Summary President Trump launched a memecoin called 'Official Trump,' reaching a $4.9 billion market cap within 11 hours, sparking mixed reactions on social media. The tokenomics reveal 200 million tokens in circulation, with 80% held by a single wallet, suspected to belong to CIC Digital LLC. The vesting period is 36 months, allowing gradual selling of the 80% supply starting in 3 months, raising concerns about market impact. Memecoin valuations are driven by compelling narratives rather than traditional financial metrics, emphasizing the importance of the story behind the token. President Trump launched a memecoin called 'Official Trump,' with the ticker $TRUMP . At the time of writing, it sat at a market cap of $4.9 billion, just 11 hours after its creation. This token launch came just two days before his inauguration. Photon This somewhat random launch has sparked significant debate on social media, particularly on X, as "Crypto Twitter" has shared mixed reactions. One side fully supports the launch. They argue that it will bring more attention to the crypto space. The other side, however, believes this will end badly , as it promotes pure gambling and attracts people to the crypto scene for all the wrong reasons. I want to discuss why I believe this may have a more negative effect on crypto market prices rather than a positive one, and why I think this memecoin mania has been driving Solana to absurd valuations. Let's talk about it. The Tokenomics There are currently 200 million tokens in circulation , with a total supply of 1 billion tokens. Currently, 80% of the supply is being held by a single wallet, which is belongs to the team behind the launch. The team is suspected to be CIC Digital LLC, the same group responsible for Trump's NFT drop three years ago. The vesting period for this surprise drop is 36 months, meaning the wallet holding 80% of the supply can gradually sell its holdings over that period, starting 3 months from now when they first begin to unlock. In my opinion, this type of vesting period may seem appealing at first glance but is often used in the crypto space to sell holdings over time for a profit. As I've mentioned before, memecoins are driven by narrative and story. If $TRUMP performs well, his team will get paid more via the memecoin over time. While more details may emerge later, there is currently no discussion about utilities for this coin for holders TrumpTokenomics Memecoins - Narratives and Valuations We live in a world driven by stories. From tulips in the 1700s to AI and memecoins in the 2020s, humans are always chasing the next big narrative. Today, with the internet, narratives are crafted faster than ever-often shaping events rather than following them. Memecoins epitomize this. Their value isn't tied to use cases, P/E ratios, or cash flows, but solely to their narrative. Without utility or intrinsic value, memecoins are entirely speculative, with their success hinging on whether a story resonates and gains traction. Take $TRUMP, for example. Its narrative thrives on its association with a globally polarizing figure, making it emotionally and culturally charged. This gives it a strong initial appeal, but also highlights its vulnerability-like all memecoins, its value will collapse once the narrative fades. Ultimately, memecoins are probabilistic bets on the lifespan of a story, not on fundamentals. The Crypto Outflow With this surprise drop, President Trump tweeted at 9:44 PM , which triggered an outflow of liquidity from other crypto markets into Solana ( SOL-USD )-the cryptocurrency most commonly used to buy or swap for memecoins. Below, I've attached two charts for comparison: 1. The first chart showcases the total market cap of all altcoins (including ETH). 2. The second chart showcases Solana's price action, highlighting the inflow of liquidity into that market around the time of the tweet. TradingView Alt Coin Market Cap TradingView SOL I find this type of price action more bearish than bullish, as we're seeing a net outflow from most other cryptocurrencies and an inflow into a cryptocurrency being propped up by the narratives surrounding memecoins, that is clearly a zero-sum game, where the majority of participants tend to lose in the long run. This outflow also highlights how thin liquidity currently is in the markets, with many major altcoins and BTC dropping following the initial $TRUMP drop. How Does This Impact Solana? As shown in the charts above, this clearly demonstrates that memecoins have a very large impact on the Solana blockchain. We saw a significant price increase as people flocked to purchase Solana in order to buy $TRUMP. This trend has been evident, with both volume and transactions increasing over the past few months to a year, due to the hype surrounding memecoins. Defillama This somewhat makes Solana a memecoin of its own, if its recent price increases have been driven by the hype around memecoin trading. This does not mean I believe Solana is useless, as it is a blockchain with low fees and a solid foundation for deploying dApps. However, seeing a short-term price surge for this chain based on memecoin hype, combined with an 10.8 FDL/TVL ratio-which is considered high compared to ETH's ratio of around 4-5- tells me that this crypto is sitting in the overvalued range for now. Conclusion I remain bullish on crypto technology and even Solana long term, as I find extreme value in blockchain, particularly with major use cases in DeFi. However, I believe this current situation hurts the crypto markets in the short and mid-term rather than helps them. It brings people into this space for the wrong reasons, with a gambling mindset... something I once had, which led to bad habits. This also further perpetuates the scammy reputation that many associate with the crypto space. Solid Fundamentals do NOT = Higher Prices in the current Crypto space It will be interesting to see how this unfolds over the next few months. However, based on past trends, I don't believe it will end well for prices in the short term, as narratives may shift if President Trump does not perform well early on. I've increasingly started to sell my holdings in Solana because, as talked about in this article, Solana's price has been heavily influenced by the memecoin market. Once again, we've seen price increases following the $TRUMP drop.
