Donald Trump's new meme coin called $TRUMP soared on Monday to top $9 billion (R168 billion) in market value, just hours before his inauguration and his return to the White House.

Nigel Green, CEO of deVere Group said that the new cryptocurrency sent shockwaves through the cryptocurrency market, with the coin’s valuation skyrocketing by over 300% in less than 24 hours.

The coin was built on Solana’s blockchain platform and debuted with a limited supply of 200 million coins. It is expected to expand to 1 billion over the next three years.

“This is a revival of the meme coin trend we saw in 2021 and 2022, where many young, inexperienced investors got burned by extreme volatility,” Green explained.

“Without doubt, investors will get burned by this frenzy too,” he warned.

Green said that meme coins are speculative in nature and warned that their valuations can fluctuate wildly.

He cautioned that although substantial profits can be achieved, this investment type carries inherent high risks and unpredictability.

“Let’s be very clear: this is more gambling than investing. If you’re considering getting involved, you need to have a sound, diversified, long-term plan in place first,” he added.

Social media-fuelled hype

Green said that the $TRUMP coin’s rapid ascent underscored the risks associated with meme coins, which are driven less by fundamentals and more by social media-fuelled hype.

The crypto analyst likens the meme coin phenomenon to gambling, explaining that many day traders are likely piling in with the hopes of capitalising on the fear of missing out (FOMO).

“They’re mostly not buying because they think the coin has inherent value. They’re buying because they hope others will drive the price higher, allowing them to sell at a profit.”

“Understand the real risks to your money. This is not the same as investing in sound assets. Gambling is not the same as investing,” he emphasised.

Favourable approach to cryptocurrencies

Trump’s move on the eve of his inauguration undoubtedly signals a crypto-friendly stance from the incoming Trump administration.

“Trump’s move into the digital asset space aligns with speculation that his government will take a favourable approach to cryptocurrencies, potentially driving further adoption and innovation in the sector,” Green noted.

This could be great for the broader crypto market as a pro-crypto administration could accelerate the adoption of digital currencies and blockchain technology, he said.

“This will have long-term benefits for the economy. But it’s important to distinguish between speculative meme coins and legitimate digital assets that provide real value and utility,” Green said.

“Trump’s presidency is expected to usher in an era of pro-crypto policies, and while this could pave the way for legitimate growth for established assets like Bitcoin, it also raises questions about the risks of speculative trading driven by social media hype,” he concluded.

IOL BUSINESS