Solana Crashes as Argentina President Milei’s Libra Rugpull Hits Credibility

Solana is taking a hit in the reputation and in the wallet in the fallout of the Libra memecoin launch, which has been widely criticized as a rug pull.

The Libra token got a huge burst of publicity when Argentina’s President Javier Milei posted on X.com about the project and then deleted his post. In the hours in between, LIBRA shot to a market cap of $4.4 billion and then collapsed after developers dumped their coins, extracting $107 million in liquidity while wiping out $4 billion in value and leaving investors with huge losses.

Milei has been accused of fraud by lawyers, is facing a probe by an Argentine federal judge, and has been threatened with impeachment.

Meanwhile, Solana’s SOL is down 20% and the ecosystem’s total value locked (TVL) is down almost 10% from $9.15 billion to $8.26 billion.

So why is Solana taking the heat for Milei?

“I think it's investors saying, ‘Hey, we’re not sure where the Solana growth has come from,” said Matthew Nay, a Messari research analyst focused on Solana. “Is it from infrastructures? Are there also real applications built on top of it? Or is it just purely driven by memecoin speculation?"

Memecoins generate the most revenue out of all Dapps categories on Solana, according to analytics firm Syndica. Between January and November 2024, memecoins generated over $500 million in revenue, almost doubling the second-largest category, Telegram bots, which made $300 million.

Insider Trading Accusations

Besides damaging memecoins' already shaky reputation, the Libra scandal also casts a shadow over some of Solana's key projects. Decentralized exchange (DEX) aggregator Jupiter and its related dynamic liquidity market maker (DLMM) Meteora were hit with insider trading accusations.

While he strongly denied them, Meow, the pseudonymous founder of Jupiter and co-founder of meteora did promise an outside investigation and announced the resignation of Meteora CEO Ben Chow. Both Meow and Chow denied any impropriety by Chow or any other employee over the Libra launch debacle.

Libra will be “the last straw for a lot of people,” Nay predicted, saying that while the Dogecoins of the world will survive based on their history, the time when “people could just launch random tokens with absolutely no utility, that’s the end of it.

Not Going Away

One person who disagrees is Alon Cohen, co-founder of token launchpad Pump.fun, where most of the memecoin trading activity on Solana concentrates.

Like many commentators on X over the last few days, he said he's “disgusted” with extractive memecoins, often through pump-and-dump or rugpull schemes.

But, Cohen says memecoins aren't going away.

“As a result of the devastation caused by the events, many people have said that this may be ‘the end of memecoins,’” Cohen said in an X thread on Feb. 17. “The fact is that user demand for permissionless on-chain creation/speculation isn’t going anywhere. In an increasingly attention-driven economy, there is no doubt that users will continue to want to trade world events, culture, technology, and more.”

What was wrong with Libra, he said, is that middlemen like development teams and market makers were involved.

“Creating a memecoin should be so stupidly simple that anyone can do it,” Cohen said, implicitly promoting his own no-code platform. “The mere existence of such actors means that anyone can easily be taken advantage of.”

That said, it’s perfectly possible to snipe a fair-launched token, particularly if you know it’s coming and that a key opinion leader (KOL) or even a president will quickly pump the token.

Cohen’s answer is more education on how to safely and ethically create new memecoins.

Memecoins vs DeFi Summer

Another, more radical suggestion came from Solana Labs co-founder Anatoly Yakovenko in an X thread about establishing rules for memecoins.

Asking “what they could even be for a memecoin,” Yakovenko said an attacker could launch a memecoin, let it sit for months while buying most of the supply and then pass it off to a KOL.

The only real solution, he said, “is to force the users to basically have a social credit score and reject coins with low score distributions.”

To which Michael Egorov, co-founder of Ethereum-based decentralized exchange (DEX) Curve Finance suggested banning the promotion of tokens designed for nothing more than speculation, despite its similarity to what the Securities and Exchange Commission (SEC) was doing.

He added that initial coin offering (ICO) coins that the SEC slapped down were better than the purely speculative memecoins.

“DeFi summer coins were much better,” he said

Yakovenko disagreed, comparing the contagion of the spectacularly failed Terra stablecoins to the damage of memecoins.

“There is virtually no contagion from memecoins,” he said

While Terra was flawed by design, a core cause of the stablecoin’s collapse was that KOLs, in the form of venture capital firms, “were so loud that even thoughtful people started to self-doubt,” Egorov said.

In Libra's case, few things are louder than a country's president tweeting to his millions of followers a Solana token address.