What Are Pumpamentals?

The term pumpamentals comes from merging the words ‘pump’ and ‘fundamental’, denoting factors that might lead to rapid price growth for a token. These factors typically involve social media influencers, community-building tactics, and external events like economic data.

Key Takeaways 

• Pumpamentals refer to factors that lead to rapid price increases for a cryptocurrency token. 

• While fundamental factors look at the technical and economic factors of a project, pumpamentals are mostly marketing driven.

• Some of these factors include the current trending narratives and social media hype surrounding the project. 

• Understanding pumpamentals can be vital for investors vying for short-term gains.

Crypto investors are no stranger to the term ‘fundamentals’, which refer to the technical aspects of a token. Before investing in a new token, many investors will conduct in-depth research and fundamental analysis. However, there’s currently a new term gaining momentum among investors – Pumpamentals.

Pumpamentals are fundamentals that lead to a ‘pump’. These pumps are usually quick price growths that usually last only for a short period of time and precede a price drop as investors take their profits.

While these pumps are usually attributed to the current trending narratives and social media hype surrounding the project, the pumps can also result from positive external data like lowered inflation rates.

Let us start by looking at the three main factors of pumpamentals – social media hype, narrative hijacking, and tokenomics. 

Social Media Hype

An active social media presence and enthusiastic community can help create significant hype around a project. Memecoins like PEPE have demonstrated this power, with large price surges relying entirely on the popularity of Pepe the Frog among investors. This led to listing on multiple exchanges, further fueling its growth, reaching a high of over $1.8 billion market cap on 6 May 2023.

High-profile figures like Elon Musk can also significantly influence the price trajectory of a cryptocurrency project. As demonstrated in May 2023, Musk tweeted an image of his dog, Floki, and announced his dog as the new CEO of Twitter. This tweet generated a wave of social media excitement, causing a high pump in prices in FLOKI and DOGE.

The new CEO of Twitter is amazing pic.twitter.com/yBqWFUDIQH

— Elon Musk (@elonmusk) February 15, 2023

Narrative Hijacking

Trending narratives in the crypto space can also act as pumpamentals. Projects that align with popular themes, such as AI or metaverse tokens, can experience price pumps due to interest. 

The breakout of metaverse technology in the third quarter of 2022 steered the crypto space into a wave of metaverse-themed tokens. Some of these have matured into blue-chip projects exploring the applications of 3D effects, while a majority of them have gone silent after the initial hype pump. This is just one of the many cases where crypto projects have leveraged trending narratives to drive profit.

Other cases of narratives in motion in the crypto space include seasons like altcoin seasons (ALTSZN), meme coin season, and the AI narrative in motion at the time of writing. An even more effective tactic used by founders is creating a project that pulls many narratives together. 

Existing projects could also hijack narratives by adding features that position them accordingly or re-branding to fit the narrative in vogue. Memecoins diving into the NFT and Gamefi space in the late quarters of 2022 is a good instance of projects taking advantage of narratives.

Always do your own research before jumping on a coin built around a trending topic.The success of Korean drama series, Squid Game triggered the creation of several Squid Game-themed tokens, among which was the infamous Squid Game rugpull, where the perpetrators netted over $3.38 million.

Tokenomics

Tokenomics is another area where pumpamentals can come into play. While fundamental tokenomics focus on supply and distribution, pumpamental tokenomics focus on aspects which can lead to short-term pumps.

Burning Of Tokens

Burning is a means of regulating a token’s supply by putting a portion of the supply away forever. A token is burnt by sending them to a burn address. A burn address is a null address with no one in the custody of its private keys. Therefore, tokens sent to this address are gone, forever. 

Projects could drive a pump by creating hype around reducing the circulating tokens through a burning program. The burning program could be a smart contract upgrade that includes a burning function or a simple transfer to a burn address.

By reducing the token supply, projects can induce a perceived scarcity and potentially drive the price up.

Vesting Of Tokens

Vesting is another factor that doubles up as both a pumpamental and fundamental. Project teams can also build hype with their vesting schedules. Schedules such as locking up team tokens, locking up liquidity, and similar programs could build hype as well. Locking up liquidity is a popular program amongst tokens traded on decentralized exchanges. Liquidity lock-up is regarded as proof against rug pulls and strengthens investors’ conviction about the reputation of the project team.

Airdrops

Projects also can build hype through airdrops. Depending on the structure, a proposed airdrop could include perks like getting airdropped newly launched tokens or being rewarded for being in the custody of another crypto asset. Some examples include BAYC’s APE token airdrop to BAYC NFT holders and other recent airdrops that fuel the adoption of their protocol, such as Arbitrum’s ARB, where users were rewarded with a share of ARB based on their interactions with Arbitrum. 

These airdrops generally create a lot of social media hype and can drive up the price of the token. 

Fundamentals vs. Pumpamentals

Both fundamentals and pumpamentals serve different purposes and cater to different investor mindsets. 

These are the different factors that investors need to consider: 

As mentioned, fundamentals typically refer to the core aspects of a project that give it long-term value and viability. These projects typically have a clear roadmap and utility behind the token. When assessing fundamentals, investors analyze the project’s whitepaper, the background and experience of the team. 

On the other hand, pumpamentals focus on elements that generally lead to fast and short-term growth. This is highly dependent on the current trend of the market, and the team often utilizes aggressive marketing strategies to create a buzz around the project. When assessing pumpamentals, investors analyze the project’s social media presence, community engagement, and trending topics. 

Understanding the interlinked relationship between fundamentals and pumpamentals can be essential for a comprehensive investment strategy. 

Final Thoughts

While pumpamentals can potentially create significant short-term gains, investing in a project purely based on its pumpamentals can be incredibly risky. It is important to conduct your own due diligence and consider traditional fundamentals on top of pumpamentals, along with technical and on-chain analysis where applicable, before investing in any project.

Do note that this article is for informational purposes only and should not be taken as financial advice.