President-elect Donald Trump’s inauguration celebrations kicked off early this weekend with the release of TRUMP and MELANIA memecoins and resulting demand, driving their combined market capitalization to a peak of more than $17 billion dollars, surpassing the value of both shiba inu (SHIB) and Avalance blockchains AVAX.
One might ask how investors had that amount of capital on the sidelines at a time when bitcoin (BTC) was hovering around yet another all-time high. The truth is they didn’t. The capital that pumped up the price of Trump’s token was simply a redistribution from existing memecoins that have bolstered the crypto market over the past year.
While some investors reportedly become overnight millionaires, a nasty sting could be in store for investors in memecoins, which are tokens with no intrinsic utility whose value is determined solely by market demand. With a price driven by popularity, they are likely to take a hit when the next shiny new coin comes along.
“Everyone knows this is a sadness, this won’t be around in four years and there’s nothing of value here.” said prominent scam hunter Coffeezilla in a YouTube video.
When TRUMP was issued early Saturday, the exodus from 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 from these four tokens alone is $13.5 billion, and that doesn’t include the double-digit declines of WIF, BONK, and 100s of other memecoins.
TRUMP himself took a hit when MELANIA was released, losing 58% of its value, reflecting the fickle nature of speculative memecoins. Together, they are now valued at just $11 billion, with $6.3 billion disappearing in the last 24 hours.
It is worth noting that the market value of crypto-tokens is defined by circulating supply multiplied by the asset price. Varying levels of liquidity mean that not all of this supply can be sold at once, so the true market value figure is actually lower than it appears. Yet a reduction in the market value of one meme and the increase in another shows capital redistribution.
Retail investors, lured in by stories of overnight millionaires, are particularly vulnerable. After all, they 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 tokens on Sunday is already 30% down.
Apart from capital flows, there is also the issue of regulation. Online influencer Hailey Welch said in December that she was “fully cooperating with lawyers” after her HAWK memecoin saw investors lose millions of dollars.
Another risk is copycat tokens, several of which have been created under the names BARRON and IVANKA, other Trump family members. The majority of the copycat tokens lost more than 95% of their value just hours after launch.
Still, one savvy trader saw an opportunity in the fragile nature of TRUMP’s rally, claiming he was shorting the token at $67 and standing to make $2.7 million if it hit $55. TRUMP is now trading at $47.
Also See: Balaji Blasts Memecoins, Calling Them ‘Zero-Sum Lottery’ As TRUMP Token Sends Market Into Frenzy
