Trump's Memecoin May Bring Indirect Benefits to the Broader Crypto Network

Raydium is one of many cryptocurrency service providers that have profited significantly from the recent Memecoin craze.

Tom collapsed onto his bed in the early hours of January 18, just two days before Donald Trump was set to return to the White House. His phone lit up with a message from an old friend: "Did you see? Trump just launched his own cryptocurrency."

Tom sprang up, sat at his desk, opened his laptop, and turned on two monitors. "It doesn't feel real," he said. "I'm trying to figure out what exactly is happening."

Tom is the head of Raydium, a decentralized cryptocurrency exchange registered in the British Virgin Islands where investors can trade cryptocurrencies without intermediaries. Like other employees at Raydium, Tom keeps his full name and whereabouts confidential for privacy and regulatory reasons.

Raydium is one of many cryptocurrency service providers that have profited significantly from the recent Memecoin craze. As an important part of the Solana network's trading ecosystem, exchanges like Raydium have experienced rapid growth over the past year, even before the emergence of Trump's Memecoin.

In 2024, Raydium processed its highest trading volume ever, largely driven by the Memecoin frenzy. Tom quickly realized that the arrival of Trump's Memecoin was an opportunity for Raydium, as the platform takes a small fee from each transaction.

After Tom verified that Trump's Memecoin (TRUMP) was real and not the carefully orchestrated scam some had speculated, he rushed to ensure that Raydium's servers could handle the impending wave of transactions. (The platform had previously crashed during another Memecoin trading frenzy at the end of 2023.) Then, Tom set about ensuring there was enough of this new coin available for people to trade freely on Raydium: he monitored the number of Trump Memecoins people voluntarily listed (a practice that allows the listers to earn a portion of the trading fees) and bought more from elsewhere when necessary to meet demand on the platform.

Around 5 a.m., Tom wearily lay back down in bed. In the chaos, he forgot to buy some TRUMP for himself.

While Tom was sleeping, a flood of trades came in. The next day, January 19, Raydium saw $16 billion in trading volume, more than the total trading volume for all of 2023. Tom said the trading charts looked "like a hockey stick."

Despite the hundreds of billions of dollars changing hands in the frenzy sparked by Trump's Memecoin, only a handful of traders made a profit. The vast majority either lost money or broke even.

Value steadily flowed to Trump's affiliated companies managing the cryptocurrency and to cryptocurrency service providers like Raydium, which together made Memecoin trading possible. As one hedge fund manager described, the "Memecoin industrial complex" also includes the Solana network, companies providing wallet software for storing cryptocurrencies, liquidity providers ensuring cryptocurrencies can be traded at any time, entities aggregating price data, and more. All of them benefit from the increase in trading activity.

"If you dig deeper, you'll find there are many moving parts in the background that the public doesn't understand," said Anurag Arjun, co-founder of cryptocurrency infrastructure startup Avail and the Polygon network.

Solana was a relatively quiet place until the Memecoin craze began to emerge in late 2023. Hardly anyone was using the network, and the services built on it could barely sustain themselves. Aside from financial speculation, there were very few applications built on Solana. "There were a lot of jokes about how developing on Solana was like chewing glass," Tom said, "it was really hard."

Previously, Memecoins have been criticized for being unserious, potentially jeopardizing efforts to establish legitimacy in the crypto industry. Trump's Memecoin was widely criticized as a "money grab." However, the emergence of cryptocurrencies like Trump's Memecoin could bring significant indirect benefits to the broader crypto network, creating a flywheel effect where the arrival of Memecoin investors attracts developers eager to build other applications for them. In theory, once people are equipped with Solana wallets, they are more likely to use various Solana-based applications, leading to sustained increases in network activity.

"Many application development teams will target these new users," Arjun said, "Memecoin is an example of something that can run on this infrastructure."

According to experts, the launch of Trump's Memecoin also has significant implications for the U.S. government's stance on cryptocurrencies. For a long time, the industry has complained about the lack of clear rules governing the issuance of new coins in the U.S.; given that Trump's Memecoin has presidential backing, its launch could be interpreted as a form of tacit approval.

"This will create a ruling that gradually affects all different institutions: the U.S. is embracing cryptocurrencies," said Demelza Hays, digital asset portfolio manager at investment firm Zeltner & Co. and chief economist at cryptocurrency industry publication CoinTelegraph. "We will see