Investors Beware: Donald Trump Memecoin Copycats on the Rise
The emergence of Donald Trump’s new cryptocurrency has set off a frenzy of imitators, raising concerns about potential risks for investors. Over 700 copycat and spam coins have flooded into Trump’s digital wallet, suggesting their ties to the president, as revealed by a Financial Times analysis. This surge comes following Trump and Melania’s introduction of memecoins, known for their speculative value rather than practical utility, just before Trump’s return to the White House.
The influx of 736 different memecoins into the official Trump coin wallet in recent weeks has raised red flags. Among these, nearly 200 coins, such as “OFFICIAL TRUMP” and “OFFICIAL MELANIA,” bear names linked to Trump or his family without any legitimate connection. The move by Trump and Melania to launch these memecoins has faced backlash for enticing retail investors to back tokens even more volatile than bitcoin.
Eswar Prasad, a senior fellow at the Brookings Institution, warns that Trump’s foray into memecoins has paved the way for deception and rampant speculation, posing substantial risks for ordinary investors. The official Trump coin wallet, controlled by entities associated with the president, holds 80% of his tokens for future release to investors.
The Rise of Copycat Memecoins
Shortly after the launch of the genuine Trump coin, the first copycat coin emerged within 30 minutes, underscoring the swift attempts of creators to capitalize on Trump’s cryptocurrency interest. Leveraging a function in Solana, the blockchain supporting Trump’s memecoins, creators can effortlessly deposit new coins into a separate wallet without authorization. Online generators have simplified the coin creation process, eliminating the need for coding skills.
The visibility of memecoins escalates when they appear in prominent wallets like the official Trump reserve, potentially leading traders to confuse them with official coins or mistakenly believe they have Trump’s endorsement. Omid Malekan, an adjunct professor at Columbia Business School, highlights the challenge for investors in distinguishing genuine projects from copycat coins due to the proliferation of deceptive tokens.
Deceptive Practices and Unusual Transactions
Of the 192 tokens referencing Trump or his family, 167 are copycat coins, while 67 incorporate the term “official” in their name. Numerous coins associated with Trump’s family members have been deposited in the official wallet, including those featuring names like “Barron,” “Ivanka,” and “Melania.” Danielle Brian, executive director at the Project On Government Oversight, expresses concerns that investors are being lured into risky ventures, predicting a looming bubble where substantial losses may occur.
Unusual transactions have been observed, such as a rapid purchase and subsequent sale of $100,000 worth of an “Official Trump” copycat coin within minutes, underscoring the speculative nature of these tokens. The illiquidity of many coins adds complexity to accurately valuing them, with tokens like “OFFICIAL BARRON TRUMP” notionally valued at billions based on limited transactions.
Brian Armstrong, CEO of Coinbase, acknowledges the challenges posed by the exponential growth of new tokens, prompting a reassessment of the token listing process due to the overwhelming volume. Coin creators have taken swift advantage of the Trump coin’s popularity, highlighting the need for heightened vigilance among investors.
In conclusion, the surge of Donald Trump memecoin copycats underscores the evolving landscape of cryptocurrency investments, with potential risks lurking for unwary investors. As the market grapples with deceptive practices and speculative tokens, it becomes imperative for individuals to exercise caution and due diligence in navigating this volatile terrain.
