Meme coins: What to know about Trump's new side hustle

They carry no actual value, are highly volatile and until recently were mostly a joke. But meme coins are suddenly more serious.

Spurred on by Donald Trump's new embrace of cryptocurrency, meme coins are attracting more fans and fresh scrutiny. Days before he took office for a second term, Trump launched a coin that overnight was worth billions of dollars, at least on paper. It plummeted after Melania Trump announced her own coin days later. 

Meme coins' popularity has skyrocketed in recent years, driven by their accessibility, their relative simplicity compared to other crypto products and their social media buzz. The coins now hold a 41% share of the total Web3 market capitalization — the decentralized platforms that use digital assets — according to data compiled by Social Capital Markets.

"In 2024, meme coins dominate the crypto, blockchain and Web3 space, claiming the largest market share at 22.49%, surpassing major blockchains like Solana and Ethereum," according to the report.

Around 40,000 to 50,000 meme tokens are created every day. Some are more popular than others, and their trading volume varies. The number of meme coins being traded jumped to 1,091 last year, compared to 740 the year before, according to data compiled by crypto firm BDC Consulting. 

Trump’s token, $TRUMP, became the fastest-growing meme coin to date, reaching a market cap of $13 billion, according to The Block, a crypto news site.

It has paved the way for wider adoption of meme coins and the overall crypto industry, industry professionals say, even as some question the risks. 

"TRUMP token just signaled to every company, municipality, university & individual brand that crypto can now be used as a capital formation and customer bootstrapping mechanism," Jeff Dorman, chief investment officer at Arca financial firm, said in a post on X.   

What are meme coins?

Meme coins are cryptocurrency, whose value rises and falls against the U.S. dollar based on how much people will pay for it. The tokens are based on internet jokes, celebrity culture and trends, and can be used to buy and sell things on the internet without worries that a central bank or government will affect how many are in circulation.

The coins can be traced back to 2013, when software engineers Billy Markus and Jackson Palmer launched dogecoin, a digital currency based on a meme involving a Shiba Inu dog. Dogecoin is now the largest cryptocurrency in the meme sector. 

Worth less than 16 cents just before Election Day, dogecoin more than doubled to nearly 38 cents after Trump won. It surged again after he created DOGE — the so-called Department of Governmental Efficiency, a budget-slashing team led by dogecoin fan Elon Musk.

One of the newer meme coins with an eye-catching name —"fartcoin" — launched in late October and peaked at a valuation of $836 million in mid-December, surpassing dogecoin. 

Even newer to the market is "Musk It," a meme coin started by Errol Musk, father of Elon. The token is funding the Musk Institute, a for-profit think tank, Fortune reported. 

Meme coin investors include everyone from bitcoin millionaires to people grasping at the chance to hit it big, industry insiders say. 

"All these kids are like, 'All the good stocks are way too expensive. And houses? I can’t afford them,'" Omid Malekan, who teaches crypto at the Columbia Business School, told CNBC. '"So I’ll gamble on something that can ‘10x’ my money, and if I lose it all, who cares? I was screwed anyway.'"

The coins are highly speculative because they're based on fast-moving social media trends, unlike cryptocurrencies such as ethereum or bitcoin that derive their value from an underlying technology. Investors can make money, but they have lost money on coins that gained huge valuations rapidly after they launched and tanked immediately after.

The industry was rocked on Monday after Trump ordered tariffs on America's three biggest trading partners, then delayed some of them. The Trumps' meme coins plunged as the news agitated markets worldwide, according to Axios.

$TRUMP saw its value drop by 18%. It was at $17.50 per token on Tuesday, compared to a peak of $72.62 the day before his swearing-in. $MELANIA dropped by 14%. 

Toe Bautista, a research analyst for crypto trading firm GSR, described meme coins as the riskiest kind of gambling.

"Because they’re worthless, you’re betting on the 'greater fool,'" Bautista told NBC News.

Trump’s coin draws crypto criticism

Trump gained fans in the crypto world by pledging to make America the "crypto capital of the planet," but his meme coin caught some off guard. 

It includes an image of him raising his fist in the air and the words "fight, fight, fight" — a reference to his reaction after an assassination attempt last July. The token is marketed as "a piece of history," with Trump described as "the crypto president."

"The unbelievable success of it so far will also likely fortify Trump’s interest in the industry since he personally benefits," Alexander Blume, the CEO of Two Prim Digital Assets, told The Block. "On the flip side, for those interested in cryptocurrency reshaping the global financial structure, this move brings us more towards a crypto casino than true reform."

CIC Digital and its affiliates own 80% of the supply of the new Trump tokens, which will be released gradually over three years, according to a disclosure on the tokens' website, The New York Times reported. "Trading revenue" will be paid as the tokens are sold, the website says.

"Trump owning 80 percent and timing launch hours before inauguration is predatory and many will likely get hurt by it," Nick Tomaino, a crypto venture capitalist and former executive at Coinbase, posted on social media.

Entities tied to Trump's coin have made nearly $100 million in trading fees, Reuters reported on Monday, while smaller traders lost money.

What's the future of meme coins?

Some coins have been more successful than others. Hailey Welch, the viral "Hawk Tuah Girl," saw her $HAWK coin jump to $490 million before crashing by over 95% on the same day last fall. Her investors are now suing the entities behind her coin. 

But meme coins continue to generate hope among their fans that they can evolve into an asset embraced by traditional financial institutions.

Grayscale Investments, one of the biggest crypto asset managers, launched Grayscale Dogecoin Trust to make it easier for institutions to gain exposure to dogecoin. If approved, the Trust would be converted into a spot exchange-traded fund, bringing dogecoin a step closer to mainstream.

The outcome would be a "litmus test" for the new SEC, according to Morningstar analyst Bryan Armour. 

"A dogecoin ETF wouldn’t benefit investors: Capital markets shouldn’t turn into a casino," Bryan Armour, director of passive strategies research at Morningstar, told Salon. "But if it’s approved, then I expect other meme coins will be approved as well."