Accidental Crypto Success

Many people are rightfully upset by the recent Trump and Melania meme token launches. I wanted to chime in on this discussion since this is a space I follow closely.

Trump has created branded memorabilia in every possible category for decades. He’s branded dozens of golf clubs and buildings. I lived in Trump International a long time ago. He’s also branded steaks, wine, ties, NFTs, gold watches, sneakers, and so on. Launching a memecoin is completely on brand. In fact, it would have been more surprising if he hadn’t launched it. The only really surprising factor was that it was phenomenally successful, beyond any venture Trump has done in his lifetime by an order of magnitude.

Anyone can launch a meme coin. You can go on Pump.Fun right now, write down a name, attach an image, and press “create coin”. It takes two seconds. If you apply some effort you can launch a website and create a few more details that help round out the “story”. On Pump.Fun the most successful meme token is Fartcoin, which you may have seen in the news recently or in pop culture – it’s worth around $2B and fluctuates wildly. There are around 300,000 meme coins launched every day (not a typo). Solana is the primary meme token ecosystem because it’s cheap, fast, and easy to use. By comparison, Ethereum is too expensive and Bitcoin doesn’t support meme tokens.

Crypto and meme tokens are all about attention. And since Trump is the world’s most famous person, he gets the most attention. At this point, the $TRUMP coin is worth about $7.6B in liquid markets and $38B if you count all shares that will eventually be unlocked. There is no stability in that price and it could fall to zero at any time and no one would be surprised. The Trump team seems to own somewhere between 50-80% of the supply. Again, anyone can do this, but only someone as famous as Trump could accidentally use it to mint billions of value out of thin air. Back to my original comment, if it wasn’t successful, no one would care. Many people in the crypto community are furious about the Trump coin situation.

The size of some of these crypto moves is what makes this relevant and not just some obscure background story. At $38B it has a market value that would place it among the top 250 S&P 500 companies, around United Airlines and Ford.

The only way to confidently make money in these types of weird crypto assets is to fully immerse yourself in all of the forums and markets 24/7. It’s like playing a video game where only the top 100 most locked-in players make the money. It’s made a bit of a mockery of the investment world as it lives in a completely different galaxy far away from value investing and has made people incredibly wealthy incredibly fast. The best line I can draw from traditional investing fundamentals to crypto is via intangible value. There is tremendous value today in brand, customer loyalty, network effects, and intellectual property (IP) that is unexplained by traditionally important valuation metrics. The growth in intangible value is a well-documented phenomenon that helps explain why technology companies with expanded multiples continue to be successful year after year despite appearing overvalued by traditional measures.

Back to attention. If hundreds of thousands of people are paying attention, the price will go up. Remember that 100,000 people with just $10,000 to invest is $1B in buying power. Also, remember that crypto is natively global so anyone with an internet connection in any country can participate without having to register an account. Crypto assets can go viral instantly thanks to the iPhone and algorithmic social media.

Back to memes, none of this is all that different from Tesla which often trades like a meme stock based on the popularity of Elon. Look at how well Tesla stock has performed since the election thanks to Elon’s political success. In crypto, Fartcoin has maintained a market cap because young people use it to mock capitalism. For Trump Coin, this particular election was an emotionally significant moment for many people. To wrap this whole thing in more context, organized religion and community have steadily declined over time as people move to cities for work and away from their families and original communities. That migration increases isolation and pushes people into obscure, often online communities. All crypto assets come with forums on Discord or Telegram where people hang out and exchange ideas and jokes. Meme assets represent membership. If you expect this general trend towards isolation to continue then you can expect meme assets to continue.

The main takeaway here is that attention is a real factor in contemporary investment markets. These weird crypto stories are far too large to write off as nonsense, especially because they keep happening and they keep getting larger. I know crypto is still considered a morally reprehensible or a low-class asset to many people for many reasons.

When I think of the last decade and the emergence of the crypto asset class as a whole and how it’s been tough for people to wrap their heads around it, I think of this quote by science fiction writer Philip K Dick, “Reality is that which, when you stop believing in it, doesn’t go away.” It’s too easy to write off crypto as complete nonsense when you see ridiculous headlines like “Trump Meme Coin hits $72B valuation in 24 hours”, but it is here to stay just like the internet is here to stay. That doesn’t mean the prices will ever work in your favor or that you need to participate. But I do think it’s a valuable exercise to take crypto seriously and consider it in your mental framework for how contemporary financial markets function, especially as we head into an overwhelmingly pro-crypto administration over the next four years.