Three days before he was sworn in, President Donald Trump launched his own crypto asset: $TRUMP. On the eve of his inauguration, Trump’s share of the so-called memecoin was $58 billion, making him, on paper, one of the richest men on the planet. Although the price of the Trump memecoin has fallen from its peak, the dangers of the president’s approach to crypto have never been more apparent.
Trump could use this crypto scheme to extract money not only from his most loyal supporters, but also from anyone who might want to curry favor with his administration in the coming months. Even many people in the crypto industry who helped elect Trump have already spoken out about how fraudulent and predatory Trump’s memecoin project is. Trump and friends own a vast majority of the new memecoin supply, meaning that when they decide to sell their holdings, the price will drop, leaving Trump much richer (in actual money) and the Trump memecoin investors poorer. It has the makings of a classic pump and dump scenario.
“I wouldn’t call this a scam,” said Omid Malekan, an associate professor at Columbia Business School. “Because to me, any time someone calls something a scam, there’s an element of fraud. There is no deception here.”
Indeed, all this is happening in plain sight. The official Trump memecoin website, with the slogan “Celebrate our victory and have fun,” includes a schedule of when more Trump Memes will be released. There is also some fine print clarifying that CIC Digital LLC and Fight Fight Fight LLC, both Trump-related organizations, own 80 percent of the memecoin supply. There is a link to the terms of service, which is over 5000 words long. So clearly lawyers were involved in setting this all up.
Such a brazen scheme sends a grim message to the country: in Trump’s crypto-first America, ethics are no obstacle to the pursuit of wealth. The theme carries echoes of previous crypto-based scams, including Sam Bankman-Fried’s Ponzi scheme, where singular ambition reaped rewards before consequences. Trump’s recent cash grab controversy is clearly a sign of things to come, as the president rolls back crypto regulations that protect investors and keep traditional banks somewhat shielded from the chaos of the crypto industry. It won’t be long before the crypto market crashes again, and this time, it could bring the entire economy down with it.
If all this excitement is making you think about buying some memecoins, please don’t. A memecoin is a type of digital asset that is built on the chain of a cryptocurrency, but is not a full-featured cryptocurrency, like bitcoin. Memecoins are usually associated with a joke or a mascot, and while they can be bought and sold, memecoins don’t power a crypto ecosystem the way ethereum does. They are all but made up, which makes the idea of Trump’s new memecoin worth tens of billions of dollars that much more absurd.
“I don’t give investment advice, but I always tell people, stay away from memecoins,” Malekan said. “If you’re going to play, think of it like casino money: Invest only as much money as you would take with you to a casino to play crap.”
Unfortunately, Malekan added, many Trump supporters who buy memecoin are new to the crypto world. This means they may not understand the risks involved in crypto investing or how the industry works. Around the same time as Trump’s launch, crypto wallet apps and trading platforms, such as Moonshot and Coinbase, climbed to the top of Apple’s App Store rankings. Most experienced crypto investors use these apps regularly, so there is reason to believe that the new downloads are from newcomers. It’s also clear that Trump is allowing people to buy his cryptocurrency with a debit card, when memecoins are usually traded for other cryptocurrencies, according to Molly White, a crypto researcher and author of the Citation Needed newsletter.
True believers would say that Trump is bringing more people into the crypto tent. If a Trump supporter hasn’t tried buying crypto for some reason, Trump makes it easy for them to get their money in the game. But it also means that potentially millions more Americans are betting on an asset that is inherently very risky and volatile. Bitcoin, by all measures the gold standard of cryptocurrency, is incredibly volatile and the value can fluctuate by thousands of dollars in the span of just a few hours. And while the Biden administration took steps to reign in the explosive growth of crypto, all signs point to chaos ahead as Trump prepares to roll back regulations protecting investors.
“The Trump administration has signaled that they intend to very quickly remove those kinds of firewalls between traditional finance and banking and the crypto industry,” White said. “We are looking at serious risk to the much broader financial ecosystem that is unprecedented for the crypto world.”
It will take some time for this to unfold, but the Trump memecoin feud is underway in the meantime. First Lady Melania Trump now has her own memecoin, $MELANIA, which also rose about 50 percent and then fell in value. Even the pastor who gave the blessing at Trump’s inauguration, Lorenzo Sewell, launched a memecoin called $LORENZO in an attempt to make money. It lost 93 percent of its value in less than a day.
And by the way, if it’s not already clear by now, memecoins are useless. They are not an actual cryptocurrency, like bitcoin, but something known as a crypto-token, which is built on top of the chain of an existing cryptocurrency. Anyone can start a memecoin and it can be a way to raise money for a project or help someone. Buying and selling memecoins is also a hobby, like collecting baseball cards, but you can’t actually hold them or even look at them since they’re just a string of random numbers stored in a wallet digital.
In the best world, memecoins are fun. The first memecoin – dogecoin – started as a joke. A pair of software engineers created this digital currency in 2013 to mock bitcoin’s lofty, world-saving ambitions. They named him after a Shiba Inu dog named Kabosu that became a “doge” meme a few years ago. Dogecoin currently has a market cap of around $53 billion, according to CoinGecko. But Dogecoin is also an actual cryptocurrency that you can use to buy and sell things.
Some would cite dogecoin as a success story, something that offers a glimpse into a possible positive future for Trump’s memecoin. In that fantasy, Trump supporters who bought the president’s tokens would not only get their money back, but hold onto those memecoins until they became rich beyond their wildest dreams. The irony here is that dogecoin was created to satirize the idea that crypto can save the world or be a force for good.
Memecoins have always been a practical joke. Only this time, when viewed in a certain light, the fortunes of the American economy are at stake. It is possible that the best case scenario is that Trump becomes much richer. The worst case is much darker.
A version of this story was also published in the Vox Technology newsletter. Register here so you don’t miss the next one!