What to know:
- As market mania over memecoins from Donald Trump and the next first lady Melania Trump continues, Balaji Srinivasan has criticized the category as not creating wealth and being a zero-sum game.
- Market interest in Trump-themed coins has sucked liquidity from the broader memecoin market, with many of the majors down double digits.
During the potential second term of Donald Trump as president, the unofficial meme coin associated with his administration is approaching a market value of $10 billion. Meanwhile, Melania Trump, future first lady, has entered the scene with her own token. Balaji Srinivasan, ex-CTO of Coinbase, expressed on platform X that this class of tokens can be compared to gambling.
A memecoin can be thought of as a type of digital lottery where overall financial growth doesn’t occur. Instead, each purchase transaction is paired with a sale transaction. After an initial price surge, the value usually plummets, leaving those who bought last with nothing. However, it’s important to note that if a platform takes a commission, it would actually result in a negative-sum game.
— Balaji (@balajis) January 19, 2025
In his post, he argued that memecoins don’t generate wealth. For every buy order there’s an equal sell order. After an initial surge in price, the value tends to plummet, with the last people who bought losing all their investment. He labeled memecoins as a game where the potential winnings are zero or even negative (due to exchange fees) in the long run.
Balaji suggested treating memecoins like casino games in Las Vegas, primarily for amusement.
He went on to say that it’s generally wise to invest in assets that maintain their worth over time. Occasionally, you can enhance a memecoin by adding new uses or keeping it relevant through media coverage, which can help its value stay high.
Responding to the query, several individuals questioned Balaji about whether Bitcoin was once classified as a meme currency. However, Balaji countered this claim due to Bitcoin’s numerous practical applications and its ability to persist for over a decade.
1. Regarding memecoins, you’re at liberty to classify any digital asset as such, and I don’t take offense to that. However, let me share my perspective on why Bitcoin stands out from the rest.
2. Bitcoin is a base layer asset supported by approximately 800 trillion hashes per second (Th/s) across numerous datacenters globally.
3. Unlike memecoins, it’s not just a trend or joke; it’s backed by a robust network that powers countless transactions daily.
— Balaji (@balajis) January 19, 2025
He stated that Bitcoin is the fundamental asset built on a blockchain network, currently processing approximately 800 terahashes per second across numerous data centers worldwide. It has grown steadily, not suddenly, and its mining issuance schedule restricts the amount that can be sold by any single entity.
The surge of enthusiasm for the Trump-themed meme token has caused a significant drain in liquidity from other meme coins. According to CoinGecko’s recent findings, the overall meme coin sector has contracted by approximately 8% within the past day. Notably, well-known meme coins such as DOGE, SHIB, and BONK have experienced a drop of more than 10% in their value over the same period.
READ MORE: Bitcoin retraces to $100K, TRUMP Tanks 30% as Melania Memecoin Skyrockets
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2025-01-20 07:01