In a rapidly achieved stunning collapse, more than 51,000 traders collectively lost $74 million trading the YZY token, a new “memecoin” created by artist Kanye West. This case is a dramatic cautionary tale about the danger of cryptocurrencies that are propelled by celebrity hype without any intention of real-world application. The token, which went live on the Solana blockchain on August 21st, saw an initial, jaw-dropping rally of 1,400% within the first hour, only to plummet over 80% shortly after.
This kind of boom-and-bust cycle is unfortunately common in the world of memecoins. The YZY story highlights the extraordinary financial risk for ordinary investors looking for a quick return while a small group of insiders walk away with millions.
The Two Faces of YZY
YZY was a classic example of a “pump and dump,” where the price of a token is artificially driven up than sold at a high, and it crashes. Bubblemaps record indicated that of 70,200 traders who invested in YZY at the start, 51,800 traders were left with losses. While the vast majority lost money, a small, fortunate group of just 11 wallets managed to secure over $1 million in profit each. An additional 99 wallets made more than $100,000. This disparity isn’t a coincidence; it’s a feature of these unregulated markets.
Insider Connections and Red Flags
Blockchain analysts swiftly noticed patterns of insider activity surrounding the YZY launch. Bubblemaps pointed to Hayden Davis, whose name has been associated with previous controversial tokens like Official Melania Meme (MELANIA) and the Libra token. Davis, who had recently had over $57 million in stablecoins unfrozen following a legal scandal, was alleged to have “sniped” the YZY launch, making an astounding $12 million.
This isn’t a new playbook. As Bubblemaps noted in a public post, “the same names keep running the same scams.” Other “snipers” tied to the TRUMP token, which famously generated $100 million in profit for them, were also among the first to buy YZY. The presence of these professional traders, who operate with advanced knowledge and tools, puts retail investors at a severe disadvantage.
Even a High-Profile Trader Couldn’t Win
The crash did not end with amateur investors. Not even controversial influencer and former kickboxer Andrew Tate – who has a history of memecoins – was able to escape. He lost a substantial amount of money. He took a leveraged short position on the token, betting against its price. Unfortunately, the bet did not pay off, and he lost $700,000 on his Hyperliquid account, which is a high-profile trading platform. It’s a good lesson, which demonstrates that even well-known and highly speculative, risk tolerating traders like Tate can be blindsided by the initially unpredictable, ultimately manipulated nature of these assets.
A Broader Trend of Celebrity Token Failures
The YZY debacle is not an isolated event but rather part of a larger, worrying trend. In June 2024 alone, there were over 30 celebrity-backed tokens that were issued on the Solana network alone, and most have declined by over 73% from the time they were issued. Going from Caitlyn Jenner and Iggy Azalea to soccer icon Ronaldinho Gaúcho, many public figures have endorsed types of projects that left huge losses for their fans and followers alike.
These tokens do not have utility, so value is only speculative and more about how long the social media hype will last. When the hype dies down, so does value. The trend of celebrities launching projects that promise riches but provided financial destruction is not new within digital assets and should serve as a sad lesson for all investors to be very careful.
