IOSG: Deconstructing the Truth Behind $PUMP Valuation—On-Chain Evidence Completely Falsifies the "Population Inflating" Theory; Who is Creating a Cognitive Discount?

Author｜ Max Wong @IOSG

Introduction

Pump.fun launched as a permissionless meme launchpad on Solana in early 2024, allowing anyone to create and trade tokens in seconds via the Bonding Curve mechanism. What began as a niche experiment quickly became one of the highest-grossing applications on public blockchains.

Between 2024 and 2025, Pump.fun's daily protocol revenue consistently matched or even surpassed Hyperliquid's. Given the inherently cyclical nature of the meme market, this figure is particularly noteworthy. Its native token, $PUMP, was issued at $0.004 through a $600 million ICO, with a total FDV of $4 billion.

Over the past few months, revenue has hit record highs and the token value has doubled, but $PUMP is currently priced at approximately $0.0019, down about 80% from its all-time high of $0.086 (corresponding to an FDV of $8.6 billion). Its current market capitalization is approximately $679 million, with an FDV of $1.9 billion. The gap between revenue trends and valuation is significant.

This report reviews Pump.fun's product evolution and ecosystem strategy, conducts stress tests on whether its revenue is inflated, and determines whether the current valuation is a pricing error or a reasonable discount to real risks.

Product Portfolio

Pump.fun is no longer just a launchpad. Starting in late 2024, it began to expand into related businesses, broaden its revenue streams, and deepen its control over on-chain speculative traffic.

Launchpad (core product)

The earliest product was also the starting point for brand recognition. Anyone can deploy the token by paying a small fee.

PumpSwap

PumpSwap is an AMM DEX built by Pump.fun, launched in March 2025. Its purpose is straightforward: to reclaim the graduation fees that previously flowed to Raydium (Raydium charges 6 SOL for each graduation token). After the fee update in May 2025, the protocol takes 0.05% of each transaction, LPs receive 0.20%, and the token issuer receives 0.05%.

Features include: creating liquidity pools for any token for free, injecting liquidity into existing pools, and trading all PumpSwap listed tokens.

Padre / Pump Terminal

After being acquired by Pump.fun, Padre was renamed Terminal and positioned as a professional trading terminal, currently supporting Solana, BNB, Base, and ETH.

Similar features to other terminals include: Trench (viewing newly migrated/soon-to-be-migrated tokens), customizable interface, flash sales and instant buy-in, multi-wallet strategies, and a bundle detector.

Pumplive

Pumplive is a live streaming feature within the platform, where streamers can associate a token when creating a live stream.

The logic is "the publisher is the exchange," similar to the models of Parti and Kick/stake.com: broadcasters want to drive trading volume because they take a cut of the total transaction fees; token holders want more trading volume and buying pressure. The more broadcasters broadcast, the more active the token becomes, and the greater the trading volume.

Ecosystem initiatives

Since TGE, Pump.fun has had approximately $1 billion in cash reserves, continuously launching new product lines (the acquisition of Padre is one example), and is also doing several other things:

Pumpfund

The $3 million BiP (Build in Public) hackathon, launched on January 19, 2026, will provide $250,000 in funding to each of 12 projects, based on a valuation of $10 million. The selection criteria lean towards market-driven selection based on public interest, rather than following the traditional VC review process.

Glass Full Foundation

GFF is a liquidity injection program launched in August 2025. It deployed approximately $1.7 million (2,022 SOL) to 10 tokens (including Tokabu 21.3%, House 20.6%, USDUC, NEET, MASK, FART, etc.) through 5 transparent wallets, selecting projects with high community engagement.

Project Ascend

The creator incentive program, launched in 2025, is based on a dynamic tiered creator fee structure (0.95% to 0.05%), with the goal of increasing creator earnings tenfold while accelerating the CTO (Community Takeover) application process.

Overall performance indicators (all products)

The table below summarizes the three product lines. 2025 figures are actual data, and 2026 figures are projected uptime.

Currently, approximately 32.7% of total revenue comes from non-Launchpad products, indicating that revenue diversification is beginning to take effect.

Currently, approximately 32.7% of the platform's total revenue comes from non-Launchpad products, clearly demonstrating its initial success in diversifying its revenue streams and seeking growth in other areas.

▲ Pumpfun Trading Volume Chart

▲ Pumpswap trading volume chart

▲ Padre/Pump Terminal Transaction Volume Chart

Does Pump.fun involve fraudulent transactions?

The fundamentals of $PUMP appear strong on the surface, but the core question is: does the trading volume truly reflect real economic activity, or is it being artificially inflated by users and bots?

Correlation analysis of trading volume

The logic is simple: in a natural market, the trading volumes of Launchpad and PumpSwap should be positively correlated with a time lag. Active Launchpad indicates high genuine speculative interest, and some funds flow into PumpSwap through the graduation mechanism, supporting post-listing trading.

If there is severe manipulation, this relationship will break. Launchpad trading volume is artificially inflated, tokens graduate based on fake curve activity, and there are no real buyers when they enter PumpSwap. As a result, Launchpad volume surges, PumpSwap volume remains flat or even falls, and the correlation approaches zero or turns negative.

The most telling combination of signals is: a surge in the graduation rate (more tokens artificially reaching the curve threshold), while the trading volume of a single token on PumpSwap is low and rapidly declining, and PumpSwap liquidity depth does not increase in tandem with the number of graduated tokens.

Data from January 2026 to present:

(The first two data points are anomalies due to adjustments in PumpSwap fees and market maker policies and are therefore not included in the correlation analysis.)

Discover:

Launchpad trading volume has been stable, fluctuating between $400 million and $570 million over eight weeks (approximately a 40% range). This is not surprising considering the large number of bundlers and users engaging in volume manipulation to maintain a minimum trading volume.

PumpSwap saw greater volatility, ranging from $3.5 billion to $5.8 billion (about 60% of the total), primarily driven by a surge in demand for meme transactions in mid-January and additional incentives for the team, but Launchpad did not experience a corresponding increase in volume.

r = 0.579, moderately positive correlation. When the sample size n=8, p<0.05 requires r>0.63, which does not reach the significance threshold, but the direction and strength are consistent with the organic growth hypothesis.

University of Pisa thesis

Researchers at the University of Pisa conducted a comprehensive on-chain analysis of Pump.fun Launchpad, covering all transactions of 655,770 tokens issued between September and October 2025, and distinguished between bot and human transactions using Solana transaction log metadata.

Four of the findings directly relate to the issue of fraudulent transactions.

Large-scale manual purchases are the strongest predictor of graduation.

The strongest predictive signal for graduation is the rapid accumulation of SOL through a small number of large transactions. The median number of successful graduations is only about 457, taking approximately 4.4 minutes from token creation to graduation. This pattern (large, low-frequency capital injections from different wallets) is consistent with coordinated human speculation (Telegram group calls, KOL hype) or continuous pump-and-dump schemes, not high-frequency trading bots artificially inflating volume. Instead, bot-driven tokens accumulate a large number of small transactions and then stagnate before graduation.

Robotic activities actually inhibit graduation

After the early curve phase, the graduation probability of tokens actively traded by bots systematically decreased. At that time, the graduation requirement was approximately 85 SOL accumulated during the curve. If bots were artificially inflating their trading volume to rush graduation, the graduation rate of tokens actively traded by bots should have been higher, but the data showed the opposite.

The reason is structural: upon graduation, the Bonding Curve transitions from virtual reserves to real AMM reserves, causing a decrease in the dispersion of effective liquidity depth. Selling before graduation (at the depth supported by virtual reserves) is more profitable than selling after graduation.

The study also found that the top ten token issuers in September 2025 each issued more than 2,000 tokens in a single month, and statistically unusual sell-off sequences initiated by wallet clusters could be observed for each token before it reached the graduation threshold. This suggests that bundled traders and snipers had built up positions in advance and then sold off during the upward curve, attracting retail demand.

The paper concludes that most bots on the platform are early adopters, extracting value from human trading counterparts when entering and exiting the market, not wash traders trying to reach the graduation threshold. Bots acquire/hoard large supplies and then dump them on retail investors near graduation. This is distinct from wash trading.

SOL's net flow has consistently been positive, and its structure is incompatible with wash trading.

The paper calculates the net SOL flow of the complete dataset (total SOL used for the curve minus total SOL withdrawn from sales). During the single-month observation period, the ecosystem accumulated a net retention of approximately 160,000 SOL (equivalent to approximately US$32 million at September 2025 prices).

This is a hard test of wash trading: the circulating trading volume between linked wallets results in near-zero net capital flow because buying and selling offset each other. The $32 million net retention is structurally incompatible with the large-scale circulating trading volume, indicating that genuine external retail capital is continuously flowing into Launchpad, with the 1.25% fee per transaction contributing to the loss and funding protocol revenue.

The paper's findings are consistent with our volume correlation analysis: a significant portion of the trading volume on Launchpad is generated by bundlers and snipers through pump-and-dump schemes, forming the volume floor, but it is not wash trading. The key difference is that wash trading generates zero net protocol revenue (fees between linked wallets offset each other), while pump-and-dump schemes generate real fees on each trade (from genuine retail trading counterparts who pay the platform). The approximately $390 million in ARR confirms that the platform monetizes real retail trading volume through its pump-and-dump ecosystem, rather than creating false metrics.

Token Economy

Buyback

Currently, the Pump Foundation uses 100% of its revenue from all product lines to repurchase $PUMP on the open market. In the eight months since the announcement of the 100% revenue buyback on July 15, 2025:

27% of the circulating supply was repurchased, clearing 9.6% of the total supply.

In comparison, since Hyperliquid launched its buyback program in November 2024, it has only burned 4.1% of its total supply (approximately 12.3% of the circulating supply).

Based on current prices and income, the annualized liquidation rate is close to 45%.

Supply Structure and Unlocking

Total supply: 1,000,000,000,000 pumps

Circulating supply: 430,000,000,000 (43%)

Remaining locked: Approximately 58% of total supply

Key Unlocking Nodes: In Progress: 12% (as of July, 2% monthly for community and incentives) July 2026: 8.25% unlocked, followed by 0.68% monthly for the next 36 months.

Valuation Analysis

If the wash trading analysis holds true, $PUMP is undervalued and has asymmetric upside potential.

The discount comes from three aspects:

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Market doubts about revenue sustainability

The market perceives Pump.fun's overall trading volume as speculative and cyclical, tied to short-term meme events. Investors view current profitability as temporary. While buybacks have a financially stimulating effect at the current P/E ratio, this isn't factored into valuation models because the underlying assumption is a significant revenue compression. The core debate isn't whether Pump.fun is profitable now, but whether it will be profitable in 24 months.

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Institutional coverage gap

We interviewed 15 Tier 1 funds and VCs to understand their perspectives on $PUMP. Only one of the 15 actively tracks $PUMP using bottom-up analytics. Most institutions did not model new product suites, did not break down revenue by product line, and did not stress test the sustainability of deal volume.

The lack of coverage created a narrative vacuum, with pricing driven more by market perception than financial analysis. In contrast, HYPE has deeper institutional backing, more research coverage, and a clearer product positioning, supporting a higher and more stable valuation multiple.

There's also a self-reinforcing effect: assets associated with meme infrastructure are implicitly categorized as speculative and ephemeral, and trading activity follows suit. The market needs time and data across multiple cycles to update this cognitive framework. Valuation compression may persist, regardless of current cash flow, until Pump's revenue withstands a broader crypto market correction and institutional coverage expands.

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Management trust has not yet been established

Investors' concerns focus on: long-term vision beyond Meme, capital allocation discipline, product roadmap execution, and the transition from viral growth to a sustainable platform economy.

The market typically assigns lower valuation multiples to founder-led, high-growth platforms until the platform demonstrates resilience during market volatility and proves that growth can translate into a sustainable platform economy. This discount is likely to persist until Pump demonstrates continued revenue diversification and robust execution through products like PumpSwap and Pump Terminal.