Three days before his inauguration as US president, Donald Trump made an unusual move. He launched $Trump, a so-called meme coin that fans and speculators could buy in the hopes it would gain value. Initially, $Trump soared from a value of $7 to $75 per coin in a day, according to crypto price-tracking website CoinMarketCap. Two days later, it dropped to about $40 – just as incoming first lady Melania Trump launched her own meme coin, $Melania. Even the pastor at Trump’s inauguration ceremony, Lorenzo Sewell, got swept up in the meme coin frenzy, promoting a $Lorenzo version the same afternoon.
So what exactly are meme coins, and why is everyone and their vicar suddenly getting involved?
Meme coins are a type of digital asset based on a meme – usually something that has gone viral online. The best known is Dogecoin, inspired by the popular meme featuring a shiba inu dog that speaks in Comic Sans. But Dogecoin is a bit different from the slew of recent meme coins, says Simon Peters, crypto analyst at trading platform eToro. Launched in 2013, Dogecoin has its own blockchain – the decentralised ledger technology that underpins cryptocurrencies such as bitcoin. The majority of other meme coins are “tokens”, meaning they operate on top of an existing blockchain and so require little in the way of technical development.
These tokens are very easy to make; there are millions of them. The only real purpose of most meme coins is speculation: users create or buy them in the hope that their value will soar so they can make a lot of money very quickly.
Sounds lucrative, what’s the catch?
In reality, the vast majority of people lose money. Most meme coins are volatile and short-lived. They are also susceptible to what’s known as a “pump and dump” scheme or a “rug pull”, says Peters. This is when creators keep a lot of the tokens for themselves, hype up the project on social media to attract other buyers and increase the value, then dump all of their tokens – flooding the market and causing the price to crash. “Then everybody moves on to another one,” says Carol Alexander, a professor of finance at Sussex University. Given the crypto market is largely unregulated, investors have little recourse if something goes wrong.
No regulators, no guardrails, sounds iffy…
All this hasn’t put people off, and there has been a boom in meme coins over the past year. Alexander compares it to the previous fad around NFTs, another type of crypto asset (you may remember people paying millions of pounds for digital images of monkeys). There are a few reasons for the recent interest. January 2024 saw the launch of pump.fun, a platform that lets anyone easily create a meme coin (although it was blocked for UK users in December following a warning from the Financial Conduct Authority). The election of crypto-friendly Trump may also have emboldened the community. But a key driver of meme coins, says Alexander, is more of a social issue: “Young men, disillusioned, wanting to try and get rich quick.”
Which would explain why they are based on internet in-jokes or puerile humour…
Indeed. At the time of writing, several top meme coins reference dogs; the shiba inu breed is a particular touchpoint. Others include a Pepe token, based on the cartoon frog meme sometimes associated with the alt-right, and a Gigachad token, referencing an “alpha male” meme. Subjects of memes have also tried to parlay viral fame into crypto gains: in December, Haliey Welch, better known as “hawk tuah girl” after a viral video of her referencing oral sex, launched the $Hawk token, which promptly lost 95% of its value).
Are bitcoin and meme coins essentially the same?
Though meme coins have their foundations in cryptocurrencies such as bitcoin, early bitcoin developer Mike Hearn says they have little to do with the original crypto vision. He left the bitcoin community in January 2016 as he didn’t agree with the direction in which it was headed. He wanted to see cryptocurrency used as a real alternative to traditional finance rather than just a speculative asset. Meme coins are a continuation of this trend, he says: “They’re basically a form of gambling – kind of a more amped-up version of the stock market, but with less connection to anything concrete.”
Doesn’t sound any more crazy than an online betting site to me…
Then consider the story of New Zealand-based artist Andy Ayrey, who trained an AI language model and set up an X account, @truth_terminal, for it to share its thoughts. Ayrey describes the bot as being like a teenager that “doesn’t have any social awareness of when to be gross and when not to be”. Truth Terminal particularly enjoyed posting about Goatse, a not-safe-for-work meme that has become part of early internet lore.
The AI gained an interest in meme coins after interacting with crypto accounts on X, and Ayrey set up a crypto wallet on its behalf. Then things got weird. Inspired by the bot’s posts, a stranger – Ayrey says he doesn’t know who – created a Goatse-themed token on pump.fun and sent some to Truth Terminal. Truth Terminal promoted the token on its account, and “all hell broke loose”, says Ayrey. The market capitalisation of the token – the total value of all tokens – shot up. At its most valuable, around a month after launch, it reached more than $1.2bn, according to CoinMarketCap.
The AI later became involved in another meme coin, Fartcoin, based on the rather more relatable meme (again, Ayrey says he doesn’t know the creator). Fartcoin reached a peak market cap of more than $2.3bn.
So Ayrey was quids in?
Not so simple. The whole experience introduced Ayrey to some of the issues around meme coins. He found that their value on paper massively eclipsed what he could actually get for them, owing to low liquidity. As soon as he sold the tokens, their value would decrease and would negatively impact others who held the tokens. Eventually, he worked out a private deal with a couple of investors on the basis that they wouldn’t dump the Fartcoin on the market. He admits it’s been amusing having to talk to finance and tax authorities about “liquidating Fart”. He believes this is part of the appeal for meme coin fans. “The more people get angry about it, especially in traditional finance, the more people think Fartcoin is funny and Fartcoin goes up,” he says.
Who is making money then?
The main people making money off crypto, says Alexander, are institutional investors – trading firms that use strategies that wouldn’t be allowed in regular stock trading. “All the big professional traders are making billions out of this, and ordinary people are losing their money,” she says.
And Trump?
Alexander sees his meme coin as being slightly different from many coins in that it has a potential alternative function on top of speculation: users buy it to show their support for the president. In this way, it’s similar to a “fan token”, like those produced by sports teams and players. The Trump token has drawn criticism owing to conflicts of interest; among other concerns, Trump owns one of the entities collecting trading fees. Alexander thinks the motivation for the coin is simple: “It’s just showing that he can do this sort of thing,” she says. “He can do whatever he likes and he knows it.”
