President Donald Trump launched his own meme coin last month.Jonathan Raa/NurPhoto/Getty Images
Trump's return to the White House has boosted interest in cryptocurrencies.
Meme coins are types of cryptos often based on internet jokes but have extended to personalities too.
Trump's $Trump coin has faced criticism, sparking numerous copycat coins and investor concerns.
President Donald Trump's support for cryptocurrencies has sparked renewed interest in digital currencies.
The former crypto critic has vowed to make the US the world's "crypto capital" — and even launched his own "meme coin" called $Trump.
What are meme coins?
Meme coins are cryptocurrencies generally based on internet jokes, fads, or characters, with often fun logos. Personalities have also jumped on the bandwagon to launch their own tokens, including singer Jason Derulo, Caitlyn Jenner, and boxer Floyd Mayweather Jr.
One of the best-known meme coins is dogecoin, the Shiba Inu dog-themed coin that Trump's close ally Elon Musk has long hyped. Dogecoin, a likely influence for the name of Musk's Department of Government Efficiency, surged soon after the election — but is down about 40% over the past month.
Along with other digital currencies such as bitcoin, meme coins are based on blockchains — most often Solana.
Elon Musk is a fan of Dogecoin.Idrees Abbas/SOPA Images/LightRocket via Getty Images
Meme coins are usually very volatile and can experience rapid price swings. Coins generally start with prices of one cent or less, meaning percentage changes can be significant.
They are also sometimes linked to scammers and "rug pulls," when promoters attract buyers and then stop trading before the coin crashes, allowing them to pocket some of the proceeds.
Nicolai Sondergaard, research analyst at multichain analytics platform Nansen, told Business Insider that meme coins were not inherently risky investments.
"What makes them dangerous, however, is the people launching them with nefarious intentions and not playing fair," he said. "This is how we end up seeing the many issues of tokens being launched, quickly rising several hundred if not thousands of per cent, only to quickly dump on the majority."
Welcome to $Trump coin
Before his inauguration, Trump and first lady Melania Trump launched their own meme coins — $Trump and $Melania.
"My new Official Trump Meme is here! It's time to celebrate everything we stand for: Winning! Join my very special Trump Community," the president said on X on January 18.
Other examples of meme coins include a token called $Hawk launched by viral internet personality Haliey Welch, the "Hawk Tuah Girl," and $Libra, a coin that led to a political scandal in Argentina after it was promoted on social media by President Javier Milei.
Why is Trump's coin problematic?
$Trump surged from $7 to $74 in a day, according to crypto price tracker CoinMarketCap. It's fallen about 55% in the past month and was trading at about $11 on Thursday, per Coinbase.
"I don't know much about it other than I launched it, other than it was very successful," Trump said in January.
Danny Scott, CEO of CoinCorner, described $Trump as a stunt, reflecting wider unease in the crypto world regarding the president's move.
"Trump's comments about not knowing much about the coin back up my opinion that he is making a mockery of the industry," he told BBC News.
Joe McCann, founder and CEO of digital assets investment firm Asymmetric, previously told Business Insider that Trump's decision to launch his own coin "gives agency to anyone or any brand to follow suit."
$Trump has sparked hundreds of spam duplicates in the Trump coin wallet, The Financial Times reported this month, including almost 200 named after members of the Trump family that aren't officially connected to them.
Researchers say that unknowing investors can be easily fooled by copycat coins.
There have been hundreds of duplicates of Trump's meme coin.Mark Humphrey/AP
'Akin to collectibles'
The Securities and Exchange Commission said on Thursday that most meme coins do not qualify as securities.
"Meme coins typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation. In this regard, meme coins are akin to collectibles," it said in a statement.
These types of cryptos generally have "limited or no use or functionality," the SEC added.
"Given the speculative nature of meme coins, they tend to experience significant market price volatility, and often are accompanied by statements regarding their risks and lack of utility, other than for entertainment or other non-functional purposes."
Why do people buy meme coins?
Ying-Ying Hsieh, assistant professor and associate director of the Center for Cryptocurrency Research and Engineering at Imperial College London, said people buy meme coins for one reason: the hope of quick wealth.
Meme coins were introduced as a "get rich quick" scheme on the back of crypto enthusiasm, with content creators promoting their coins and promising lucrative outcomes, Hsieh explained.
"However, after several scams and cases of fraud in regards to highly inflated coins, the general public grew aware of a pattern that showed a sudden spike in value in most meme coins," she told BI. "Instead of giving up on meme coins, individuals, fully aware of their risk, decided to buy these coins with a very opportunistic mindset, hoping to sell the coin just before it came crashing down."
Hsieh said: "To this day, people still buy meme coins for the same reason as why people gamble. The thought of winning big and never having to work another day in your life, in addition to its proven outcome, provides a constant vortex of attraction."
What's going on with bitcoin?
Trump's crypto-friendly pledges during his campaign, branding himself as the crypto candidate, helped to boost bitcoin to new highs.
The best-known cryptocurrency surged through the $100,000 threshold for the first time in December when the then-president-elect nominated Bush-era Securities and Exchange Commission boss Paul Atkins to run the regulator once again. A crypto advocate, Atkins' nomination assured the industry that the SEC may be more lenient toward digital currencies.
However, bitcoin has been on the slide in recent weeks, declining more than 20% from January's record price of just over $109,000 to under $84,000 on Wednesday.
