On Wednesday, the team behind the official Donald Trump memecoin sparked a trading frenzy after announcing that the investors who held the largest amount of the crypto coin in the coming weeks would be invited to a gala dinner attended by the US president.
“At this intimate private dinner, hear first-hand president Trump talk about the future of crypto [sic],” reads the listing on the TRUMP coin website. “The most exclusive invitation in the world. Only for the top 220 $TRUMP meme coin holders.” The dinner is set to take place on May 22.
Traders rushed to buy up the TRUMP coin, some trying to bump themselves onto the invite list and others simply hoping to profit, according to analysis by blockchain analytics firm Nansen. Within an hour, its price had surged by almost 60 percent.
However, for the two organizations that own 80 percent of the coin’s supply—CIC Digital LLC and Fight Fight Fight LLC, offshoots of a conglomerate owned by Trump—the market price was a secondary concern. In the immediate term, those firms profit primarily based on how frequently people trade it.
When Trump announced his memecoin in January, the two organizations funneled 10 percent of the total supply into a so-called liquidity pool, the purpose of which is to ensure the asset can be traded freely. In return for supplying liquidity and promising to buy and sell the coin as trades come in—known as market making—the Trump-affilitated organizations command a fee. That fee ranges from 0.1 to 10 percent of each trade depending on the present level of demand. Think of it like surge pricing on a ride-hailing app.
“If you have a coin and you control the market making and the fees generated, what you care about is volume and price movement, not price itself,” says Nathan van der Heyden, head of business development at crypto company Aragon.
Previously, Trump-affilitated entities have reportedly earned tens of millions of dollars in trading fees in connection with the TRUMP coin. In the 24 hours following the dinner announcement, $1.6 million in fees were collected by contributors to the TRUMP liquidity pool on Meteora, the exchange through which the token was originally launched. Most of that money will have accrued to CIC Digital and Fight Fight Fight as the largest contributors to the pool, based on previous reports.
On paper, the Trump-affilitated organizations also stand to gain by any appreciation in the price of TRUMP, as they are by far the largest holders. But in practice, they are prevented from selling their stash of coins, partly by a mechanism that limits access to their holdings for a three-year period, and partly by the prospect of a backlash resulting from the inevitable drop in price caused by any large sales.
“The optics of profiting from selling your own coin are terrible, while profiting from the market making is opaque enough to protect your reputation,” says van der Heyden.
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