Snowball 2 Days 20 Times, Analyzing How the Automated Market Making Mechanism Ignites a Cold Market

The cryptocurrency market in December is as cold as the weather.

On-chain trading has been hibernating for a long time, and new narratives are hard to come by. Just look at the drama and gossip that the Chinese crypto community has been discussing these days, and you’ll know that there aren’t many people playing in this market anymore.

However, the English community has been discussing something new these days.

A meme coin called Snowball launched on pump.fun on December 18, and within four days, its market cap surged to $10 million, still reaching new highs; while hardly anyone in the Chinese circle mentioned it.

In the current environment where there are no new narratives and even meme coins are not being played, this is one of the few things that stands out and has a bit of localized wealth effect.

The name Snowball translates to the "snowball effect," which is the story it wants to tell:

A mechanism that allows the token to "roll bigger by itself."

Turning transaction fees into buy orders, rolling the snowball for market making

To understand what Snowball is doing, you first need to know how tokens typically make money on pump.fun.

On pump.fun, anyone can create a token in a few minutes. The token creator can set a "creator fee," which is essentially a percentage taken from each transaction into their own wallet, usually between 0.5% and 1%.

Theoretically, this money can be used for community building and marketing, but in practice, most developers choose to: run away once they have enough.

This is also part of the typical lifecycle of a "shitcoin." Launch, pump, harvest fees, run away. Investors are betting not on the token itself, but on the developer's integrity.

Snowball's approach is to not take this creator fee money.

To be precise, 100% of the creator fees do not go into anyone's wallet, but are automatically transferred to an on-chain market-making bot.

This bot performs three tasks at regular intervals:

First, it uses the accumulated funds to buy tokens on the market, creating buy support;

Second, it adds the purchased tokens and corresponding SOL to the liquidity pool, improving trading depth;

Third, it destroys 0.1% of the tokens with each operation, creating deflation.

At the same time, the percentage of creator fees collected by this coin is not fixed, fluctuating between 0.05% and 0.95% based on market cap.

When the market cap is low, it takes a bit more to allow the bot to accumulate ammunition faster; when the market cap is high, it decreases to reduce trading friction.

In summary, the logic of this mechanism is: every time you trade, a portion of the money automatically becomes buy orders and liquidity, rather than going into the developer's pocket.

Thus, you can easily understand this snowball effect:

Transaction generates fees → fees become buy orders → buy orders push up prices → higher prices attract more trades → more fees… theoretically, it can roll itself up.

On-chain data situation

Having explained the mechanism, let’s look at the on-chain data.

Snowball launched on December 18, and now it has been four days. The market cap has surged from zero to $10 million, with a 24-hour trading volume exceeding $11 million.

For a shitcoin on pump.fun, this achievement is already considered quite long-lived in the current environment.

In terms of chip structure, there are currently 7,270 addresses holding the token. The top ten holders together account for about 20% of the total supply, with the largest single holder accounting for 4.65%.

(Data source: surf.ai)

There is no situation where one address holds 20-30% of the chips, so the distribution is relatively decentralized.

In terms of trading data, there have been over 58,000 transactions since launch, with 33,000 buys and 24,000 sells. The total amount bought is $4.4 million, and the total amount sold is $4.3 million, resulting in a net inflow of about $100,000. Buying and selling are basically balanced, with no one-sided selling pressure.

The liquidity pool holds about $380,000, half in tokens and half in SOL. For this market cap size, the depth is not very thick, and large orders will still have noticeable slippage.

Another noteworthy point is that Bybit Alpha announced the listing of this token less than 96 hours after its launch, which somewhat confirms the short-term popularity.

A perpetual motion machine in a cold market

After browsing around, it can be seen that the discussion in the English community about Snowball mainly focuses on the mechanism itself. Supporters' logic is straightforward:

This is the first meme coin that locks 100% of the creator fees into the protocol, making it impossible for developers to run away with the money, at least structurally safer than other shitcoins.

The developers are also cooperating with this narrative. The developer wallet, market-making bot wallet, and transaction logs are all public, emphasizing "on-chain verifiability."

@bschizojew labels himself as "on-chain schizophrenia, 4chan special forces, first-generation meme coin veteran," which has a self-deprecating degen flavor that resonates well with the crypto-native community.

However, the safety of the mechanism and the ability to make money are two different things.

The premise for the snowball effect to work is that there is enough trading volume to continuously generate fees to feed the bot for buybacks. The more trades there are, the more ammunition the bot has, the stronger the buy orders, the higher the prices, attracting more people to trade…

This is also the ideal state for any meme coin's so-called buyback flywheel to spin in a bull market.

The problem is that the flywheel needs external power to start.

What is the current environment of the crypto market? On-chain activity is sluggish, the overall heat of meme coins is declining, and there is already little capital willing to chase shitcoins. In this context, if new buy orders do not keep up, trading volume shrinks, and the fees the bot can receive will decrease, weakening the buyback force, reducing price support, and further decreasing trading willingness.

The flywheel can turn positively or negatively.

A more realistic issue is that the mechanism addresses only the risk point of "developers running away with money," but meme coins face risks far beyond this.

Market manipulators dumping, insufficient liquidity, and outdated narratives—any one of these can occur, and the effect of 100% fee buybacks will be very limited.

Everyone is scared of being cut, and an older brother in the Chinese circle summed it up quite well:

Play if you want, but don’t get too carried away.

Not just one snowball rolling

Snowball is not the only project telling this automatic market-making story.

Also in the pump.fun ecosystem, a token called FIREBALL is doing something similar: automatic buybacks and burns, packaged as a protocol that other tokens can connect to. But its market cap is much smaller than Snowball's.

This indicates that the market is currently responding to the direction of "mechanism-based meme coins."

The traditional methods of pumping, community speculation, and hype are becoming increasingly difficult to attract capital. Using mechanism design to tell a story of "structural safety" may be one of the recent tricks of meme coins.

However, when it comes to artificially creating a certain mechanism, it’s not a new play.

The (3,3) model of OlympusDAO in 2021 is the most typical case, using game theory to package the staking mechanism, telling the story that "if everyone doesn't sell, we can all earn together," with its market cap peaking at tens of billions of dollars. The outcome is well known, with a spiral decline of over 90%.

Even earlier, there was Safemoon's "tax on every transaction distributed to holders," which was also a mechanism innovation narrative, ultimately leading to an SEC lawsuit and the founder being accused of fraud.

Mechanisms can be excellent narrative hooks, capable of gathering funds and attention in the short term, but the mechanism itself does not create value.

When external capital stops flowing in, even the most sophisticated flywheel will come to a halt.

Finally, let’s recap what this little shitcoin is actually doing:

Turning meme coin creator fees into an "automatic market-making bot." The mechanism itself is not complex, and the problem it addresses is clear: it prevents developers from directly running away with the money.

Developers not being able to run away does not mean you can make money.

If you find this mechanism interesting and want to participate, remember one thing: it is primarily a meme coin, and only secondarily an experiment of a new mechanism.