Donald Trump and Melania’s meme coins surged over the weekend, becoming multi-billion-dollar tokens.
The Official Trump (TRUMP) token has a market cap of $9.3 billion, while Melania Trump (MELANIA) is valued at $1.2 billion.
While these tokens may continue rising before and after Trump’s inauguration, several factors suggest they could crash in the coming days.
First, most celebrity-themed tokens experience initial surges, only to retreat once the hype fades. For instance, Rapper Iggy’s MOTHER token jumped over 1,000% in its first few days, hitting a high of $0.2410. However, it has since dropped by 91%, trading at $0.020 and nearing its all-time low.
A similar pattern has occurred with other popular tokens like Daddy Tate (DADDY), Jason Derulo’s JASON, and Caitlyn Jenner’s JENNER. The “pump and dump” phenomenon is also common among meme coins, such as Kekius Maximus and Popcat.
Second, these tokens may crash due to the “buy the rumor, sell the news” phenomenon. TRUMP and MELANIA tokens surged ahead of Donald Trump’s inauguration but could decline once the hype settles and the market enters a new normal.
As this new phase begins, insiders and large investors (whales) are likely to sell their holdings to take profits, potentially leaving retail traders holding the bag. A similar scenario occurred with ai16z (AI16Z), a meme coin in the AI agent space. As shown below, top profit leaders sold their tokens, likely leaving smaller investors exposed.
TRUMP and MELANIA may drop as many meme coins do
Further, history suggests that many cryptocurrencies surge initially and then retreat after a while. Shiba Inu jumped to $0.000088 in 2021 and is now down by 76% below its all-time high. Similarly, Dogecoin is about 50% below its record high, while Floki is down by 57%.
TRUMP and MELANIA tokens may crash because of the Securities and Exchange Commission’s policies. Most crypto investors have cheered the end of Gary Gensler’s era and are looking forward to Paul Atkins.
Atkins has been a vocal supporter of the crypto industry in the past few years. However, there is a risk that some of his policies as the head of the SEC will not be as friendly as crypto investors expect.
In addition, TRUMP and MELANIA tokens lack any clear catalyst now since the biggest crypto exchanges like Binance and Coinbase have listed them.
Technically, the recent surge was part of the Wyckoff’s markup phase that is characterized by higher demand. This phase is usually followed by the distribution and the markdown when assets drop.
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