The celebration of President-elect Donald Trump’s inauguration began early this weekend with the release of TRUMP and MELANIA memecoins, and the resulting demand pushed their combined market cap to a peak of more than $17 billion , exceeding the value of the two shiba inu (SHIB). and AVAX from the Avalance blockchain.
One might wonder how investors were able to set aside so much capital at a time when bitcoin (BTC) was teetering around another all-time high. The truth is, no. The capital that drove up the price of Trump’s token was simply a reallocation of existing memecoins that have driven the crypto market over the past year.
While some investors may have become millionaires overnight, a nasty injury could await investors in memecoins, which are tokens with no inherent utility whose value is determined solely by market demand. With pricing determined by popularity, they risk taking a hit when the next shiny new coin arrives.
“Everyone knows it’s a scam, it won’t exist in four years and there’s nothing of value here.” said prominent scam hunter Coffeezilla in a YouTube video.
When TRUMP was released early Saturday, the exodus from stocks like dogecoin (DOGE), shiba inu, pepe (PEPE), and popcat (POPCAT) began.
POPCAT has lost 42% of its market cap since TRUMP launched, SHIB and DOGE are both down 15%, and PEPE is down 22%. The combined market cap loss of these four tokens alone amounts to $13.5 billion, and that doesn’t include the double-digit declines of WIF, BONK, and hundreds of other memecoins.
TRUMP himself took a hit when MELANIA was released, losing 58% of its value and reflecting the fickle nature of speculative memecoins. Together, they are now valued at just $11 billion, $6.3 billion of which has disappeared in the last 24 hours.
It should be noted that the market capitalization of crypto tokens is defined by the circulating supply multiplied by the price of the asset. The different liquidity levels mean that not all of this supply can be sold at once, so the true market cap figure is actually less than it seems. Nevertheless, a reduction in the market capitalization of one meme and the increase of another demonstrates a reallocation of capital.
Retail investors, attracted by stories of overnight millionaires, are particularly at risk. After all, these are tokens issued by the President of the United States. Thousands, if not hundreds of thousands, of retail investors stand to lose money. Anyone who bought the tokens on Sunday is already 30% in the red.
Beyond capital flows, there is also the question of regulation. Online influencer Hailey Welch said in December that she was “fully cooperating with the lawyers” after her memecoin HAWK saw investors lose millions of dollars.
Another risk involves copycat tokens, several of which were created under the names of BARRON and IVANKA, other members of the Trump family. The majority of copied tokens lost more than 95% of their value just hours after their launch.
Yet one savvy trader saw opportunity in the fragile nature of TRUMP’s rise, saying he sold the token at $67 and would make $2.7 million if it reached $55. TRUMP is now trading at $47.
See also: Balaji blasts Memecoins, calling them a ‘zero-sum lottery’ as TRUMP token sends market into frenzy
