Crypto for Advisors: Memecoins

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Ah, memecoins! The delightful little darlings of the cryptocurrency world, recently thrust into the limelight by none other than the President’s $Trump coin. Yes, you heard that right! The U.S. SEC has decided that, for the most part, these whimsical tokens are not securities because they don’t pass the Howey test. But don’t let that fool you; your clients will still be peppering you with questions about these digital oddities. 🤔

In today’s crypto escapade, Janine Grainger from New Zealand’s Easy Crypto will take us on a merry jaunt through the land of memecoins, explaining what they are, how they work, and the risks that come with them. Spoiler alert: it’s a bit like walking a tightrope over a pit of alligators. 🐊

And then we have Kieran Mitha, a next-gen investor, ready to tackle your burning questions about memecoins in our “Ask an Expert” segment. Buckle up!

– Sarah Morton

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Memecoins: Boom, Bust and Billion-Dollar Bets

On January 17, the $Trump meme coin made its grand debut, peaking at a staggering $14.5 billion in market value within just two days. But, as is often the case with things that seem too good to be true, it soon crashed by two-thirds. The masterminds behind this coin reportedly raked in a cool $100 million in trading fees in under two weeks. Meanwhile, countless everyday investors were left holding the bag. Talk about a rollercoaster ride! 🎢

And let’s not forget the time in late 2024 when Trump announced a Department of Government Efficiency (DOGE), causing Dogecoin to surge by 150%. It’s like watching a soap opera, but with more zeros involved.

These moments have firmly placed memecoins on the investment radar. However, they thrive on hype rather than utility, creating both opportunities and risks for investors. Financial advisors, take note: your high-net-worth clients may be curious about these speculative assets, so brush up on your memecoin knowledge!

Figure 1: CoinDesk view of $TRUMP which plummeted shortly after launch.

What are memecoins?

Memecoins are the quirky offspring of internet culture, social media trends, and the occasional joke. Unlike the more serious bitcoin or ether, which have managed to convince some folks they belong in a diversified portfolio, memecoins thrive on hype, community sentiment, and celebrity endorsements. They often start as a parody or a joke, but with a little viral marketing magic, they can gain traction—albeit usually for a fleeting moment. 🪄

Why meme coins matter

Memecoins have gained mainstream visibility thanks to their cultural relevance and the tantalizing potential for outsized short-term gains. High-profile figures like Elon Musk can send prices soaring with a single tweet, making traders dream of overnight riches. But beware! These coins are high-risk assets with price swings that could make a seasoned stock trader faint.

Take ‘Fartcoin,’ for instance—a joke token that hit a $2.2 billion market cap purely through viral appeal before crashing spectacularly. Platforms like Pump.fun have made it all too easy for anyone to create and trade meme coins, leading to a flood of short-lived tokens that reinforce the market’s high-risk nature. It’s like a carnival, but with fewer clowns and more financial peril. 🎪

But are they legal?

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2025-03-13 18:08