We don’t usually write about memecoins because they don’t have a business application or impact. With President Trump issuing the $TRUMP memecoin following by his wife’s $MELANIA coin, that changes things. As of writing, the market capitalization of the $TRUMP token is around $8.4 billion and $MELANIA around $1.1 billion, with both claiming to retain 80% of the token which will be circulated over the coming three years.
Is it good for crypto?
With the Trump coin issuance, the President has broadcast the message that the United States is open for almost any crypto business, while also multiplying his own wealth many times over, if one treats the issuing company as indirectly owned by him.
In the short term, the tokens have and will attract huge numbers of new users into crypto, which many will view as a good thing, especially crypto exchanges. But some of the more serious crypto folk have strong misgivings.
Trump was reported to be worth around $7 billion before the coin issuance. Adding another $34 billion ($8.4bn x 4) to his net worth over the weekend might be enough to make an impression on him. So if he was crypto friendly before, he is likely to be way more supportive now. That’s provided there isn’t too much of a backlash following the initial speculative frenzy and the price remains high enough.
After all, there has been a backlash against non fungible tokens (NFTs) following the hype, even though they provide tangible benefits and are a genuine use case for brands, sports and games. Today most brand issuers refer to NFTs as digital collectibles to avoid the association.
Politico did not pull any punches about the $TRUMP coin: “The sheer opportunism of the move suggests that the worst sorts of crypto charlatans, a crowded field at the best of times, already have Trump’s ear. If clarity is indeed coming, it’ll be a single dire message: ‘Anything goes.'”
The real challenge is Trump fans could lose a lot of money.
Fan tokens
The most successful memecoins to date, Doge and Shibu were not linked to something that existed. Fan tokens – distinct from NFTs – are arguably a sub class of memecoins, though they often provide tangible benefits like giveaways. Last year we wrote about the Paris Saint Germain (PSG) soccer fan token:
“The fan token has not always been kind to fans. The PSG price peaked at around $55 in April 2021, but its current value is just $3.64.” And it’s even less today.
The PSG token responds to two sets of factors – crypto markets and the soccer club’s performance.
Hence, the $TRUMP token is likely to go up and down in response to people’s views on the President’s performance. That means that the President has skin in the game. If he were to respond to the price movements, it might encourage him to be populist.
The flip side is he could lose supporters who get burned financially. With the volatility of the coin price today, that’s already happened to some.
Following the explosion of the $TRUMP token price, how many celebrities will sit on the sidelines? No wonder Coinbase and Binance are listing the token. Not only are the tokens in demand today, but the floodgates will open. There will be a massive race for celebrities to issue memecoins or fan tokens while the sector is hot. Some of the biggest winners are likely to be fan token platforms Socios and Calaxy, which was founded by NBA star Spencer Dinwiddie.
Many in the crypto community recognize that this could bring loads of new crypto users, but still have misgivings because it’s a memecoin move. Blockchain and crypto can be used for real business and social applications. Memecoins highlight the frivolous and speculative side of crypto.
One memecoin fan has been rather quiet on the $TRUMP coin: Elon Musk.
What about the law?
Assuming this brings a flood of new users into the crypto sector, the need for legislation to provide protections becomes far more urgent. Creating that urgency is probably a good thing. Most serious players in the crypto space want some laws, otherwise scammers can flourish too easily.
On the question of the legality of the $TRUMP fan token, memecoins generally aren’t considered an investment, but the law is not entirely clear. Crypto lawyer Preston Byrne considers it highly unlikely that the SEC or DOJ would pursue any enforcement action in the next couple of years.
At the same time, we can’t see how this will make it any easier for the new SEC Chair, Paul Atkins. The President has set a precedent. If Atkins disagrees with that precedent or, for example, believes there has been some insider trading, that creates an awkwardness just as he’s starting his new role.
By creating an immediate explosion of activity in the sector, Atkins will more than have his hands full just pursuing the outright scams and fraud that will come through the floodgates alongside the celeb coins.
Will the $TRUMP coin mean civil action suits?
Preston Byrne points out that the $TRUMP coin might give ammunition to Democrats to open civil legal actions against Trump, which could be distracting.
Several people have raised the issue of foreign powers buying influence.
Byrne also predicts that the issuer will face some sort of consumer civil action within a couple of months. We concur. The $TRUMP price already dropped from $72 to $42 when the $MELANIA token was announced. It recovered somewhat, but fell about 20% in the two hours spent producing this piece. Today it is down 35%. This kind of price volatility is what triggers lawsuits in the United States. That said, Newsweek noted that the coin’s terms and conditions have a legal waiver that can prevent participation in class action lawsuits, unless the person acts fast enough.
If a lawsuit were to be successful, it could wipe out all the gains. Let’s hope it doesn’t happen, but say the $TRUMP coin drops to $5. That’s still worth $1 billion, so Trump’s family’s cut is another $4 billion. But if the coin price drops from say $50 to $5 with the public owning 20%, that’s a $9 billion loss to the public, which is more than Trump’s interest in the coin is worth.
As they say, nothing ventured, nothing gained.
