Here comes a sentence I had hoped never to have to write: this is the website of the official memecoin of the President of the United States of America.

I looked for the definition of a memecoin, just to be sure: 

A memecoin is a cryptocurrency named after characters, individuals, animals, artwork or something else, with the intention of being humorous, light-hearted and attracting a user base by promising a fun community. 'Humorous, light-hearted and works of art in a fun community,' are indeed the core values of Donald Trump's MAGA world. 

The circus began with the launch of the $TRUMP token on the Solana blockchain last Friday, resulting in a rise in value of more than eleven hundred percent, from six to seventy-five dollars within a day and a half. Currently, the price is around thirty dollars. 

The $TRUMP token is managed by two entities, CIC Digital LLC and Fight Fight Fight LLC, which collectively own eighty percent of the token stock. Details about the exact split between these entities and Trump's personal share remain unclear. At the maximum value of the Trump-coin, many media outlets cited an estimated valuation of fifty-eight billion dollars.

Market cap versus FDV

Once again, it appeared that many journalists don't understand the difference between theory and reality when it comes to the economic value of stocks or crypto-currencies. CNBC went completely off the rails and headlined, "Trump's crypto-driven inauguration weekend makes first family billions of dollars richer.

Let's use the Trump-coin, so it actually has some use, to determine the difference between market capitalization and fully diluted valuation (FDV), two concepts essential to understanding the potential value of cryptocurrencies:

• Market capitalization (market cap): this variable reflects the active market value by multiplying the current token price by the number of tokens in circulation. So for $TRUMP, with two hundred million tokens in circulation of about thirty dollars, the market cap is about six billion dollars.
• Fully Diluted Valuation (FDV): FDV estimates the total potential value if all one billion tokens were in circulation at the current price. For $TRUMP, this theoretical value is thirty billion dollars (one billion tokens × thirty dollars).

FDV assumes that the token price remains constant as supply grows, but in reality the price often falls when supply increases because demand usually does not keep pace. This makes FDV a less reliable metric compared to market capitalization, which provides a more realistic and current valuation. 

That's why sites like Coinmarketcap and Coingecko primarily use market capitalization, as opposed to, say, CNBC. So the difference between those two methods leads to a valuation of six billion for the Trump-coin, or thirty billion. See the left column on Coingecko. That's quite a difference.

No scam

Critics, as expected, accused Trump of deception or, even worse, scam. "I wouldn't call this a scam," said Om Malekan, an associate professor at Columbia Business School. "To me, something is a scam only when there is deception. Here there is no deception." Malekan is referring to the fact that a memecoin, by definition, has no intrinsic value because there is no underlying revenue or profit on which to base the price. It is total speculation.

Incidentally, the difference between market cap and FDV was aptly explained years ago by British comedian Jethro, who explained to his son the difference between theory and reality. 'Your mother says she would sleep with the plumber for a million and so would your sister. So in theory we are at two million. In reality, we live under one roof with two slappers.'