99% of Meme trading is destined to suffer losses, and the dealer is the big winner

Author: Foxi (DeFi / AI)

Compiled by: TechFlow

My Meme trading account is currently losing -60%. Am I a bad trader? Yes I do. But it's not just because of bad decisions, I prefer to believe that I'm no worse than an average gambler. So, what exactly is the problem? Inspired by @0xngmi 's data (he pointed out that the benefits of playing Memecoin are even worse than those of casinos), I decided to go deeper into what the root of the problem is.

First of all, I admit: I'm a terrible Meme trader

Like many newbies, I am led by market speculation and emotions, chasing ups and selling downs, buying highs and selling lows, and frequent trading leads to slippage, and even unknowingly handing over money to insider traders in the market.

While this is not my first time participating in the cryptocurrency market, this experience makes me feel like I’m playing an unfair game. Worse, the rules of this game seem to change every moment and always tend toward those who have more information.

@0xngmi calculates the comparison between the expected returns (EV) of playing roulette in a casino and the expected returns of Meme speculation (based on paid fees only).

(Original picture from @0xngmi , compiled by Shenchao TechFlow)

• The fee for small transactions is 2.5%, and the fee for Raydium is 0.25%. One speculation requires two transactions, so the fee needs to be multiplied by 2.

** Moonshot's default slippage is set to 5%, taking half of it as the average sandwich attack estimate.

*** It is difficult to estimate accurately because different tokens vary widely, assuming the cost per transaction is 2.5%.

This made me think: How does Meme speculation compare to actual gambling? Are their odds equally bad? Even worse? More importantly, is Meme traders just casino gamblers wearing the guise of "investors", or is there a more complex and hidden mechanism behind it that is manipulating? According to @0xngmi 's analysis, it seems wiser to put money into a casino than to play Meme .

Real odds: Memecoin and the casino

We need to talk about expected value ( EV ) , a core concept in betting and trading. It tells us that on average, how much you can expect to win or lose every time you place a bet over time.

Casino games have a kind of "fair injustice" in mathematics. In the long run, you can always predict how much you will lose. Let's take a look at it in detail:

(The original image is from Foxi (DeFi/AI) , compiled by Shenchao TechFlow)

In traditional betting, casinos draw profits in a slow and predictable way. Whether it is every rotation of the roulette or every pull of the slot machine, a known probability model is followed. For example, in American roulette, if you bet on red, you have a 47.37% chance of winning, and a 52.63% chance of losing. Over time, the casino always wins, but it doesn’t cheat —just use the probability to give yourself the edge. However, to protect gamblers, some jurisdictions will set a minimum return ratio. For example, in Ontario, the RTP (player return rate) of slot machines must reach at least 85%, which means the advantage of the casino (i.e. the dealer’s commission) is up to 15%.

Why 99% of people lose money in Memecoin transactions

Unlike casinos, Memecoin trading may seem like a “game of chance”, but the problem is that you don’t even know who the real player is. Although the Memecoin market does not have a clear "House Edge", your funds will still be slowly swallowed up through transaction fees, slippages, insider trading and market manipulation. Moreover, this loss is often implicit and difficult to quantify.

Here are the three main reasons for the general losses of Memecoin investors:

• Processing fee

• Slip point

• Market manipulation

1. Transaction fee: Hidden "dealer commission"

Each transaction will incur a fee. Whether you are on a centralized exchange (CEX, such as @bitgetglobal or @MEXC_Official ), a decentralized exchange (DEX, such as @RaydiumProtocol ), or using a trading bot (such as @gmgnai , which is used by most people), these Fees will gradually erode your profits.

• CEX Fee : Approximately 0.1% per transaction (buy + sell = 0.2% round trip fee)

• DEX Fee : Approximately 0.3% per transaction, plus Gas Fee (per transaction may be $5-$50+)

• Trading robot fees : approximately 1% per transaction, plus priority fees (probably 4 times the average DEX fee)

• Meme coin tax : Some items draw 5%-10% from each transaction as part of the redistribution or destruction mechanism. For example, @aipool_tee charges a 10% fee for selling transactions.

These trading bots are making a lot of money from the underlying users. Although there are fewer people trading Meme now (February 17), daily income can still reach over $700,000.

On the surface, the transaction fees of 0.2%-1% don’t seem to be high, but when you trade frequently every day, these fees accumulate quickly. If you make 10 transactions in a day, you may consume 2%-6% of your principal, which is even more serious than the loss of playing European roulette.

2. Slip point (MEV cost)

Slip point means that when you place an order at a price, the actual execution price is worse than expected due to market fluctuations. Slips are particularly serious in Memecoin trading, especially in situations where liquidity is insufficient or market fluctuations are severe.

• Example: You try to buy a Memecoin for $100, but due to insufficient liquidity, you can only get tokens worth $95, losing 5%.

• Similar situations will happen when sold. You plan to sell for $200, but the slippage leads to you actually only getting $190.

• Total slippage loss: about 10% round trip transaction cost.

@0xngmi mentioned that about 2.5% of transaction fees will be consumed due to MEV (sandwich attack cost), while on BNB Chain this cost may be as high as 5% because of its poor infrastructure.

A better blockchain infrastructure can significantly reduce MEV costs. This is why many people think Solana is better than BNB Chain (I totally agree). If @cz_binance wants to promote Meme culture on BNB Chain, the first priority should be to reduce the cost of MEV and thus increase the expectations of Memecoin players (EV).

However, even on Solana, the cost of 2.5%-5% of MEV is still more serious than the loss of casino games. If you find that the dealer's commission is as high as 10% on the slot machine, you may be furious. But in the Memecoin market, this is not even the worst part.

3. Insider trading and market manipulation

There is little need to say anything about this. Unlike casinos, casinos have clear rules, while the Meme market is completely inclined to insiders . There is no regulation that prevents team wallets, developers or internet celebrities from harvesting retail traders by “pulling up shipments” (Pump and Dump). For example, the following cases:

• $LIBRA: Swallowed tokens worth more than $107 million

• $MELANIA: Is it related to Meteroa?

• $CAR: African Rugged Event

• $CUBA: Rugged Events in Another Country

• $GANG: @mrpunkdoteth cashes out $10 million through fans

• $Broccoli: Being manipulated by scammers and insiders to make a profit

These are just the tip of the iceberg. It can be said that if you are not an insider like @frankdegods , you have almost no advantage in participating in these Memecoins. In the casino, you at least know what the dealer’s commission is, and in the Memecoin market, you don’t even know who the dealer is, but they are definitely taking your money.

Final comparison: Memecoin speculation vs gambling expectations (EV)

Casino games will slowly pull your money over time, while Memecoin speculation is much crueler. A wrong transaction can instantly erase your gains for weeks. The only motivation for people to continue to participate is the occasional 100-fold gain. But in fact, the probability of achieving a 100x return is about 1/25,000, which is even lower than the chance of winning the lottery.

People tend to believe they are “special” or “skilled” (yes, I’m the self-righteous guy) but they end up being harvested.

Memecoin is not like gambling because it gives people a sense of illusion of control— an illusion that you can make money through research, timing and skills . Indeed, some traders are profitable, but they are only a few, just like professional poker players. And most traders, like most gamblers, end up losing money.

Suggestions on the chain

If you want to attract users and increase transaction volume on the chain, make sure the trader's MEV cost is low enough and try to reduce transaction fees through cooperation or fund subsidies. The reason why casinos can operate for a long time is that gamblers are willing to continue to participate.

Advice for investors

If you are participating in Memecoin speculation, remember that dealers are always winners . And you won't know who the dealer is until it's too late. If you realize you can't get out of your way, you may have fallen into a gambling addiction.