President-elect Donald Trump’s inauguration celebration began early this weekend with the launch of the TRUMP and MELANIA memecoins, and the resulting demand that drove their combined market capitalization to a high of over $17 billion. , surpassing the value of both shiba inu (SHIB). and AVAX from the Avalance blockchain.
One might wonder how investors had that amount of capital on the sidelines at a time when bitcoin (BTC) was teetering around another all-time high. The truth is that they didn’t. The capital that drove the price of the Trump token was simply a reallocation of existing memecoins that have driven the cryptocurrency market over the past year.
While some investors reportedly become millionaires overnight, investors in memecoins, which are tokens with no inherent utility whose value is determined solely by market demand, are in for a nasty sting in the future. the tail With a price driven by popularity, they are likely to take a hit when the next shiny new coin appears.
“Everyone knows this is a scam, this isn’t going to happen for four years and there’s nothing of value here.” said noted scam hunter Coffeezilla in a YouTube video.
When TRUMP was issued early Saturday morning, the exodus of companies like dogecoin (DOGE), shiba inu, pepe (PEPE), and popcat (POPCAT) began.
POPCAT has lost 42% of its market cap since TRUMP’s release, SHIB and DOGE are down 15%, and PEPE is down 22%. The combined market cap loss of these four tokens alone is $13.5 billion, and that doesn’t include the double-digit drops 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. Collectively, they are now valued at just $11 billion, and $6.3 billion has vanished in the past 24 hours.
It is worth noting that the market capitalization of crypto tokens is defined by the circulating supply multiplied by the asset price. Different levels of liquidity mean that not all of that supply can be sold at once, so the true market capitalization figure is actually lower than it appears. Still, a reduction in the market capitalization of one meme and an increase in another demonstrates a reallocation of capital.
Retail investors, drawn to stories of overnight millionaires, are especially at risk. After all, these are tokens issued by the President of the United States. Thousands, if not hundreds of thousands, of retail investors are likely to lose money. Anyone who bought the tokens on Sunday is already 30% in the red.
Apart from capital flows, there is also the regulatory issue. Online influencer Hailey Welch said in December that she was “fully cooperating with lawyers” after her memecoin HAWK caused investors to lose millions of dollars.
Another risk is copycat tokens, several of which have been created under the names of BARRON and IVANKA, other members of the Trump family. Most copycat tokens lost over 95% of their value just hours after launch.
Still, one savvy trader saw an opportunity in the fragile nature of TRUMP’s rise, claiming that he had shorted the token at $67 and would make $2.7 million if it hit $55. TRUMP is now trading at $47.
See also: Balaji slams Memecoins, calling them ‘zero-sum lottery’ as TRUMP token sends market into a frenzy
