The US president has his own meme coin, but is it a Trumped-up investment?

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About 15 years ago, an anonymous person or group of people blessed us with bitcoin, the world’s first-ever cryptocurrency. Now I don’t want all the maths nerds to come after me with the whole “correlation does not imply causation” line, but you can draw a pretty clear line between the invention of bitcoin and the general downfall of modern democracy. Something to think about.

Speaking of lines, another pretty clear (vertical) one is the price of bitcoin, which has gone from a few cents to $155,000 over its 16-year existence. Whatever your views on crypto, that’s an undeniably massive gain, which has meant major windfalls for hundreds of thousands of investors around the globe.

Wondering whether meme coins are a worthwhile investment? Hint: look at the name.Credit: Michael Howard

Furthermore, bitcoin and its crypto ilk have become even more “legitimate” since Donald Trump’s recent election (speaking of the downfall of modern democracy), spurring further price gains and ensuring that we’ll have to suffer at least another four years of crypto madness.

What’s the problem?

While you might be across crypto more broadly, something that’s come roaring into prominence in the past 18 months is the “meme coin”, cryptocurrencies with no value or purpose that are entirely intended to make a lucky few people extremely rich. Take Trump’s own coin (called $TRUMP), which reached a $US14.5 billion ($23 billion) market capitalisation days before his inauguration.

What you can do about it

If you’re curious about the world of meme coins, here’s what you should know:

• What are they? The term “meme coin” can tell you a lot about the intent and quality of such cryptoassets, with the word “meme” meaning a popular internet joke. As such, these cryptocurrencies are often inspired by jokes or brief internet phenomenons, such as Fartcoin, the crow with a knife coin (based on a popular image of a crow holding a knife), or the “dogwifhat” coin, based on an image of a dog wearing a hat. Adrian Przelozny, chief executive of local cryptocurrency exchange Independent Reserve, says meme coins represent “the current pop-culture trends of the internet. Investing in one is like buying into a community that embraces a particular idea.” If you’re wondering how you can base an entire asset around a picture of a dog, well, that’s sort of the point. These coins have no value other than what others are willing to pay for them, and they make no promises about producing any goods or services. Some may have a website to promote the coin, but the vast majority do not.

• Are they popular? Yes, or at least in the crypto sphere. According to research from major crypto exchange Binance, there were 37 million new meme coins launched in January, a number that is expected to triple by the end of the year. Despite this, most of them have negligible market capitalisations – the top 100 tokens represented 98 per cent of the total meme coin market cap. There are a few exceptions, most notably Dogecoin, the first-ever meme coin, created in 2013, which today has a market capitalisation of $US39 billion.

• So how are people making money? Luck, basically. Given the lack of any real purpose, there’s very little technical analysis investors can do of meme coins. Instead, buyers simply hope they pick one of the thousands made each day that will “go to the moon” (crypto parlance for rapidly increasing in price). However, picking the right time to sell is equally important, as these coins are extremely volatile. Furthermore, pump-and-dump schemes and “rug pulls”, where coin founders take the money and run, are extremely common. “Meme coins offer the promise of asymmetric returns, which is what makes them appealing to short-term investors,” Przelozny says. “While some meme coins have enjoyed meteoric returns, most have been short-lived and quickly forgotten.”
• Should you invest in one? For 99 per cent of people, the answer to this question is a resounding no. They’re not for the faint of heart, being largely unregulated, and promoted entirely via social media platforms such as X. Only if you are extremely comfortable trading crypto already and want to take a punt on something more speculative should you consider meme coins being even slightly feasible. As Przelozny says: “Internet trends often come and go, so I would caution anyone against treating meme coins as a serious long-term investment.”

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.