As you've probably heard by now, President Donald Trump recently launched the Official Trump meme coin with the ticker $TRUMP, which is hosted on the Solana (SOL +1.69%)blockchain. With a market cap of about $7 billion, the coin is already one of the most-valuable meme coins.
There's just been a new development which could send its price higher. Here's what could happen, and how to think about it if you're considering an investment.
CRYPTO: SOL
Key Data Points
This asset may soon be available to a larger set of investors
It's often difficult to invest in the newest cryptocurrencies, even on relatively easy-to-use blockchains like Solana. Without going through the trouble of setting up a wallet, funding it with fiat money via an on-ramp, swapping that money for the blockchain's native token, and then swapping the token for the actual investment you want to make, there's no way to get exposure to most of the recently launched coins. Especially if you typically hold investments in a retirement account provided by a traditional financial institution, there are simply a lot of steps involved, and it's a prohibitive barrier for the vast majority of people.
Some major cryptocurrencies like Bitcoin and Ethereum have such high investor demand that financial institutions have created workarounds. For example, exchange-traded funds (ETFs) that are meant to closely track the performance of these assets give investors the exposure they want via their normal financial accounts, such as an individual retirement account (IRA).
ETFs tend to attract capital, buoying prices of the corresponding crypto and increasing their integration into traditional financial markets. So, the ETFs are seen as major catalysts, even if the actual evidence of this effect is somewhat ambiguous.
In that vein, as of Jan. 21, there are now applications for an Official Trump ETF.
Osprey Funds, the company that's applied to sponsor the ETF, also filed for permission to offer ETFs for Solana, Dogecoin, and Bonk, so it's safe to say that Trump's coin isn't alone in the meme coin ETF bonanza.
Go for the safer option here
Does the ETF filing make Official Trump a coin worth buying? Not exactly.
First, there's no guarantee regulators will approve the ETF. If it is, the effect on the price may not be what holders are hoping for. Consider that many investors have heard of the coin by now, and that most of the more highly motivated potential buyers have probably found a way to invest.
Furthermore, there aren't really any traditional financial fundamentals with which to model the asset's appropriate value, making it very hard to understand whether investors would be getting a bargain by buying the coin now -- or paying way too much. An ETF won't change that.
Nor is it feasible to project the coin's future growth in any sensible way. It's true that the president has a vested financial interest in at least somewhat preserving the asset's value, as it bears his name. But that doesn't change the fact that as a meme coin, it's inherently a highly speculative and volatile bet, regardless of whether it's held on the blockchain directly or in an ETF.
For most people, it simply isn't a responsible financial decision to buy the Official Trump coin. Nonetheless, if you're really enthusiastic about buying it regardless of the risks, it will be for the best if you ensure that your portfolio is already sufficiently diversified with safer investments beforehand.
If your portfolio is already diversified, a smarter idea is to buy Solana and hold it for at least a few years if you want exposure to the effect of Trump's coin or other meme coins on the cryptocurrency ecosystem.
Anyone who wants to buy the president's coin will need to buy Solana first to complete their purchase, which will create buying pressure and potentially continue to boost the price. At the same time, Solana itself is the main token of its chain, on which there's currently a tremendous amount of activity. In other words, it doesn't need any one project hosted on the chain to continue to gain in value for it to still be valuable.
