On the eve of his inauguration, President Trump surprised the world by issuing his own cryptocurrency. The new token, named $Trump, quickly rocketed in price, peaking at $75 before entering a dramatic tailspin which saw its value fall by half. Most of the digital tokens are held by Trump-linked companies and total billions of USD in value. While the price of the cryptocurrency remains volatile, on Monday, $Trump was worth $42.9 billion to the President, dwarfing his real estate empire and social media venture in value to make him one of the world’s richest men.

While a disclaimer on the official $Trump coin website makes it clear that the digital token should not be viewed as an investment opportunity, it is likely many buyers will have been burned in an attempt to cash in on the viral craze. One trader reportedly lost $7.08 million attempting to capitalise on investor FOMO after the coin price crashed, leading experts to warn of the dangers associated with meme coins.

Finance chief issues warning over $Trump coin

A leading financial expert warned this week that investors should not think of so-called meme coins as business opportunities and said trading the digital currencies was more akin to gambling. Nigel Green, CEO of the deVere Group, said investors who are tempted into the volatile meme coin arena risked being burned. Commenting, he said:

“This is a revival of the meme coin trend we saw in 2021 and 2022, where many young, inexperienced investors got burned by extreme volatility. Without a doubt, investors will get burned by this frenzy too.

“Let’s be very clear: this is more gambling than investing. If you’re considering getting involved, you need to have a sound, diversified, long-term plan in place first.”

Mr Green, who heads up one of the world’s leading independent financial institutions, explained that the $Trump coin had no inherent value and that it was being traded based on speculation. This practice can result in a form of brinkmanship whereby traders try to jump in and cash out before the price tumbles – but with such a volatile commodity, the risks can be enormous, and the crash almost instantaneous. Mr Green continued:

“They’re mostly not buying because they think the coin has inherent value.  Understand the real risks to your money. This is not the same as investing in sound assets. Gambling is not the same as investing.

“If you do want the thrill or novelty of chasing big gains, ensure it’s part of a diversified strategy and not your main plan.”

Why did Trump create a meme coin?

Many commentators were bemused at the issuance of the $Trump coin, suggesting the President’s foray into the murky territory of meme coins stained his inauguration and jeopardised the reputation of established cryptocurrencies. However, others have celebrated the President’s embrace of the crypto space after four years of crackdowns under the Biden administration.

Nic Carter, a founding partner at Castle Island Ventures described the move as “Plumbing new depths of idiocy” and “absolutely preposterous” in comments to Politico. Also speaking to the outlet, a Washington crypto lobbyist who retains their anonymity said: “This is a horrible look for the industry already trying to make the case that we’re not a bunch of hucksters, scammers and fraudsters.”

Hong-Kong-based crypto analyst Justin D’Anethan said the $Trump coin raised a whole host of ethical questions, and told Reuters of his concerns over the new meme coin. Commenting, he said:

“While it’s tempting to dismiss this as just another Trump spectacle, the launch of the official Trump token opens up a Pandora’s box of ethical and regulatory questions.

“Should public figures, especially those with such political clout, wield this kind of sway in speculative markets? That’s a question regulators are unlikely to ignore.”

However, others in the crypto space have been less scathing about $Trump. While crypto venture capitalist Nick Tomaino was widely quoted in the media for his criticism of the meme coin, he complained on social media that his comments hadn’t been put in their proper context and that he felt the meme coin represented a positive development. In a series of posts on X, he said:

“Net positive. Vibe shift from the Biden anti-crypto era to Trump era is great. Trump owning 80 per cent and timing launch hours before inauguration is predatory and many will likely get hurt by it. Trump should be airdropping to the people rather than enriching himself or his team on this.

“There’s a way to spin it that way but unclear if that’s the direction it will go. At the moment it’s looking like an FTX coin – This isn’t as big a deal as some are saying and will blow over soon. Mute the people saying it’s a top signal and also mute the people saying it’s the biggest thing ever…

“No surprise the New York Times only used the negative part of my post on Trumpcoin. Trumpcoin is great. It signals the end of the Biden era of establishment control and the start of crypto innovation flourishing in the U.S. Just hope they put 80 per cent of the supply to good use.”

That being said, the overriding sentiment emerging from the crypto camp appears to be a sour one. President Trump, who a few years ago derided cryptocurrencies as ‘a scam’ before wholeheartedly embracing the sector has in his own meme coin transmitted a clumsy signal that he is all-in on crypto. As ever, former Trump aide Steve Bannon’s famous quote on understanding the President’s inimitable style of communication is instructive here; follow the signal, not the noise.

It is likely the President sees his foray into the crypto space as a way of stamping his seal of approval on crypto, which he has promised to make America a world leader in. But in appearing to profit from the venture while others lose, the 78-year-old President, whose understanding of meme coins might not be the most comprehensive, has done so in an inelegant and ill-advised way at best.

How much is $Trump worth?

On Tuesday, the Trump coin was trading between $33 and $38, significantly down on its Sunday peak of over $70, with a market cap of over $7 billion. But does it hold any inherent value? Finance chief Nigel Green says not:

“It is important to distinguish between speculative meme coins and legitimate digital assets that provide real value and utility.

“Trump’s presidency is expected to usher in an era of pro-crypto policies, and while this could pave the way for legitimate growth for established assets like Bitcoin, it also raises questions about the risks of speculative trading driven by social media hype.”

And as the FT puts it: “This token has no inherent value.” Yet $Trump boasts a multibillion-dollar market cap, despite being fundamentally worthless. That’s largely because of a combination of traders buying the token on a speculative basis, which drives the price up, alongside Trump supporters purchasing $Trump coin as a show of support.

In some ways, the $Trump coin saga resembles the public offering of the President’s social media platform, Truth Social, which garnered a multi-billion dollar valuation which in October shot past the price of Elon Musk’s X platform. That’s despite the view of the vast majority of analysts that there is very little value in the product, which is dwarfed by rivals like TikTok and Meta. However, the company attracted both those who wanted to express their support for Trump and traders betting on a speculative basis.

While Trump’s media company, DJT, does have something of value behind its overblown valuation, $Trump coin is a fiat currency, of which 80 per cent is held by a Trump-linked company and there is no known roadmap on when or how the remaining tokens will be introduced into circulation, making it an even more dubious proposition for anyone considering a serious investment.

Is there an opportunity in $Trump coin?

The launch of the $Trump cryptocurrency by President Donald Trump has cast a spotlight on the volatile and speculative nature of meme coins within the digital asset market. Initially introduced at approximately $6.50, $Trump experienced a meteoric rise, peaking at around $75, which propelled its market capitalization to over $14 billion. However, this surge was short-lived, as the coin’s value plummeted by nearly 50 per cent, stabilising around $37.85 with a market cap of approximately $7.56 billion.

This dramatic fluctuation illustrates the potentially grave risks associated with meme coins, which often lack intrinsic value and are heavily influenced by social media trends and speculative trading. The centralised ownership structure of $Trump, with 80 per cent of the tokens held by Trump-affiliated entities, has prompted concerns regarding market manipulation and ethical implications.

Financial experts have drawn parallels between the $Trump coin and previous speculative bubbles within the cryptocurrency sector, cautioning that such assets are more akin to gambling than traditional investing. The rapid ascent and subsequent decline of $Trump serve as a stark reminder of the volatility that characterises the meme coin market. This episode also raises questions about the potential for conflicts of interest, especially when public figures leverage their influence to promote financial instruments from which they stand to benefit directly.

The $Trump coin phenomenon highlights the dubious nature of meme coins and the broader implications for the cryptocurrency industry. Investors would be well advised not to look at meme coins like $Trump as prospective investment opportunities but rather should understand trading in these speculative meme coins as a form of gambling.

The key to a successful investment strategy is to build a diverse portfolio and adopt a long-term view. Time in the market, rather than timing the market – especially to chase memes or fads – is a far more reliable and far less risky approach. Always take financial advice before making any investment decision.