Players of losing Meme coins are rushing into the prediction market.

Written by: BUBBLE, BlockBeats

While the intense competition among meme launch platforms like Pumpfun and Bonk is in full swing, another market is beginning to gain popularity in the entire space, similar to the Memecoin trend of 2023 for Degen.

The prediction market has a firm grip on the throat of the Memecoins market.

John Wang, who just joined Kalshi as the head of cryptocurrency last month, recently released a set of data indicating that the current prediction market has reached 38% of the total trading volume of Solana Memecoins.

In less than a month since John joined Kalshi and doubled Kalshi's trading volume, the overall trading volume of the prediction market has also reached the level seen before the elections in October last year, driven by various parties. However, another set of data is quite striking: the number of independent addresses for Memecoins has dropped sharply from last December's peak, and the number of traders has now fallen below 10% of its peak.

Left: Predicted weekly trading volume of the market, Right: Number of traders on Solana DEX, Source: DUNE

Is the era of Memecoins really coming to an end? Will the scale of the prediction market reach more than 10 times that of the Memecoins market as John said?

The decline of the Memecoins craze

It must be said that Memecoins in the crypto market have created many wealth myths in recent years, attracting many newcomers to this industry for a time, but now this frenzy is clearly cooling down.

Looking back at 2021, established Memecoins like Dogecoin (DOGE) and Shiba Inu (SHIB) saw their prices soar, fueled by discussions around figures like Musk, with market capitalizations reaching as high as 80 billion and 39 billion USD respectively. The market capitalization of Memecoins peaked at 12% of the entire altcoin market that year.

Since then, Meme culture has once again surged in 2023-2024, especially with the emergence of the Pump.fun platform on the Solana chain in early 2024. The zero-threshold issuance of tokens has sparked a new round of "Meme minting" movement, leading to an unprecedented explosion of Memecoins trading in the crypto field at that time, with a large number of retail investors flocking to Solana in pursuit of the next opportunity for wealth.

However, signs of a decline have already begun to appear. Although platforms like Pump.fun have created legendary cases of turning a few dollars into millions, the vast majority of speculators cannot escape the fate of losses. According to statistics, nearly 99% of newly issued Memecoins ultimately go to zero, and Solana's transaction fee revenue has also decreased by more than 90%.

Solana transaction fee revenue, source: Defillama

The decline of Memecoins is actually attributed to multiple factors. The uncertainty of the macro environment makes speculative funds cautious, the lack of regulatory constraints has led to rampant harvesting by manipulators and insider trading scandals, social media influencers and celebrities frequently hype up and then sell off at high points, a classic scheme of cutting leeks (even the president is involved), rampant insider trading, lack of liquidity, and thousands of scams and rug pulls; even the most risk-loving degens cannot help but feel fatigued by this.

The participants in the Meme sector have undergone structural changes. On one hand, due to compliance pressures, many early large players who acted as market makers are withdrawing from this gray area; on the other hand, apart from the insider operations by whales, what remains in the market are mostly small to medium individual investors engaging in mutual competition, and Meme trading is increasingly evolving into a naked zero-sum PVP.

P players are happy to chase the thrill of short-term speculation, but long-term holding is aimed at building a consensus culture. This lack of sedimentation in the PVP hype model makes it difficult for Memecoins to form a genuine community consensus, resulting in price fluctuations that lack fundamental support, leading to a situation where prices surge all at once during rises and scatter like birds and beasts during declines. There are no stable funds willing to participate in long-term construction, and it is even less likely for large funds to step in and take over, creating a vicious cycle.

The profit and loss ratio of players participating in pumpfun has previously fluctuated around 7:3, with ( losing to ), and now it has reached 6:4. However, the range of profit and loss is almost concentrated around ±500 dollars, and the wealth effect of Memecoins is disappearing. Source: DUNE.

Consensus leads to price instability and funds staying away, which in turn makes it difficult for market capitalization to grow. This "pass the parcel" type of game is becoming increasingly cold as the wealth effect fades.

The old Meme has become a swing trading tool, the new Meme has turned into the realm of P juniors, and cultural consensus has become an impractical existence. Various signs indicate that the myth of Memecoins is gradually fading, and the market is beginning to focus on new hot areas.

Degen's New Arena

As the Meme frenzy gradually subsides, Degen does not hold back but instead shifts their enthusiasm to prediction markets. If you often browse X, you may frequently come across some so-called "character stories," which usually narrate how a person made a high multiple of profits with very little money. The background of these stories used to be about Memecoins or DeFi arbitrage, but nowadays it has changed to prediction markets.

Dopamine

David Sklansky, the founder of the mathematical theory of Texas Hold'em, said in "The Theory of Poker" that "the essence of gambling is betting under asymmetric information". In other words, what gamblers need is a perception of odds and informational advantage, rather than an absolute certainty of winning.

From this perspective, prediction markets provide a dopamine rush similar to trading Memecoins, but with mechanisms that are more transparent and fair. When you buy a bet contract on "Trump winning the election" or "the Fed cutting interest rates", the final outcome depends on the objective results of the events. There is no risk of project teams suddenly running away, nor is there a "carpet pull" that causes a man-made crash to zero. The worst outcome is simply betting in the wrong direction and losing all your money, rather than suffering from arbitrary manipulation like some air coins.

This psychological shift from "Will the development team abscond with the funds?" to "Will the event itself occur?" represents an "upgrade" in the pattern of speculative behavior. Gamblers are still placing bets, but the stakes are anchored to the outcomes of the real world, providing a fundamental basis of authenticity.

Polymarket has reached 1.3 million traders, while Kalshi has not disclosed user data, but its market share has surpassed Polymarket. The number of participants in prediction markets may have reached millions, source: polymarketanalytics

regulation

More importantly, regulatory trends have added a halo of legitimacy to prediction markets. In the past, many decentralized prediction platforms closed their doors to users in markets like the United States due to policy risks, but the situation is changing now.

In the second half of 2024, a lawsuit between the Kalshi platform and the U.S. Commodity Futures Trading Commission (CFTC) became a turning point. The prediction market exchange, which is based in the U.S. and operates fully compliant, was previously hindered by the CFTC for attempting to launch contracts on congressional election results. However, it was reported that in September of that year, a federal court ruled in favor of Kalshi, determining that the regulatory agency did not have the authority to prohibit such political event contracts.

This ruling has cleared the way for Kalshi to operate nationwide in the United States, making it the first truly licensed prediction market platform in the country. Kalshi quickly seized the opportunity to showcase its strengths during the 2024 U.S. elections. According to reports from Reuters and others, the platform generated about $1 billion in trading volume just on presidential election night, with the total trading volume for the year soaring tenfold to $1.97 billion. Thanks to its compliance advantages, Kalshi was able to rapidly expand its reach, attracting users to participate without geographical limitations, which also helped it achieve a valuation of up to $1 billion in a new round of financing in early 2025.

At the same time, the well-established decentralized prediction market Polymarket is also seeking a path to compliance. The platform was fined $1.4 million by the CFTC in 2022 for not adhering to U.S. regulations in its early years and temporarily shut down for U.S. users. However, after the Trump administration took office, the U.S. regulatory environment eased, and Polymarket re-entered the U.S. market in 2025 by acquiring a licensed entity.

Wealth Effect

For speculative funds driven by profit, the reason why the prediction market can sustain the enthusiasm after the Meme tide recedes lies in its ability to generate a wealth effect and its more diverse gameplay.

First of all, from the perspective of potential returns, betting on black swan events can yield returns that are not inferior to speculating on altcoins. In prediction markets, if you place a bet on a low probability event at extremely low odds early on, you can obtain several times or even dozens of times the return once it actually happens. For example, before the 2024 U.S. presidential election, many people purchased contracts for Trump's victory as a hedge or speculation. It has been reported that a big player spent 30 million dollars buying call options for "Trump's Election"; as a result, after Trump successfully won the election, that trader made a profit of up to 85 million dollars.

Of course, small-cap players can also choose long-tail event contracts with odds of up to dozens of times to achieve "small bets to win big money." It is worth mentioning that decentralized prediction markets, which are centered around binary options, have also begun to introduce contract leverage tools to further amplify profits. Platforms like Azuro, D8X, and Drift have either provided or continue to offer contract leverage.

This model that integrates DeFi derivatives broadens the profit space and provides a venue for professional players who are adept at capturing arbitrage opportunities, allowing some DeFi players to participate more effectively in prediction markets. They can seek arbitrage opportunities through odds discrepancies across different platforms or use derivatives to hedge risks, coupled with increasingly sophisticated various data dashboards and copy trading bots, making the gameplay much richer than simply speculating on Memecoins or engaging in pure contract trading.

The distribution table of players predicting market returns over the past 6 months, with red indicating higher ROI. One player in the lower left corner earned nearly $60,000 with $3.72. Source: hashdive.

Low education cost

In addition to high yield opportunities, "low educational costs" is also one of the important reasons why prediction markets attract funding.

Unlike Memecoins, which are limited to speculative crypto projects, the tradable assets in prediction markets cover almost all aspects, including politics, economy, sports, and entertainment, catering to the "gambling interests" of different groups. Taking Polymarket as an example, there are serious macro topics (such as "Will Bitcoin break its all-time high before a certain date?" and "Will the Federal Reserve cut interest rates at its next meeting?"), as well as quirky topics filled with online cultural colors (such as "Will a member of the first-line boy band Coldplay get divorced by the end of the year?" and "Will it be officially confirmed that aliens exist by 2025?").

Many seemingly absurd hot topics have corresponding markets on this platform, which effectively integrates meme culture into prediction trading. Users can bet on popular memes and celebrity topics, making this entertaining participation more accessible and enjoyable.

Polymarket's prediction topics

In contrast, while Memecoins have "Meme" in their name, they are ultimately products of the crypto community's self-entertainment, and outsiders often find it difficult to understand their jokes and value. On the other hand, prediction markets bet on events occurring in the real world, which the public can more easily understand and participate in.

Some people vividly say that prediction markets just move the behavior of betting on horse racing and football matches from offline to on-chain, using a more open and transparent method. Many ordinary investors who were initially puzzled by cryptocurrency tokens will become interested in placing bets once they see contracts related to news events on the platform.

In addition, some platforms (such as MYRIAD) have started to directly embed predictive behavior logic into social media or mobile apps through plugins or integrations, allowing users to easily participate in predictions while scrolling through Twitter or using the app, thereby increasing engagement. All of this makes the prediction market more likely to break out of its niche and attract long-tail users beyond traditional crypto assets like Bitcoin.

The predictive market's reverse impact on the real world.

The fairness and informational value of prediction markets are also praised by some viewpoints. Since the final settlement of contracts is based on objective facts, there is no room for human manipulation in the market, making the results relatively fair and transparent. In the realm of Memecoins, retail investors often worry about malicious actions from development teams or market manipulators, but these issues are not present in prediction markets. At the same time, participants with high information sensitivity can profit by placing bets early, and this process, in turn, provides signals for market prices, which is seen as the original design intention of the mechanism of "using money to predict the future."

For example, when the true probability of an event is underestimated, traders who have insider information or professional insights will buy a large amount of the corresponding contracts, thereby driving the price closer to a reasonable level. This arbitrage process is a correction of the erroneous odds. Research has pointed out that it is precisely these rational arbitrageurs that allow mature prediction markets to often provide more accurate event probabilities than polls and other sources, which are referenced by the media and institutions.

Of course, excessive speculation can also obscure the effectiveness of information. If a large influx of uninformed and purely follow-the-trend speculative funds occurs, it may cause contract prices to deviate from reasonable probabilities in the short term. However, practice shows that as long as there are enough rational players, significant deviations are usually corrected quickly, and extreme prolonged mispricings are relatively rare.

Overall, prediction markets have unique value in aggregating public opinion and information. The more diverse the participants and the richer the information, the more meaningful the results become. This model of "embedding speculation in prediction" has even gained recognition from some mainstream figures. Since prediction markets emphasize trading based on information and judgment, many supporters avoid using the term "gambling" and instead refer to it as the concept of "information markets" to enhance its social acceptance.

This type of packaging is quite effective, as many VCs or government officials are increasingly using data from prediction markets as the basis for sharing their own views. Compared to Memecoins, which give the impression of being "purely a gamble on size", prediction markets are striving to create a more intellectually stimulating and valuable investment game atmosphere, thereby attracting a broader audience.

Hasseb, a partner of dragonfly, referenced the predictive views of Polymarket in the discussion about USDH.

It is worth noting that the capital market is also chasing this new trend. Since last year, several prediction market platforms have received large amounts of financing and their valuations have rapidly climbed. Kalshi announced the completion of a $100 million financing shortly after winning a lawsuit, reaching a post-investment valuation of $1 billion. Polymarket also raised $200 million in early 2025, bringing its valuation to about $2 billion.

Emerging startup projects are emerging one after another, and capital interest in them is also increasing. In this sector, investment from institutions has grown from just 3 million dollars in 2021 to 370 million dollars now.

Thomas Peterffy, the founder of the established internet brokerage Interactive Brokers, publicly predicted during an interview with CNBC in November 2024 that the market size for predicting could surpass the stock market in the next 15 years due to its unique pricing for various public expectations.

After experiencing the boom and bust of Memecoins, the prediction market may be poised to become the new arena for speculative capital competition.