Just three days before Donald Trump’s presidential inauguration, he launched a cryptocurrency called $Trump. This meme coin attracted a lot of buzz, and its price quickly jumped from $7 to $75 in just one day, according to CoinMarketCap. However, two days later, the value fell to around $40. Coincidentally, incoming first lady Melania Trump introduced her own meme coin, $Melania, around that time. Even the pastor at the inauguration, Lorenzo Sewell, joined the trend by promoting a $Lorenzo token.
Meme coins are digital currencies inspired by internet memes and viral trends. The most famous example is Dogecoin, which features a shiba inu dog. Unlike Dogecoin, which has its own blockchain, most recent meme coins are simply tokens that exist on existing blockchains. This makes them easy to create, leading to millions of different tokens. Most of these coins are bought not for long-term investment but for speculation—people hope to cash in quickly when prices rise.
But there’s a catch. The reality is that many investors end up losing money. Meme coins can be extremely volatile and fade quickly. There are schemes known as “pump and dump,” where creators hype up a token to inflate its value, only to sell off their holdings, causing prices to crash. With the lack of regulation in the crypto market, investors often have no safety net when things go wrong.
Despite the risks, meme coins have gained popularity. Some experts liken this to the eagerness surrounding NFTs in the past. There are a few reasons for this surge: platforms like pump.fun allow anyone to create meme coins easily, and the influence of crypto-friendly figures, like Trump, has invigorated the community. Additionally, many young people see meme coins as a way to escape financial instability and make quick profits.
Meme coins often reference popular memes or humor, making them relatable in today’s online culture. Common themes include dogs, like the shiba inu or other humorous tokens like a Pepe coin. In December, Haliey Welch, known for a viral video, launched a $Hawk token, which swiftly plummeted by 95% in value.
While meme coins have roots in the broader cryptocurrency world, they mostly serve as speculative assets. Early bitcoin developer Mike Hearn criticized this trend, expressing a desire for cryptocurrencies to function as alternatives to traditional finance rather than mere gambling tools.
Interestingly, the world of meme coins can get bizarre. For instance, an artist named Andy Ayrey created an AI chatbot that eventually started promoting meme coins. The AI drew attention to a Goatse-themed token, which saw its market cap balloon to over $1.2 billion at one point. Another project, dubbed Fartcoin, experienced a similar spike, reaching over $2.3 billion in market cap. However, Ayrey soon learned about the real challenges in trading these coins, especially issues around liquidity—selling tokens often caused their value to drop significantly.
So, who profits from this frenzy? Institutional investors tend to be the big winners, using strategies not available to regular stock traders. Meanwhile, average investors often find themselves losing money. As for Trump’s $Trump coin, it stands out. It may serve as a way for supporters to show their loyalty, similar to fan tokens used by sports figures. However, it faces scrutiny over potential conflicts of interest, as Trump benefits from trading fees tied to the token. Analysts suggest that this venture underscores Trump’s ability to navigate the financial waters as he pleases.
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