we can’t find any.
What we think is happening is that people are conflating trader bots/sniping activities as “wash trading.”
The bots/sniping activity is real. It’s part of the game. It pays fees. People like to trade memes when they first launch. They use various tools to do so. We think the market currently views this as a bug, but it’s actually a product feature. Each token launch is treated like a game. Fast trading creates instant price action and excitement. Only tokens with staying power make it out of this phase (less than 1%).
Are some players better than others? Absolutely. Are they making $ from this? We think so. Others are likely losing $. The key thing for us is whether users understand the game they are playing. We think they do. Furthermore, we struggle to see how this is any different from quant/algorithmic trading activity and market-making in public stock markets. Surely, those tools are designed to “make money from other traders.”
At the end of the day, more transparency and or rules/regulations would likely help. But it appears that users keep coming back. Nobody is forcing them to do so.
This is another narrative we’ve seen, similar to the narrative surrounding NFTs last cycle.
Is it true?
It’s possible. But the only reported incident we could find was related to the Bybit hack by North Korea’s Lazarus group last year. Apparently, a wallet linked to the hack (identified by ZachXBT) launched a memecoin on Pump Fun, which generated $26m of trading volume within three hours before it was removed/blocked from the platform.
Our understanding is that the Pump team addressed this as fast as possible.
via Bybit on X
Could more of this happen in the future? We think so. But this is how permissionless systems work. At some point, the Pump team may have to integrate user KYC. We think they will do so if that is what the law requires.
In November of ‘24, Pump Fun’s livestream feature was suspended after a backlash over violent, obscene, degrading, and dangerous content was used to generate attention for tokens.
This is a clear example of how “attention markets” can create dangerous incentives. But it’s also important to remember that everything Pump is shipping is an “experiment.” We should expect stuff like this to happen.
What’s more important is how it’s handled after poor behavior is identified.
Here’s what we know about how the issues with the livestream product were handled by the team:
Paused the feature in November of ‘24, indicating it would not return until the moderation infrastructure could handle the increased platform activity (which had grown 100x in under a week at the time). Our understanding is that they were taking down hundreds of streams daily, but their safety/content moderation could not keep up with the explosive growth.
Thereafter, Pump expanded its moderation resources and systems by doubling the headcount of human moderators and investing in human-assisted systems and automated moderation to more quickly identify inappropriate content.
The livesream feature returned on April 4th of 2025 and was reintroduced to just 5% of users at the time to properly test the new systems.
It was later rolled out to all users once again with new systems and explicit rules, prohibiting content involving violence, threats, self-harm, harassment, underage use, illegal activity, copyright violations, etc.
Is it cool that a small subset of Pump users abused the platform? Absolutely not. But did the team simply look the other way and let it continue? It doesn’t appear that this was the case. Instead, the evidence suggests they used it as an opportunity to improve the product, create rules, and improve user safety.
And for good reason. We analyzed data on tokens with livestream/social components versus those without.
Here’s what we found:
Is Pump Fun good for humanity? Does the world need this product? No! But it’s an incorrect framing in our view. Because if we applied this same premise to just about everything in society, we’d be living in the Stone Age.
It’s just not how the world works. The way it works is that if people ascribe value to something, it’s valuable.
Maybe a better question to ask is: why do so many people enjoy trading memecoins and interacting on Pump Fun?
The answer to this question may not be so complicated. We think it’s because they think it’s fun (and a way to make $).
As an investor, we want to be clear-eyed about this. Free of our own ideology. Free of bias and judgment.
This is how we grew conviction in BTC 7 years ago — when nobody in our inner circle thought it made sense. We applied the same logic to SOL in late ‘22. We’re applying it to WLD in ‘26. And now PUMP in ‘26.
At the end of the day, the best investments we’ve historically made have come when we identify something that we think lots of smart people are missing. We think it’s reasonable to assume that the naysayer arguments are correct. But when we dig into the data and apply some second-level thinking, we see the potential for a different outcome.
Which makes us 1) contrarian, 2) better informed than the market view (we think).
That’s where we are most comfortable as investors. When we see the opposing view, yet we still arrive at a different conclusion.
As Charlie Munger (RIP) used to say: “I never allow myself to have an opinion on anything that I don’t know the other side’s argument better than they do.”
Of course, there is no guarantee we are correct. And no investment is free of risk. The primary risks, as we see it:
Security/smart contract risk. Pump Fun was hacked in May of ‘24 for $1.9m, but it was not a 3rd party security exploit. It was a former employee who had “withdrawn authority” and used flash loans to manipulate tokens through their bonding curve. The Pump team responded by 1) halting trading, 2) making users whole, 3) temporarily waiving trading fees, and 4) assisting with law enforcement.
A new “shiny object” or competition. It’s possible that a new project comes along, iterates on what Pump has built, and offers a compelling alternative. It should be noted that this has already played out to some extent, via Let’s Bonk last year (which briefly stole market share before Pump reclaimed it).
Interest in memecoins. It’s possible that user preferences shift away from memecoins. With that said, we see no signs of this in the data we track. In fact, we see the sector growing from cycle to cycle in terms of trading volumes, with Pump Fun generating $1m in revenue/day during the latest crypto “crypto winter.”
Legal risk. Investors should note that successful crypto products often face legal challenges/lawsuits. Pump Fun is no different. There is currently a pending lawsuit concerning unregistered securities (the SEC has already spoken on this subject; memecoins are not securities), insiders, launch mechanics, etc. We think it’s a similar “no crying in the casino” case to the one we saw with Uniswap during the Gensler era. The court dismissed that case on the grounds that Uniswap could not be held liable for 3rd parties' misuse of the decentralized, permissionless protocol. That said, the analogy isn’t perfectly apples-to-apples. The distinction is that Uniswap is a general-purpose AMM, while Pump Fun is a purpose-built token launchpad that integrates creation, bonding-curve distribution, trading, creator incentives, and migration. Plaintiffs will likely argue that this makes Pump Fun more directly involved in the alleged conduct than Uniswap. Pump’s counter is that the tokens remain user-created, permissionless, and outside the scope of securities laws (per SEC guidance). The Pump Fun team filed a motion to dismiss the case a few months ago, which is currently pending.
Cyclicality/market risk. While Pump Fun has held up quite well in terms of token launches, user activity, revenues, creator fees, etc., in the bear market, investors should understand that PUMP’s valuation will likely be tied to “risk-on” market conditions. If apathy sets into the market, it can take time for a rebound.
After studying the platform (and market) extensively from both qualitative and quantitative perspectives, we believe the risk/reward is in our favor with PUMP trading at 1.4x sales (with 50% of revenue going to token repurchases).
We also want to keep an eye on how the app evolves. We think it’s a sticky product. But there is also a chance the platform could grow into much more than a “memcoin casino.” At the end of the day, with “memes,” you can take any idea in the world. Tokenize it. And bootstrap liquidity relatively easily and at low cost on the Pump Fun platform. It’s a large design space for creatives. As such, we expect the platform to evolve with time, potentially altering how content creation works.
That’s why we’ve added PUMP to the TDR Pro portfolio.
If you’d like to see the allocation and other assets we’ve recently added, you can access TDR Pro and get a one-month fee here.
If you’re a monthly subscriber and would like to lock in to the annual plan at a 20% discount ($16.67/month), you can do so here.
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Disclaimer: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. Although The DeFi Report and the author believe the information presented is substantially accurate in all material respects and does not omit to state material facts necessary to make the statements herein not misleading, all information and materials in the report are provided on an “as is” and “as available” basis, without warranty or condition of any kind either expressed or implied.