Pump.fun issue coin: Opportunities and risks under a valuation of 4 billion

Author: GLC

Compiled by: Shenchao TechFlow

The upcoming token launch of Pump.fun may become one of the most anticipated events in the crypto space this year. Since 2024, this launch platform has been at the center of the Memecoin craze, creating what can be said to be the most successful and controversial retail traffic channel in the ecosystem.

Whether you love it or hate it, Pump.fun has proven its product-market fit.

Its permissionless token issuance platform has attracted thousands of users and creators through viral marketing and gamified user experiences (UX), generating astonishing trading volumes. Although Memecoin activities have generally cooled down, Pump.fun still maintains a strong moat and continues to advance through new initiatives such as PumpSwap.

As of this year, Pump's monthly median revenue is approximately $45 million, making it not only one of the most widely used platforms in the crypto space but also one of the most profitable. With the upcoming launch of the $PUMP token, the protocol is at a critical turning point.

The key issue is whether the team views this moment as an opportunity to build a sustainable and investable asset, or chooses to aggressively extract value. Their past performance has raised some doubts, but the opportunity still exists.

Regardless, the risk and reward (R/R) seem asymmetrical.

Next, we will analyze the bull and bear market scenarios of $PUMP in depth.

Agenda

Data and Performance: Revenue, Trading Volume, and User Base

Team and Narrative Shift: Can They Reach an Agreement with Holders?

Valuation: Cash flow, revenue, and price-to-earnings (P/E) considerations

Growth Catalysts: Airdrops, Acquisitions, and Vertical Expansion

Main risks: execution capability, competition, and market structure

Summary of thoughts

Key indicators: More resilient than expected

In January this year, with President Trump launching personal tokens, the Memecoin market sparked a frenzy, marking the peak of activity in the entire industry. That month, Pump.fun generated an astonishing $140 million in revenue. However, shortly after, the trading volume in the Memecoin market began to plummet, and market sentiment took a sharp downturn.

The remarks about "Memecoin's demise" spread rapidly.

However, the performance of Pump.fun has proven to be much more resilient than most people expected.

Even in the context of an overall market downturn, Pump.fun has still managed to retain a large and active user base. Currently, it has about 340,000 daily active users, which is only slightly down from 400,000 in January. Of course, PumpSwap had not yet been launched at that time, but the key point is that there are still a large number of users using Pump's products every day.

Since the beginning of the year, Pump.fun has averaged a monthly trading volume of approximately $14 billion through PumpSwap, with a total fee rate of 0.3% (of which 0.2% is allocated to liquidity providers, 0.05% to creators, and 0.05% to Pump).

Its core Bonding Curve product also maintains a monthly trading volume of approximately 5 billion USD, charging a 1% fee for both buying and selling.

This series of active data explains why the platform can consistently generate monthly revenues of 45 to 60 million dollars, with an annualized income of about 500 million dollars. This makes $PUMP one of the highest-grossing tokens in the cryptocurrency space.

It is expected that $PUMP will launch its token issuance with a fully diluted valuation (FDV) of $4 billion, making it easy to understand why this is one of the most anticipated launches of the year.

We will delve deeper into its valuation mechanism later, but the core conclusion here is simple: even in a bear market, $PUMP continues to "print money" non-stop.

Team: Can the narrative be reversed?

Pump.fun has created one of the most profitable products in the crypto space, but the team behind it has not earned the same level of respect. Critics argue that they focus too much on value extraction without providing enough benefits to the community. Moreover, many view Memecoins as a factor that undermines the reputation of the crypto industry rather than a catalyst for growth.

Nonetheless, their success is not accidental. Speculation remains the core driving force of this industry, and Pump.fun is the first team to truly capture this demand through product-market fit.

Now, they have the opportunity to reverse this narrative.

The upcoming $PUMP token issuance is an opportunity aligned with the holders. It is reported that a portion of the protocol's revenue may be used for buybacks, but the specific ratio has not yet been disclosed.

We do not expect a 100% revenue reinvestment like the Hyperliquid model. While this model can stimulate price performance in the short term, it can harm long-term sustainability. Pump is not an L1 (Layer 1 blockchain), and its growth requires capital support. A more realistic approach may be to allocate 50% of the revenue for buybacks, similar to Raydium or Jupiter.

This ratio is competitive and also leaves room for reinvestment for new business lines, acquisitions, or ecosystem expansion. Pump.fun is a young company with real growth potential. We would prefer to see them set a target of around 10% in annual dividend payouts, while using the remaining funds for compounded growth of long-term value.

More important than numbers is transparency. If the team wants to be taken seriously, they need to disclose how funds are being used, including operational costs, capital expenditures (Capex), reserve funding plans, and governance structures.

Raising 1 billion dollars requires genuine responsibility.

If they can do this, even a moderate buyback could be effective. However, if they fall back into silent value extraction behavior, the market reaction may not be very positive.

That said, even if they make mistakes, the downside risk appears to be limited. We will delve deeper into this in the next section.

$PUMP Valuation Analysis

In this section, I will not provide a complete valuation framework as we usually do in GLC. The reason is simple: we are not experts in the Memecoin field, and any modeling attempts may carry a high degree of subjectivity.

That said, Messari's @defi_monk has put forward a rather solid valuation framework, and I feel reassured by his assumptions. He is an excellent analyst and seems to take a more conservative rather than optimistic stance, which aligns very well with the way I assess such issues.

In his foundational predictions, Monk expects that the trading volume of the Bonding Curve will decrease, but the activity of AMM (Automated Market Maker) will increase, with annualized revenue potentially reaching around 670 million dollars by 2027. These predictions reflect the overall growth in on-chain trading volume, the potential increase in market share compared to Raydium, and the advantages brought by vertical integration.

In my opinion, this outlook is not only reasonable but also very realistic.

Of course, we can't know the specific plans of the PUMP team. This is also one of the reasons why this is an asymmetric opportunity. If the revenue really reaches this range, it's hard to say that $PUMP is overvalued at a fully diluted valuation (FDV) of $4 billion, especially when the price-to-earnings ratio (P/E) is around 12.

Indeed, the long-term existence of Memecoins remains uncertain, but the fact is that they have lasted longer than many expected. Memecoins have strong community support, and if Bitcoin breaks its all-time high later this year, speculative activities are likely to surge again, with $PUMP likely becoming one of the main beneficiaries.

In the past, the main way to invest in Memecoin was through $SOL, but now $PUMP is gradually becoming a more direct and logical choice. If the market turns bullish, $PUMP is likely to become a high-beta asset that quickly reflects this trend.

Overall, considering that the protocol has generated about $500 million in revenue annually and holds a cash reserve of $1 billion, purchasing $PUMP at a valuation of $4 billion, while 75% of the token supply may be used for community incentives or airdrops, seems to be a choice with relatively limited downside risk.

Unless we accidentally enter a deep bear market with a crash in on-chain trading volume (which I did not believe would happen in February of this year and still do not believe), this opportunity is quite attractive to me.

Growth Catalysts: Airdrops and Acquisition Engines

$PUMP is considered an asymmetric investment opportunity for several key reasons:

First of all, most participants in the cryptocurrency space have now recognized that Hyperliquid's operating model is working—creating products for the community, sharing profits with the community, and ultimately reaping rewards. Game theory strongly favors founding teams that follow the Hyperliquid model. Currently, $PUMP is in the issuance phase, fully controlling its token supply, backed by a highly profitable enterprise with a cash reserve of $1 billion and a potential large-scale airdrop plan. These conditions undoubtedly equip it with all the elements for success.

It is even more noteworthy that the team has generated hundreds of millions of dollars in revenue without issuing tokens. It is reasonable to speculate that most team members have earned far beyond expectations, and they now hold all the resources to turn $PUMP into a long-term successful asset.

Although it is difficult to predict growth solely through airdrop speculation, a more practical source of growth is the potential for vertical acquisitions. With its cash reserves and strong profitability, Pump.fun is fully capable of acquiring businesses that perfectly align with its model.

Jack Kubinec recently shared some insights in Blockworks' Lightspeed newsletter, where two of the acquisition targets he proposed are particularly aligned with Pump's growth strategy:

Telegram trading bot (such as BullX)

Telegram trading bots are widely used by active traders for sniping and copy trading. These bots generate income by taking a cut from trading volumes. According to estimates by Blockworks, the annual revenue from Solana trading bots alone reaches at least $500 million. Acquiring such bots can not only integrate well with Pump's core products but also add a significant new revenue stream.

DEX Screener:

As pointed out by Jack, another pain point for Pump in terms of user attrition is token discovery. Traders often rely on platforms like DEX Screener for real-time and data-rich analysis. DEX Screener has also generated considerable revenue by charging Memecoin projects for enhanced visibility. According to DeFiLlama data, the platform earned over $100 million in revenue in just the past year. If Pump could acquire such a platform, it would help them better control the user experience and improve user retention.

The above are just two examples of vertical integration cases that can strengthen Pump's market position, but the potential possibilities go far beyond this. We believe that Pump will actively utilize its raised funds and operational cash flow to acquire companies that can expand its moat, drive diversification, and accelerate growth.

With its strong fundamentals, substantial cash reserves, and clear vertical expansion path, Pump is likely to evolve into a comprehensive acquisition engine to drive its next phase of growth.

Risks and adverse factors

Clearly, Pump.fun has some risks.

The first thing that comes to mind is competition. Everyone has seen how profitable the Pump business model is, so multiple teams are trying to capture market share, including Launchlabs, Believe App, Moonshot, etc. One of them may eventually succeed in gaining market attention.

Another risk is regulatory pressure. Pump has already faced some issues, and it can be said that their current model does not fully align with regulatory expectations. Further scrutiny is entirely possible.

However, in my opinion, the biggest risk lies in the team's future operational choices. As previously mentioned, to gain positive evaluations for this issuance, the team needs to embrace transparency, maintain consistent reporting, and appropriately align with token holders. If they repeat past mistakes, exhibiting exploitative behavior or transferring value to insiders without clear communication, I believe the market will not respond favorably.

Currently, the market seems to hope that the team will follow the Hyperliquid model, viewing tokens as long-term, community-aligned assets rather than short-term extraction tools.

Even if the team fails to meet these expectations, I believe the downside risk could be limited to around -50%, assuming on-chain transaction volume remains stable. Of course, broader market changes could alter all of this.

Nevertheless, I find it hard to believe that a company with $1 billion in cash and $500 million in annual revenue would be valued below $2 billion in the long term.

Final Thoughts

Pump.fun has positioned itself at the intersection of crypto speculation and on-chain infrastructure. Although the narrative surrounding Memecoins remains controversial, the platform has clearly demonstrated product-market fit, becoming one of the most profitable and widely used applications in the space.

The upcoming $PUMP is a pivotal moment. Besides being a highly anticipated event, it also represents a broader test:

"Can the team shift from a closed, extractive model to a more transparent one that aligns with the interests of token holders and focuses on long-term sustainable development?"

If possible, $PUMP has the potential to evolve into a more sustainable asset within the ecosystem.

At the same time, long-term success may also depend on whether the team can move beyond the Memecoin sector and diversify. Competing with more mature platforms like Jupiter to become a broader on-chain "super application" requires continuous product development, deeper integration, and strategic acquisitions. Although this is fraught with uncertainty, the foundation has already been laid.

This report specifically focuses on the asymmetric opportunities at the time of $PUMP's listing, based on the current fundamentals and market expectations. Considering its annual revenue of approximately $500 million, $1 billion in cash reserves, and flexible token supply mechanism, a fully diluted valuation (FDV) of $4 billion does not seem excessive, provided the team can execute a credible strategy aligned with investors' interests. Furthermore, as the market's demand for direct exposure to Memecoin infrastructure increases, $PUMP may achieve a higher valuation premium.

It should be noted that we typically do not focus on the Memecoin space and do not consider it our core area of expertise. However, from a financial perspective, if the team takes the right measures, the valuation of $PUMP at the time of listing seems reasonable. Given its current cash flow and balance sheet strength, the downside risk also appears to be relatively limited in the short term, unless macro conditions or on-chain activities deteriorate significantly.

In short, $PUMP is a high-risk, high-reward opportunity with some clear potential growth drivers, while the downside risk in the short term appears limited. Although we usually take a cautious approach to such areas, this is indeed a prime example of an asymmetric opportunity worth paying attention to.

Disclosure Statement: The analyst of this research plans to purchase the asset upon the listing of $PUMP.