Mechanism Capital, a prominent crypto fund, has announced that it is placing its bets on tokens and non-fungible tokens (NFTs) centered around former US President Donald Trump. The fund believes that Trump’s media profile, particularly in the lead-up to the US elections, will drive the value of these meme coins higher, regardless of whether or not he wins.
In the past 24 hours, several Donald Trump-themed tokens on Ethereum, Solana, and other networks have experienced significant spikes, with some rising as much as 100%. Mechanism Capital has revealed that these Trump-related tokens are its first positions of 2024. Founder Andrew Kang stated that the fund has accumulated new positions centered around Trump, including meme coins and NFTs, with the intention of profiting from the hype surrounding the former president.
Kang explained that the fund’s bet is not solely based on whether Trump wins or not, but rather on the attention and news cycles that he generates. Trump’s provocative and controversial statements are known to captivate the public, and meme tokens provide a way to capitalize on this phenomenon.
One specific meme coin that Mechanism Capital is betting on is the TRUMP token offered by @MAGAmemecoin. These tokens currently have a market capitalization of over $90 million and have seen $3.3 million in trading volumes in the past 24 hours, according to DEXTools data. Interestingly, a crypto wallet believed to be directly owned or operated by Trump holds over $1 million worth of these TRUMP tokens. The wallet initially received $7,100 worth of TRUMP tokens from the meme coin’s developers between August and October of the previous year, but its value has significantly increased as the tokens gained popularity as a proxy bet on Trump’s campaign.
While the issuance of the TRUMP token and other meme tokens has nothing to do with the former US president directly, the ability to create and trade these tokens is facilitated by blockchain technology. Anyone can create tokens on Ethereum or other blockchains for a minimal cost, and decentralized exchanges enable instant issuance, liquidity provision, and trading.
Meme coins, which serve as a measure of popularity rather than a prediction market, are gaining traction as an alternative tool for betting on future events. Tokens centered around Trump have become a significant driver for trading volume. During the 2020 election, FTX, a cryptocurrency exchange, created a perpetual contract market that allowed investors to bet on the election outcome. The TRUMP and BIDEN tokens generated a combined volume of nearly $4 million, with a significant increase in trading following Trump’s Covid diagnosis.
Polymarket, another platform, currently has a contract asking bettors to predict the result of the 2024 presidential election. This contract has accumulated over $37 million in volume, with a $4 million bet on the outcome of a possible Trump presidency and a $3 million bet on Biden. The market currently gives Trump a 53% chance of winning, while Biden has a 36% chance. Additionally, there are wildcard bets on Michelle Obama and Gavin Newsom, with 7% and 2% chances respectively, although there is no credible evidence suggesting they would replace Biden as the Democratic candidate.
In conclusion, Mechanism Capital’s decision to invest in Trump-themed tokens and NFTs reflects the growing popularity of meme coins and the potential profitability associated with them. The fund’s strategy is based on leveraging Trump’s media presence and the attention he generates, rather than solely relying on the outcome of the US elections. As the crypto market continues to evolve, meme tokens are emerging as a unique and intriguing investment opportunity.