Donald Trump and Melania’s coins surged over the weekend, becoming tokens worth billions of dollars.
The official Trump (ASSET) the token has a market capitalization of $9.3 billion, while Melanie Trump (MELANIE) is valued at $1.2 billion.
Although these tokens may continue to rise before and after Trump’s inauguration, several factors suggest that they could collapse in the coming days.
First, most celebrity-themed tokens experience initial surges, only to retreat once the hype has passed. For example, MOTHER token of rapper Iggy surged more than 1,000% in the first few days, reaching a high of $0.2410. However, it has since fallen 91%, trading at $0.020 and closing in on its all-time low.
A similar pattern occurred with other popular tokens like Daddy Tate (DAD), JASON by Jason Derulo and JENNER by Caitlyn Jenner. The “pump and dump” phenomenon is also common among meme coins, such as Kekius Maximus and Popcat.
Second, these tokens may collapse 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 subsides and the market enters a new normal.
As this new phase begins, insiders and large investors (whales) will likely sell their holdings for profits, potentially leaving retail traders holding the bag. A similar scenario happened with ai16z (AI16Z), a meme piece in the AI agent space. As shown below, major profit leaders sold their tokens, likely leaving smaller investors exposed.
TRUMP and MELANIA could drop so many meme coins
Additionally, history suggests that many cryptocurrencies initially go up and then fall back after a while. Shiba Inu surged to $0.000088 in 2021 and is now down 76% below its all-time high. Likewise, Dogecoin is about 50% below its all-time high, while Floki is down 57%.
TRUMP and MELANIA tokens may crash due to Securities and Exchange Commission policies. Most crypto investors have cheered the end of the Gary Gensler era and are looking forward to it Paul Atkins.
Atkins has been a strong advocate for the crypto industry in recent years. However, there is a risk that some of his policies as head of the SEC may not be as friendly as crypto investors expect.
Additionally, TRUMP and MELANIA tokens now lack a clear catalyst since largest crypto exchanges like Binance and Coinbase have listed them.
Technically, the recent rise was part of the Wyckoff markup phase, characterized by higher demand. This phase is generally followed by distribution and markdown in the event of a decline in assets.