Dumpy.fun: How to short Memecoin

Author: Justin Baba (@0xbaba23), Diligence Research Analyst; Translated by: Baishui, Golden Finance

Historically, for small-cap memecoins, investors have only been able to speculate on price increases, but have been unable to profit from price declines.

However, dumpy.fun, created by Save (formerly Solend), hopes to change that with its recently announced platform, which will allow users to short any memecoin using leverage.

Let’s take a look at how it works:

Users who are bullish on a token provide liquidity on squeeze.fun by depositing tokens to earn a yield from high borrowing and lending rates.

Users who are bearish on a token deposit USDC or SOL as collateral to open a short position.

When a short position is opened, the protocol borrows the token being shorted and exchanges it for the collateral token on Jupiter.

When a user closes their position, the protocol swaps the collateral tokens back to the original shorted tokens to repay the loan.

The shorting user will receive the remaining collateral assets as profit/loss.

In addition to the new platform, the project will also launch an experimental memecoin, DUMP, which is designed to "go to zero." It is designed to show how dumpy.fun works and provide commentary on game theory of market behavior.

Dumpy.fun is expected to launch in beta on July 30th and will add another layer to the PvP on-chain memecoin ecosystem on Solana. Once live, it will allow users to develop new strategies to profit from memecoin, thereby improving market efficiency.