Trump coin: Why the bitcoin world is divided over the president’s crypto project

Three days before the inauguration of President Donald Trump launched his own crypto asset: $TRUMP. On the eve of his inauguration, Trump’s share of the so-called memecoin valued at $58 billionwhich makes him on paper one of the richest people on the planet. Although the price of Trump memecoin has fallen from its peak, the dangers of the president’s anything-goes approach to crypto have never been more apparent.

Trump could use this crypto scheme to extract cash from not only his most loyal supporters, but anyone who might want to curry favor with his administration in the coming months. Even many people in the crypto industry, which helped get Trump electedalready commented on where scams and predators Trump’s memecoin project is. Trump and friends own the 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 Trump memecoin investors poorer. It has the hallmarks of a classic pump and dump scenario.

“I wouldn’t call this a scam,” said Omid Malekanassociate professor at Columbia Business School. “Because to me, any time someone calls something a scam, there’s an element of deception. There’s no deception here.”

In fact, all of this happens in plain sight. Trump memecoin’s official websitewith the slogan “Celebrate Our Win & Have Fun,” includes a schedule of when more “Trump Memes” will be released. There’s also some fine print clarifying that CIC Digital LLC and Fight Fight Fight LLC, both Trump-affiliated organizations, own 80 percent of the memecoin supply. There is a link to a Terms of Service which is over 5,000 words long. So obviously lawyers were involved in setting this all up.

Such a brazen arrangement 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 past crypto-based scams, including Sam Bankman-Fried’s Ponzi scheme, where singular ambitions reaped rewards before consequences. The recklessness of Trump’s latest cash grab is also surely a sign of things to come as the president rolls back crypto regulations that protect investors and keep traditional banking somewhat sheltered 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 makes you think about buying some memecoins, don’t. A memecoin is a type of digital asset that is built on a cryptocurrency’s blockchain, but it is not a full-fledged cryptocurrency, like bitcoin. Memecoins are typically associated with a joke or a mascot, and while they can be bought and sold, memecoins don’t run a crypto ecosystem the way ethereum does do. They are anything but fiction, which makes the idea that Trump’s new memecoin is 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 want to gamble, think of it like casino money: Invest only as much money as you would take with you to a casino to play craps.”

Unfortunately, Malekan added, many Trump supporters who buy memecoins are new to the crypto world. This means they may not understand the risks associated with crypto investing or how the industry even works. Around the same time as Trump’s launch, crypto wallet apps and trading platform, e.g Moonshot and Coinbase, rose to the top of Apple’s App Store placements. Most experienced crypto investors use these apps regularly, so there is reason to believe that the new downloads are from newcomers. It’s also telling 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 newsletter Citation Needed.

True believers would say Trump is bringing more people into the crypto tent. If for some reason a Trump supporter hasn’t tried buying crypto, Trump is making 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 accounts the gold standard of cryptocurrency, is incredibly fleetingand the value can fluctuate by thousands of dollars in just a few hours. And while The Biden administration took steps to reign in crypto’s explosive growthall signs point to future chaos as Trump is preparing to roll back the rules that protects investors.

“The Trump administration has signaled that they intend to very quickly remove these types of firewalls between traditional finance and banking and the crypto industry,” White said. “We are looking at a serious risk to the much broader financial ecosystem that is unprecedented in the crypto world.”

It will take some time for that to unfold, but Trump’s memecoin scam is well underway in the meantime. First lady Melania Trump now has her own memecoin, $MELANIAwhich also rose by about 50 percent and then plummeted in value. Even the priest who delivered 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 rather something known as a crypto token, which is built on top of an existing cryptocurrency’s blockchain. Anyone can start a memecoinand 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 memecoins in your hand or even look at them, as they are just a series of random digits stored in a digital wallet.

In the best of worlds, memecoins are fun. The very first memecoin – dogecoin – started as a joke. A pair of software engineers created this digital currency back in 2013 to poke fun at bitcoin’s lofty, world-saving ambitions. They named it after a Shiba Inu dog named Kabosu had become the “doge” meme a few years earlier. Dogecoin currently has a market cap of around $53 billionaccording to CoinGecko. But Dogecoin is also an actual cryptocurrency that you can use to buy and sell things.

Some will point to dogecoin as a success story, something that offers a glimpse of 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, they would 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 could save the world or be a force for good.

Memecoins have always been a practical joke. Only this time, seen in a certain light, the fate of the American economy is upside down. It is possible that the best case scenario is that Trump will be much richer. The worst case is much darker.

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