Meme trash to Mars

Whatever one's opinion of the latest US President, his ambition is breathtaking.

From re-taking the Panama Canal to putting astronauts on Mars, from capturing Greenland to imposing sweeping import tariffs on a variety of countries, his first days in office have been a whirlwind of executive orders, reversals of President Biden's key policies, withdrawals of US involvements in muilti-national bodies, and pardons for favored jailbirds.

But his most staggering decision was the creation and launch of a so-called 'meme coin' shortly before he took office. His wife Melania then launched her own meme coin. A meme coin is a digital token, a cryptocurrency that is inspired by a joke or internet trend. It is deliberately unserious. $TRUMP launched at $6.50, swiftly rose to a high of $73, before falling to $40. It's market cap on Monday this week was more than $7.5 billion. $MELANIA set off at more than $7, rose to more than $13 and then dropped to under $5.

It's a long journey to Mars - about 18 months return trip - but even longer for $TRUMP or $MELANIA to prove they are anything more than gambling chips. They will go up and down in value like all cryptocurrencies but for those who like risky speculation they can be tempting - even FARTCOIN (another meme coin) which launched last October at slightly more than $1.5 now has a market cap of $1.76 billion. That's more than many publicly-listed companies that actually make things. Meme coins, Stablecoins, Alt coins, Central Bank Digital Currencies - more than 20,000 cryptocurrencies have been created since Bitcoin launched in 2009 but most are dormant or deceased. Bitcoin still has more than 90% of the cryptocurrency market.

Bitcoin and money

The creation of Bitcoin in 2009 made sense. The world was still going through ripples of the Great Financial Crash. Bitcoin's philosophy was to remove money from governmental control. Governments had shown they did not protect the value of fiat money; they printed and issued millions to bail out banks and avoid a global banking collapse. Bitcoin was in part designed to combat inflation and make control over money more of a public good. But Bitcoin still struggles to be used as money and has been described as an economic bubble or Ponzi scheme, a fraud. The American lawyer Eric Posner has a more nuanced view of Bitcoin. For him a Ponzi scheme "takes fraud; Bitcoin, by contrast, seems more like a collective delusion." Bitcoin has been and is used by criminals to avoid taxes, launder money, and trade in illegal goods such as drugs or weapons. El Salvador has adopted Bitcoin as legal tender; but it has generally failed in its ambition to displace fiat money. Transactions are slow, laborious, and the underlying technology is challenging for many. And it's peculiar that something that aspires to be money is still valued in terms of Dollars, like all currencies around the world.

The danger inherent in cryptocurrencies was evident this past week. A fake meme coin, 'Barron' (named for Trump's youngest son) was launched Monday and quickly soared to a market cap of more than $400 million - only to collapse by more than 90% soon after its appearance. Scammers used the rampant Trump euphoria to dupe investors and leave them high and dry. Another son, Eric, took to social media to try to dispel a rumor that a 'USA Coin' was soon to be launched. At President Trump's inauguration Lorenzo Sewell, a previously obscure 'pastor', delivered a prayer thanking God for the new President. He then launched his own meme coin, called 'Lorenzo'. It hit a $4.5 million market cap, then collapsed by more than 90%, leaving unwary 'investors' out of pocket. It feels like the Wild West.

Conflict of interest

Regulation of cryptocurrencies in the US is confused. There is no overarching federal regulatory framework for digital assets. The Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the Internal Revenue Service (IRS) and individual states can all chip in with rules and regulations. With cryptocurrencies it's a matter of 'buyer beware'. The Consumer Financial Protection Bureau (CFPB) enforces laws and regulations protecting consumers from unfair or abusive financial practices.

Financial regulatory agencies in the US

President Trump vowed to create a US Bitcoin strategic reserve before the election. That was sufficient to propel Bitcoin's valuation higher, above $100,000. Predictions for its future price seem like fantasy - in the millions of Dollars in a few years. The official $TRUMP coin website states "Trump Memes are intended to function as an expression of support for, and engagement with, the ideas and beliefs embodied by the symbol '$TRUMP' and the associated artwork, and are not intended to be, or to be the subject of, an investment opportunity, investment contract, or security of any type." There you have it.

But aside from the worthlessness of $TRUMP there are deeper worries. President Trump is in the process of firing the heads of regulatory agencies and appointing in their place people who have publicly attacked regulation. There is a clear conflict of interest here - backing your own cryptocurrency while appointing those intended to regulate cryptocurrencies. This should be setting off ethical alarm bells. He can make laws that favor his own and his extended family's financial interests. As one cryptocurrency hedge fund brokerage put it, Trump's "economic interest is for sale...there are no checks and balances here." Exercise your own checks and balances - choose an asset that doesn't depend on transient whimsy and which can actually be used as money.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.