Nigerian musician Davido (David Adeleke) debuted on the NFT platform Drip on Wednesday, May 29, 2024. On the same day, he introduced Timeless Davido, a token on the Solana blockchain with the ticker $DAVIDO.
The token’s market capitalisation increased to $10 million, but it also rapidly decreased to $2.2 million according to TechPoint analysis.
Some cryptocurrency enthusiasts have linked the collapse of $DAVIDO to a significant sell-off, or dumping, that they claim Davido orchestrated. Dumping typically lowers the value of an asset on the stock market and in cryptocurrency.
In essence, it conveys a lack of confidence in the asset, and when an asset is oversupplied in the market, there is a surplus of supply relative to demand.
Rug pull projects, the crypto equivalent of an exit scam, typically abandon a project as soon as it starts to acquire traction and generate revenue for the developers.
Some people believe that $DAVIDO has deceived investors, but others maintain that the sell-off is not fraudulent.
Experts, according to Mint, think that a token should be supported by fundamentals—also referred to as utilities or use cases—rather than communities.
Popular tokens that were first meme coins are now developing a use case. For instance, the SHIBA INU whitepaper has indicated that ShibaSwap, a DeFi platform that would make cryptocurrency trading easier, will be a part of the token ecosystem.
This implies that if it is successful, $DAVIDO might have a use case that elevates it above the status of a meme coin.
A further clue that a coin is a scam according to YouTuber Mentoraa’s World, is if more than 4% of all coins are held in one wallet. In the case of a sell-off, wallets like this one effectively have too much control over the coin, which might cause its value to crash.
Fortunately, the blockchain is publicly accessible, and it is evident that a wallet holding 4% (43,254,689.74) of $DAVIDO worth $119,129 exists.
The entire quantity of the token is actually close to one billion, of which the top 10 holders possess 225,637,134.4 tokens (or 22.56%), while the remaining holders hold 77.43% (774,358,473.25) of the token.
Although this does not always mean that there is a scam, many believe that the sell-offs are.
An X account, Lookonchain, which tracks the movement of cryptocurrency token prices, claims that wallets connected to the development of $DAVIDO sold off the token and generated $473K in profit in just 11 hours.
The token’s market capitalization fell from $10 million to $2.2 million as a result of this sell-off. In other words, those who made investments at the height of the market’s valuation suffered losses.
Given how much this sell-off resembles a rug pull, Tech Point reported that it can be viewed as a scam. The token’s creators sell it to make a profit after the price peaks, according to CoinDesk, leaving investors with severe losses.
On the other hand, some people believe it isn’t a rug pull. “If you don’t sell, someone else will,” stated DannyCrypt, a crypto influencer on X.
There are unclear restrictions in Nigeria regarding the launching of memecoins, and the lack of a whitepaper suggests that the coin was developed primarily as a means of making money, as is the case with most meme coins. It is also unclear whether it would be morally or ethically questionable to dump the token.
Initial coin offerings (ICOs) in Nigeria are subject to regulations set down by the Securities and Exchange Commission (SEC) of Nigeria.
