Did Trump Really Make Tens of Billions on a Memecoin?
Welcome to Money/Power Reader Questions: Vol 1, Issue 1
Since the start of the year I’ve been receiving more and more reader questions, whether they be follow-ups to specific pieces I’ve written, or queries prompted by things going on in our crazy world. Most of these have been fantastic, important questions, and many have been far too complicated for me to answer in a short email or text message. So today I’ll be testing out a new feature: Money/Power Q&A. This is Issue #1.
This Q&A should not be confused with a FAQ. Each question does not get a short, discrete reply, both because some questions just cannot be answered that simplistically, and because the answers to multiple questions may depend on building up a framework within which to respond to them. Therefore, I’ll group questions together, and then offer a set of overlapping responses. In some issues there may be multiple rounds of questions, but to start things off we’ll keep this one short and sweet.
Questions for vol 1, issue 1
What does it mean that Trump made tens of billions on a memecoin?
Can crypto be exchanged for goods and services, like money?
Can the definition of money change?
Money is very hard to understand. I launched this newsletter just over a year ago, right after I had published a book containing my effort to make sense of money. In writing Money/Power I spend a lot of time behind the scenes trying not to repeat arguments I’ve made defending my theory of money; instead, I try to focus on how, armed with that theory, we can better make sense of a variety of money/power phenomena.
Of course, along the way, I often drop down markers to specify the distinctiveness of my theory: money is not a commodity that holds real value; nor is it merely a norm/ritual/practice (a generic social relation) by which communities allocate value to money tokens through their beliefs. Instead, money is a specific relation of credit/debt. I call this relation the money array, which contains four elements: token of credit/debt; creditor (who holds the token); debtor (who owes); and denomination, which means the credit/debt has both a money name (like francs or rupees) and a number (like 52).
I contend that one key power of this theory of money lies in its capaicty to distinguish money from other stuff. Capitalism creates a swirling vortex of value, and under capitalism, money is the necessary form that value takes. In simple terms, in order for money to beget more money, at the end of any capitalist circulation or production process the value of goods and services must be realized by exchanging them for money. But money is not the only form that value takes. Here are two reasons why.
First, because commodities are simultaneously both use-values (they serve some purpose for human consumption or production) and exchange-values (they can be priced in and sold for money). This means that under capitalism there is always the possibility of exchanging a commodity for another commodity. If a merchant wants to accept bitcoin as payment, they can do that, but they could also accept loaves of bread or barrels of oil – if they really wanted to. It’s always conceivably possible to pay with a commodity, but this will be payment in kind, where the value of the exchanged goods are still measured in a money of account. Payment in kind does not make a commodity money; rather, it indicates the necessity of a money of account in which we can calculate the value of commodities that we would then exchange.1
Second, because almost anything in a capitalist society can be treated like a commodity. Under capitalism, you can sell anything and everything. Memecoins might be the ultimate example of this principle of capitalism, because they are such an extreme case – a memecoin is not a commodity (it has no use-value) and it is not money (it makes no claim on any debtor).
Memecoins work, when they work, partially because they are easy to confuse for something else. We might mistake them for something basic – a precious and rare commodity, like gold. Or we might mistake them for something complex – a sophisticated product of financial engineering, like bonds, stocks, or derivatives. Gold is a commodity because in addition to having a market price (exchange-value) it also has a material use-value (you can make pretty jewelry out of it or fill cavities with it). A bond (a security) or a call option (a simple derivative) are money-credits because they are denominated tokens that make a valid claim on a debtor.
Memecoins are neither commodities nor money, yet that doesn’t stop people from buying and selling them! So what are they? In one sense, nothing more than a pure speculative gamble. You buy a memecoin because you think its price will go up and allow you to sell at a profit, and you reason that the price of the “coin” will go up precisely because it’s a “meme.” Of course, like most gambling, the only way to truly win is to be the house, which in this case means not trading memecoins but issuing them. If I simply give myself most of the coins, then I can always sell at a profit.
Still, we must be very careful in how we calculate that profit. One of the biggest lies of crypto remains “market cap” numbers.2 It is on the basis of this lie that the Money/Power reader naturally assumes that Trump made billions of dollars on TrumpCoin. But we don’t know if that’s true at all. Within hours of launch, TrumpCoin traded hands for as high as $75. It’s now down 83% and seems to be trading steadily (as of this writing!) around $12 or $13. But how much money Trump or anyone else made can only be calculated if we know how many coins they sold at what price (and on what basis).
The best source I’ve seen on this was an early analysis of trading during the frantic first hours and days. I doubt readers will be shocked to learn that almost all of the individuals who bought TrumpCoin either lost money or made very little in profit. The majority of coin holders own less than $100 worth. However, readers might be more surprised to discover that even the “whales,” who gained all the profit, earned at most $500 million (that’s an “m,” not a “b’). And those numbers were calculated back when the token was trading at closer to $30, so even the whales have likely been losing since then. Surely Trump-owned entities make up a significant chunk of the whales, but if we hazard a rough guess – say half of the whale wallets are Trump-related wallets – then we end up with an estimate of perhaps $100–$200 million in profit to Trump. That’s still a lot of money to basically steal from individuals who bought in (too late) to the hype, but it’s a fraction of what the headlines lead most people to believe.3
Notice that to really get at the question “how much did Trump make” we must insist on a proper conceptualization of money. You do not “make” money when the market price of your non-money asset rises; you only make the money when you realize its value by selling (by cashing out). And even then, you still never hold stable value in your hands. If you are a TrumpCoin whale who cashed out $25 million, what do you do with it? Buy more memecoins, where you could lose it all? Put it in equities which almost everyone thinks are primed for a big fall? Buy bonds in the face of concerns that Trump policy will upend the global capitalist economy in way that leads to inflation and low growth?
This leads to questions about the nature of money and how you might capture, or at least glimpse that nature. My point is not to “define” money analytically or statically, but to pay close attention to the money phenomenon as we witness it in the world (and across history), and, on the basis of that work, to develop an adequate conceptualization that helps us to see money and money/power. So the question is less about new “definitions” and more abut the possibility that the world could change so radically that my account of the specificity of money (which I think holds across history, going back to at least the thirteenth century) no longer allows us to parse the different forms of value within societies we inhabit.
My understanding of historical change is such that I refuse the idea that we, living in a capitalist social order, can know what a post-capitalist social order would look like. Feudal lords and serfs could not imagine a social order that did not even contain the subject positions “lord” and “serf,” and we are similarly situated. So I don’t rule out the possibility of a future without the capitalist value-form, and in such a world, it’s quite possible that “money” itself would change, perhaps dramatically.
But I think that’s all beside the point: because the folks arguing most vigorously for “new money” today are also those most deeply committed to maintaining the major structures of capitalism. I am confident that within that framework, money will remain what it has been for almost a thousand years (arguably much longer). We do well to remember that when someone says, “look over here at the new form of money,” they are asking us to play a shell game. The shell game is always a con. Don’t play. Instead, wait for them to show their cards, and then carefully distinguish the money, from the commodities, from the bullshit.
I learned this crucial point from Geoff Ingham who has proved it over and over again in a variety of contexts.
I will continue to cite Molly White and point readers to her definitive refutation of all the market cap bullshit, until such a day as this nonsense ceases.
The headlines also led people to believe, still to this day, that Trump got 53% of the popular vote, not the 49.8% he actually wound up with.