The Truth About Retail Investors' Frenzy: When Meme Coin Market Sentiment Becomes Assets

Another Carnival During the Holidays

In the days leading up to Golden Week, while the stock market was closed and tourists flocked to scenic spots, a completely different story was unfolding on crypto exchanges. Several obscure Meme coins saw their market caps multiply dozens of times in just a few days. Meme4, PALU, and various creatively named tokens—these seemingly joke-like assets—caused some early investors to see their paper gains surpass one million USD. The community exploded with excitement; influencers and KOLs eagerly shared and reposted as if they had truly discovered a printing press.

But the excitement didn’t last long. Starting October 9th, this wave of coins collectively turned downward. The decline was shocking—some plummeted 95% in a single day, over a hundred thousand traders were liquidated overnight, with total losses reaching $621 million.

Stories of overnight riches quickly turned into the most painful loss records.

This scene is actually not unfamiliar.

From Wall Street to the Crypto World, the Logic Is Changing

Do you remember the GameStop incident in 2021? Retail investors on Reddit banded together to push the stock of a struggling game retailer to the moon, forcing short-sellers into a complete loss. The SEC chairman called it a “milestone in behavioral finance.” Despite the absurd prices, as long as the trading was genuine and information was fully disclosed, it was considered “part of the market”—that’s the American way.

The underlying logic in the US is straightforward: Let bubbles form; bubbles themselves are the trigger for market evolution.

If this Meme coin frenzy had happened on Nasdaq, the story would be entirely different. Wall Street would respond swiftly, new financial products would emerge—like “Meme Stock ETFs” that quantify social hype into investment factors; The Wall Street Journal would run full-page discussions on the “New Era of Retail Capitalism”; the SEC would launch investigations into “social media market manipulation,” and the likely conclusion would be: this isn’t fraud, just a natural financial reaction driven by collective sentiment through algorithms and dissemination.

But what if this happened on the Shanghai Stock Exchange?

The response would be much faster. Regulators would immediately issue risk warnings, media would advise rational investing, and the event would be labeled as a “speculative market anomaly,” serving as a lesson for investors. China’s market philosophy is “steady progress”—it can be lively, but order must be maintained; innovation is welcomed, but risks are to be borne individually.

Meme Coins Living in the Third World

The magic of the crypto market lies precisely here. It is neither under SEC oversight nor under any stock regulatory authority. It is a lawless zone, a gray experimental playground entirely self-organized by code, liquidity, and narratives.

A fascinating fusion has occurred—American-style social speculation mechanisms (information diffusion + group momentum) intertwine with Chinese grassroots wealth psychology (bottom-up resonance + community belonging).

Exchanges no longer serve as neutral matchmakers but have become “narrative creators”; KOLs shift from spectators to “price amplifiers”; retail traders indulge in self-celebration and self-destruction within cycles of algorithms and consensus. The most fundamental change is coming—

The power to set prices is no longer solely based on cash flow but on the speed of narrative dissemination and the density of consensus. We are witnessing the birth of a new form of capital: emotional capital. It has no financial statements, only cultural symbols; no company fundamentals, only consensus curves; it doesn’t seek rational returns, only the release of emotions.

Data Tells the Truth

Looking at the numbers makes it clear: in the first nine months of 2025, 90% of top Meme coins’ market caps became worthless; in the second quarter, 65% of newly issued coins lost over 90% of their value within six months. This isn’t normal volatility of an emerging industry; it resembles a digital gold rush, where most prospectors lose everything, and only those selling shovels profit steadily.

The problem lies right here: when currencies start telling stories, the entire logic of global finance is rewritten.

Traditional markets operate on the principle that prices reflect value; in crypto, prices create value. This is the ultimate expression of decentralization, but it may also be the limit of irresponsibility. When narratives consume cash flows, and emotions become tradable assets, we all become lab rats in this experiment.

Where Is This Path Leading?

The Web3 industry now stands at a crossroads. Should it continue to indulge in the short-term “emotional capitalism” carnival, or calmly build the long-term foundation of a “value-driven ecosystem”?

The real solution is actually quite clear: strengthen community self-governance, introduce more transparent frameworks, and establish effective investor education. Only then can decentralized technology truly promote fairness in global finance, rather than becoming a tool for harvesting retail investors.

Next time you see a KOL wildly hyping a “hundred-bagger coin,” pause for three seconds and ask yourself: Am I participating in a wave of financial innovation, or am I just paying for others’ wealth freedom? When currencies start telling stories, FOMO (Fear Of Missing Out) is no longer what you need most. What you need most is the ability to think calmly.