Bernstein says some may cringe, but Trump memecoin is a 'paradigm shift' in US crypto approach

According to analysts at Bernstein, the launch of a memecoin by the biggest political figure in the world is a “massive paradigm shift” in how the U.S. and the rest of the world will approach crypto.

Ahead of his inauguration as the 47th President of the United States later today, Donald Trump’s team launched the TRUMP memecoin on the Solana blockchain late Friday, with a frenzy of trading activity subsequently lifting the token to a fully diluted valuation of more than $73 billion at one point over the weekend as Solana witnessed $50 billion in trading volume.

The under 48-hour surge was enough for Trump’s token to surpass the world’s largest memecoin, DOGE, by fully diluted valuation, rising into the top 20 cryptocurrencies by market cap. That was until the launch of returning First Lady Melania Trump’s own memecoin saw a 50% correction for TRUMP before later rebounding .

“It signifies a new regulatory era, where governments see crypto as a technology to reach out to the masses directly,” the Bernstein analysts, led by Gautam Chhugani, wrote in a note to clients on Monday. “Thus, potentially leading to certain politicians leaning towards favorable crypto policy — we have seen this in the U.S., Argentina and even in Canada, where the right-wing political side has leaned in favor of bitcoin/crypto.”

Trump’s memecoin: The good, the bad and the ugly

While some in the industry believe the move took away the regulatory risk in launching tokens in the U.S. — a signal that freedom and innovation are back for U.S. builders — there are also strong critics, the analysts noted.

“Given the previous U.S regulatory regime was about crackdown on crypto builders and enforcement actions on token-related activities, a token launch by the President, is a huge social signal to U.S builders,” they said. “Build away in the U.S, and don’t be shy of launching tokens — a new crypto regulatory era is here.”

However, not everyone was so excited by the prospect as early reactions came in. “The Trump memecoin stuff is bad for the industry,” SkyBridge Capital Founder Anthony Scaramucci said . “Don’t delude yourself. It’s Idi Amin level corruption.”

“I don’t like it,” Bloomberg ETF analyst Eric Balchunas said . “I get its probably being done to add to the enthusiasm for the dawn of a new era but it seems exploitative. Unforced error in the making IMO.”

Another concern is the lofty 80% of the TRUMP token supply that is held by wallets associated with CIC Digital — the Trump-affliated entity linked to the previous launch of Trump-branded NFTs, sneakers and mugs as part of the election campaign — leading to concerns over insider selling. However, these tokens are subject to a vesting period of up to three years, according to the project’s website.

The Bernstein analysts suggested that the Trump family’s anecdotes of de-banking following his 2020 election loss explained their affinity for the crypto industry, as well as its utility for fundraising. “Crypto tech allows politicians to go directly to the audience to crowd fund their election campaign and garner support,” Chhugani said. “With obscure animal branded meme coins reaching billions in market cap, it is not surprising that a coin built on Trump’s social capital could reach billions too and attract several new traders (more than 400K new holders by the meme token buying platform called Moonshot).”

The analysts acknowledged that given the asset’s substantial surge in price, the 80% held by insiders does put pressure on its market value, suggesting the market will be looking for further information on the team’s plans over the coming days. It could be used as collateral to build something useful in crypto banking and finance, an engagement model to reward supporters or a treasury asset to fund more Trump-related political initiatives, the analysts argued.

While memecoins often come and go as attention wanes, capitalizing on Trump’s brand and politics has “potential longevity,” Chhugani said, depending on the team’s plans going forward to make it less extractive — as evidenced by the negative reaction to further dilution of the brand amid the MELANIA memecoin launch.

“Whichever way you see it, we think a new chaotic crypto era is here,” Chhugani added. “The President of America has his own coin. Our view would be to view the event as a signal that a new crypto regulatory era is here to stay and invest in the more valuable parts of the ecosystem. But some may still cringe — it is what it is.”

Gautam Chhugani maintains long positions in various cryptocurrencies.