This post was inspired by Demetri Kofinas’ appearance on Grant Williams’ excellent podcast a few weeks ago, where he took a negative view on political memecoins, as well as Arthur Hayes’ recent fascinating and somewhat positive article on political memecoins, “ Zero Knowledge Proof.”
We begin by laying out Dmitri’s point about the audacity and absurdity of Trump’s memecoin.
This is completely insane. You are the President of the United States! It was once the most prestigious position in the world, and working in the Oval Office was an incredible privilege, an opportunity to make a difference. You are in your seventies, and this is a chance to impact the world, leave a legacy, and change people's lives. And you are launching a memecoin!
The launch of the Trump memecoin was particularly disturbing because Trump was elected on a platform that was all about national renewal. So when he took office, the first thing he did on Inauguration Day was launch a memecoin. It was a punch in the gut.
Memecoins are, at least in the eyes of some, the dirtiest, most useless, stupidest part of a cryptocurrency ecosystem that has itself developed a notorious reputation for scams, and not without merit. Memecoins are an extreme example of financial absurdity, speculative bubbles, and greed. Maybe it’s understandable that teenagers would be interested in this stuff, or that a disgraced Nazi rapper would dabble in memecoins. But the President of the United States! How on earth did we get here? How could the president get away with all this, politically and legally, without getting hurt?
Trump is not just a lunatic or an unexpected or random event that fell from the sky. Trump is the result of decades of bad policies and outright corruption from our political leaders. As Dmitry said, when people question $TRUMP, someone always says:
"Look at Biden, look at Hunter Biden. He's on the board of Burisma. What does he know? Biden put him in."
Grant Williams seemed to agree, citing the 2002 lies about Iraqi weapons of mass destruction (WMD) and the 2008 global financial crisis (GFC) as other factors that led to a massive loss of public trust in the political system, and this loss of trust made $TRUMP possible.
So when it did come out that no weapons of mass destruction were found and that the whole invasion was completely unnecessary, there were probably enough high-level and powerful people who were responsible that it was swept under the rug and nothing was done and nobody was punished. Yes, there was an investigation, but it was a cover-up. And so people were angry because they felt that…whatever you think of humanity,
Not bearish, but cynical
Grant goes on to discuss how this loss of trust has led to a loss of moral values. In his view, it’s all about greed and making money in speculative bubbles now. Rather than being bearish on these bubble markets, he’s developing a broader cynicism about Western values.
"It's interesting, this idea of being bearish when the market is going up, going back to 2008, and what happened afterwards and the lack of consequences. I think this idea of being 'bearish' has become much clearer to me personally now. And it's not about being bearish on the market. It's being bearish on society. It's being bearish on what happens when we get to that moral vacuum that you're talking about. The idea is that if 'numbers are up' becomes the only thing that matters, that leads to OnlyFans, and all these horrible women showing off on the internet how many men they can sleep with in a day, and being proud of it, and all this attention-seeking stuff. And then you look at all these so-called 'influencers', and it's just a complete and utter moral vacuum."
“I guess I’m just now really starting to understand what my own ‘bearishness’ is all about, because it’s not like I haven’t invested all these years, and it’s not like I’m sitting on a pile of gold and canned goods waiting for Armageddon. For me, it’s an attempt to have a conversation about something other than what’s going to go up tomorrow. And that’s what’s important to me. Because there are enough places out there talking about ‘numbers going up,’ but there aren’t that many places where you can hear people like you having a meaningful conversation about meaningful topics that don’t end with ‘so to summarize, here’s a three-letter acronym you need to buy to make money from this conversation.’”
Dmitry then agreed with Grant and also expressed a negative opinion on cryptocurrencies.
I don’t mean to be overly critical of cryptocurrencies, but…
It’s been a really emotional experience to be in the crypto space and have this unique experience. All the smart people I know who have made money in this space know that it’s almost all a scam, almost all a pyramid scheme, and almost all driven by a pyramid model. If you’ve been in the crypto space long enough, you’ll remember a time when people really believed that most of this stuff would work. Maybe they will eventually work—if enough money is invested in it and enough government regulation is supported. Blockchain and other distributed ledger technologies (DLTs) do have some applications in finance. But in my opinion, the amount of capital and wealth generated to date does not justify it. I worry, and I’ve been vocal about this, about what this means for our economic success in the long run. If we’re putting all our efforts and capital into an economic sector that can only produce limited returns, then what are we really doing? The Chinese are not doing that.
All Politicians Should Own MemeCoins
Arthur Hayes, Chief Investment Officer at Maelstrom, has a more positive view on $TRUMP. In his recent article, he explains how memecoins are bringing us into a new political era - a more competitive and dynamic one. In this era, up-and-coming political leaders can both enter public office and get rich at the same time by issuing memecoins to finance their campaigns. The price of memecoins will reflect the political fortunes of the politicians involved.
Like Dmitri and Grant, Arthur brought up the issue of Hunter Biden’s corruption, but explained that Memecoin actually improves the situation by allowing politicians to profit from public office in a more transparent way.
“This is much better than the Bidens filling their own pockets with secret payments from a range of foreign businesses to various super-secret corporate entities. Of course, these would have been super-secret if the guy passing the cash wasn’t a drug addict.”
Arthur’s point is technically correct, of course. Transparency is a good thing, so transparent grassroots corruption is better than covert top-down corruption from big business or Ukrainian gas companies. But with memecoin, “the veil has been lifted.” Under Biden’s corruption, maybe half the country could pretend everything was reasonable. Now, everyone knows the system is corrupt, and everyone knows everyone else knows. This could lead to more political instability. This is undoubtedly a bad thing! No matter how obvious it may have seemed to you that some American “junkie” knew nothing about the Eastern European energy industry, some people just couldn’t see it. Whether it was Twitter blocking private messages on the topic or just plain willful ignorance, some people were able to pretend that the government was for the people. Now, everyone knows, and everyone knows everyone else knows. In a way, the rules of the game have changed.
Trump’s allocation of 80% of TrumpCoin to himself is seen by critics as a sign of corruption. However, as Arthur mentioned, this problem is solvable for other politicians.
“The simplest way to do this is to distribute 100% of the tokens at launch. Then if politicians want to believe in themselves, they have to enter the market at the same price as everyone else.”
Conservative view on memecoin price
As for whether the price of political memecoins should reflect a politician’s career or popularity, Arthur’s opinion is simple:
“People buy $TRUMP because they want to be part of the group of Trump supporters, or they believe Trump will be more popular in the future. That’s it. There is no complicated economic or financial theory to understand here. You don’t need to know algebra, basic calculus, statistics or probability theory. You just need to think and feel like a red-blooded human being. Therefore, anyone can understand what gives political meme coins value.”
We tend to take an old-school, boring, traditionalist, value investor type view, probably closer to Grant and Dmitri's position. Why should the price of a memecoin follow the popularity of a particular politician? Isn't this just a stupid speculative game? The price is bound to deviate wildly from political reality.
"Vote for me, I don't have any memecoin"
Rest assured, we think a dystopian political future where every politician needs to own a memecoin to have a chance of winning an election is unlikely. A new generation of politicians could rise up with “no memecoin” as their unique selling point. Such politicians could claim that they are running for the right reasons, not to get rich, but to help people.
Trump and his supporters have hyped up DEI (diversity, equity, and inclusion). Criticizing DEI is now the easiest path to support and the most obvious entry point. But is DEI really so pervasive that it causes lasting damage to economic productivity? We think not. Perhaps a bigger economic problem is that people dream of getting rich quickly through speculative financial instruments such as memecoins. Why work hard at a 9-to-5 when you can speculate and make a fortune at home and misallocate capital to political finance (PoliFi)?
Trump's economic recovery plan
In addition to launching memecoin, Trump also plans to launch a series of exchange-traded funds ( ETFs ), including two Bitcoin-related ETFs:
- Truth.Fi Bitcoin Plus ETF
- Truth.Fi Bitcoin Plus SMA
This is another clear opportunity for corruption. What will Trump discuss the next time he meets with Sheikh Mohammed bin Zayed of Abu Dhabi? Trump may ask him to redeem his $437 million investment in BlackRock $IBIT and invest it in Trump's Bitcoin ETF instead. This is the so-called art of the deal.
As to whether the optimism that Trump has successfully inspired, and his strategy of making corruption more open and transparent, will actually “make America great again,” time will tell. However, call us cynics, we think Trump’s memecoin or other cryptocurrency-related initiatives could be a hindrance rather than a help.
