Trump’s crypto grift is a warning

Three days before taking the oath of office, President Donald Trump launched his own crypto asset: $TRUMP. By the eve of his inauguration, Trump’s share of the so-called memecoin was worth $58 billion, making him, on paper, one of the richest people on the planet. Although the price of the Trump memecoin has fallen from its peak, the dangers of the president’s anything-goes approach to crypto has never been more apparent.

Trump could use this crypto scheme to extract cash from not only his most loyal supporters but also 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 elected, have already spoken out about how scammy and predatory Trump’s memecoin project is. Trump and friends own a vast majority of the new memecoin supply, which means when they decide to sell their holdings, the price will fall, leaving Trump much richer (in actual money) and Trump memecoin investors poorer. It has the makings of a classic pump and dump scenario.

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

Indeed, this is all happening in plain sight. The Trump memecoin’s official website, featuring the slogan “Celebrate Our Win & Have Fun,” includes a schedule of when more “Trump Memes” will be released. There is 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’s a link to a terms of service, which is over 5,000 words long. So it’s clear that lawyers were involved in setting all this up.

Such a brazen scheme sends a grim message to the country: In Trump’s crypto-first America, ethics are no barrier to the pursuit of wealth. The theme carries echoes of previous crypto-based swindles, including Sam Bankman-Fried’s Ponzi scheme, where singular ambition reaped rewards before consequences. The recklessness of Trump’s latest cash grab is surely a sign of things to come, too, as the president rolls back regulations on crypto 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 is making you think about buying some memecoins, please don’t. A memecoin is a type of digital asset that’s built on a cryptocurrency’s blockchain, but it is not a full featured cryptocurrency, like bitcoin. Memecoins are typically associated with a joke or a mascot, and while they can be bought and sold, memecoins don’t power a crypto ecosystem in the way that ethereum does. They are all but make-believe, which makes the idea of Trump’s new memecoin being 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’re going to play, 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, a lot of Trump supporters buying the memecoins are new to the crypto world. That means they might not understand the risks involved in crypto investments or how the industry even works. Around the same time of Trump’s launch, crypto wallet and trading platform apps, like Moonshot and Coinbase, rose to the top of Apple’s App Store rankings. Most seasoned crypto investors use these apps regularly, so there’s reason to believe 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 Citation Needed newsletter.

True believers would say that Trump is bringing more people into the crypto tent. If a Trump supporter hasn’t tried buying crypto for any reason, Trump’s making it easy for them to get their money in the game. But that also means that potentially millions more Americans are betting on an asset that’s inherently very risky and volatile. Bitcoin, by all measures the gold standard of cryptocurrency, is incredibly volatile, and value can fluctuate by thousands of dollars in span of just a few hours. And while the Biden administration took steps to reign in crypto’s explosive growth, all signs point to future chaos as Trump prepares to roll back regulations that protect investors.

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

It will take some time for that to unfold, but the Trump memecoin grift is well underway in the meantime. First lady Melania Trump now has her own memecoin, $MELANIA, which also surged by about 50 percent then plummeted in value. Even the pastor who delivered the benediction at Trump’s inauguration, Lorenzo Sewell, launched a memecoin called $LORENZO in an attempt to cash in. 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 launch a memecoin, and it can be a way to raise money for a project or to help someone out. Buying and selling memecoins is also a hobby, kind of like collecting baseball cards, but you can’t actually hold the memecoins in your hand or even look at them since they’re just a string of random digits stored in a digital wallet.

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

Some would point to dogecoin as a success story, something that offers a glimpse at 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’d hold onto those memecoins until they got 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, when viewed in a certain light, the fate of the American economy is the punchline. It’s possible that the best case scenario is that Trump gets a lot richer. The worst case is much darker.

A version of this story was also published in the Vox Technology newsletter. Sign up here so you don’t miss the next one!