A lot of things are changing. And there’s a lot of things that the new White House administration wants to do differently. One of the areas where we’ve seen a lot of attention is cryptocurrency. Some of the latest developments are pretty confounding, to say the least. Lucky for us, our guest this week has spent years following crypto. Zeke Faux is a reporter for Bloomberg News and the author of “Number Go Up: Inside Crypto’s Wild Rise and Staggering Fall.” He joins WITHpod to discuss some of the latest developments in cryptocurrency, concerns about the government purchasing it, Trump memecoins and more.
Note: This is a rough transcript. Please excuse any typos.
Zeke Faux: Nearly every platform listed TRUMP coin pretty quickly. This is one of the ways that there’s a big conflict of interest, because the Securities and Exchange Commission, that’s the big financial regulator in the U.S., they’re currently coming up with new rules for the crypto markets. And the crypto industry has said the rules are unclear. We want new rules.
Now, the new rules that they came up with, could very easily have placed some restrictions on this kind of gambling. Now, do you think that the new SEC chairman will create rules that will make TRUMP coin illegal? Like, definitely not.
Chris Hayes: Hello and welcome to “Why Is This Happening,” with me, your host, Chris Hayes.
Well, lots of things are changing. We have a new president. There’s lots of things that the president wants to do differently than the last president. There’s lots of areas of contrast and kind of 180s, and one of them, which I am particularly obsessed with and I think we all should be, is cryptocurrency.
Years ago, Donald Trump was like, I don’t like crypto. Crypto is bad. And he shunned crypto. And then what happened was out on the campaign trail, I think, that he found that a lot of people super into crypto were very adjacent into Trump-amenable cultural circles, I think would be the way to say it, and embraced crypto, started going to crypto events, told the crypto people like, I will be the crypto president, and then also started doing some crypto stuff like selling things in the crypto space, which I think is probably what persuaded him the crypto was awesome.
And then the day before, or two days before he became president, he launched a Donald Trump meme coin, that the headline said that he’d made $28 billion. Now, I don’t think there’s any way that headline can be true. This is a rule taught to me by an old editor, which is like, if a number doesn’t look believable, it probably is wrong. Like, anytime you see a number and you’re like, that can’t be right, 9 times out of 10 it’s wrong. It doesn’t mean you’re like, don’t check it.
But he launched this meme coin. It said it increased his net value by $28 billion, which would mean like the vast bulk of his personal wealth was now in this meme coin. Then Melania also dropped a meme coin.
And then a bunch of people who were basically Trump sympathetic crypto people started going online to be like, this is so gnarly, and so trashy and exploitative, and just confirms the worst things people think about crypto. I can’t believe he’s doing this. This is bad for the reputation of crypto.
He then gets inaugurated president. The value of that has continued to fluctuate, but he also signs some pro-crypto executive memoranda. I think crypto is going to be a central storyline of the Trump administration in a bunch of ways.
Policy, what the U.S. government does, the possibility of the U.S. government itself purchasing crypto, which would amount to a massive transfer of wealth from taxpayers to crypto holders, which many people in crypto want. You can understand why.
And then the president’s personal attempts to profit off of this wildly unregulated set of financial instruments in markets. I got to say this is one of those podcasts where, I love these, I got way more questions than answers. There’s a lot I don’t know and I just want to talk to someone who just lives and breathes this.
So today Zeke Faux, who’s a reporter for Bloomberg, author of “Number Go Up: Inside Crypto’s Wild Rise and Staggering Fall.” He covers crypto. He was on “All In” with me a few weeks ago when I did a long monolog about this attempt to sort of pull off this heist and have a bill that requires the federal government to purchase crypto. And he is one of crypto’s most able chroniclers. So, Zeke, welcome to the program.
Zeke Faux: Hey, great to be here, Chris.
Chris Hayes: All right. Can we just start? I really just want to understand what the heck happened last week with his own meme coin. Dad, I’m thinking about you right now, because I had a conversation with my dad the other day, if you’re listening to this, Dad. He was like, is there somewhere I could go to just understand like what the heck this is?
So I want to even just start with the most basic thing of like a piece of cryptocurrency, like Bitcoin, what’s that? And then we’ll go to, what’s a cryptocurrency like a Bitcoin or Ethereum, people might know. What determines its value? Then we could go to why there’s all these other cryptocurrencies, and then we can work our way to meme coins and the Donald Trump coin.
So let’s just start real basic for folks trying to figure this out, like what is a Bitcoin, a piece of cryptocurrency. What is it?
Zeke Faux: So, okay. At this point, cryptocurrency can be all sorts of different things. Some cryptocurrencies are more like stocks, where they represent a share of some kind of venture. Some are like alternative payment systems that are trying to be ways that you’d make everyday transactions. That was kind of the original idea with Bitcoin.
This was going to be a rival currency that was outside the control of any government, and that didn’t require you to place your trust into some sort of central counterparty.
I like to think of a big Google doc in the sky. In column A, you’ve got the names of the people. In column B, you got a number that represents how much money they have. So that’s basically the blockchain. The big innovation is they’ve come up with a way where this blockchain can be maintained by a distributed network of computers, rather than trusting Bank of America to keep track of how much money everybody has.
Chris Hayes: So there’s a distributed public ledger, and that public ledger, which is accessible and distributed, not controlled by any one person, is recording transactions, such that when you’re moving money, if I pay you, Zeke, 5 Bitcoin, it goes from me to you, there’s a public record of that transaction that’s transparent for everyone. All transactions are recorded in this thing called a blockchain, which means we’ve got this distributed means of moving this currency around.
Zeke Faux: Yeah. But like a Bitcoin, a Dogecoin, ETH, it doesn’t really exist in any real sense of the word. It’s just that column B in the spreadsheet.
Chris Hayes: Right.
Zeke Faux: So if you have 5 Bitcoins, that just means that there’s a 5 next to your name in there.
Chris Hayes: Right.
Zeke Faux: Actually, the database doesn’t have your name. It’s pseudonymous, so that you’ve got like a 31-character string of random letters and numbers that represents you.
Chris Hayes: Right.
Zeke Faux: So it begs the question, why does it cost a hundred thousand dollars to make the number in this Bitcoin database next to your name go up by one. And there’s not really any good reason other than the fact that at this point, there are a lot of people who seem to really want Bitcoins and are willing to pay $100,000 for one.
Chris Hayes: So this is where we think about like Beanie Babies. There was a Beanie Babies craze in the ‘90s. The value of certain Beanie Babies, which were like this stuffed kids’ toy, had a market value because there was huge demand and then speculation, right?
So anything that you can purchase, with the expectation it will inflate in value, can become valuable independent of its use value. Beanie Babies are not useful. The number next to you on the ledger is not useful. It doesn’t have use value, right? It’s valuable because other people want to buy it too, and you’re making a guess that more people want to buy it in the future, and the value will go up.
Zeke Faux: Yeah. I mean, this is where I got the title for my book “Number Go Up.” I was at my first Bitcoin conference. It was 2021. I was kind of under the impression that they were trying to make Bitcoin useful, that the interest in Bitcoin was because they saw it as some way to revolutionize Wall Street to make it easier to move money around the world.
Chris Hayes: Originally, that was the original project.
Zeke Faux: Right. But that’s long in the past. Only weirdos try to use Bitcoin for anything anymore. That’s sort of like a strange hobby some people have.
This guy on stage, he was talking about why Bitcoin has value and he said, number go up. He said, number-go-up technology. It’s a very powerful piece of technology. It means when the price goes up, people start to notice it, that makes them want to buy. And then the price goes up more, which gets more attention, and it goes up from there. And I was sitting there thinking, wow, this sounds like a pyramid scheme. This sounds super dumb. And since then, the price has gone up quite a lot for just that reason.
Chris Hayes: Yeah, the number has gone up. The number did go up. So this is key, I think. The transformation of the first wave in which Bitcoin was maybe going to replace the U.S. dollar, was going to be used for all these digital transactions frictionlessly, that right now there’s a financial intermediary.
There’s a use case for that because those financial intermediaries, they charge a percentage. I mean, everyone has gone into a store and they say credit card minimum of $10. And the reason is because the credit card companies are taking a cut of every transaction. Small transactions, they take a bigger cut percentage-wise. And so, they don’t want to deal with that.
There were all these ideas that were not crazy of. What if we had an independent digital currency, you didn’t have to deal with these financial intermediaries. But what I’ve gotten from your reporting and what you just said, it is purely an instrument of financial speculation at this point.
Zeke Faux: Bitcoin, definitely yes. The pitch now is that it’s digital gold and that it’s valuable because Satoshi Nakamoto, its anonymous creator, declared that there could only ever be 21 million Bitcoins. So unlike the U.S. dollar which the government prints more and more of, the number of Bitcoins will not go up, and therefore their value is guaranteed to increase.
Chris Hayes: Constrained supply.
Zeke Faux: Yes. Now, this does not actually make sense. Just because there’s not very many of something does not make it valuable.
Chris Hayes: It’s a fair point.
Zeke Faux: I did a lot of research on this because I wanted to find something else, where there were 21 million of them and it was limited. And I came up with VHS tapes of the original “Toy Story.” They only made 21 million. I’m sure the factory is gone. Probably a lot of people threw them in the trash. So there’s not 21 million anymore.
Chris Hayes: Probably fewer now. Yeah.
Zeke Faux: Yeah. And you can get one on eBay for 3 bucks.
Chris Hayes: Right.
Zeke Faux: So this logic that the 21 million means the price will always go up doesn’t make sense to me.
But the Bitcoiners also had this other argument, and at this first conference, the headliner was this kind of crazy Bitcoin bro who was pacing around the stage, cursing and talking about what seemed to be like a summer vacation in El Salvador and how Bitcoin was saving El Salvador. Then like, boom, the president of El Salvador was delivering a video address and he was saying, Bitcoin will be legal tender in my country. And the guy on stage was crying. People in the audience were crying.
I talked to some of these Bitcoiners after, and they’re like, this is game theory. Once El Salvador gets in, the other countries will realize that they have to get in, and these big pools of money will come in and that will drive the price up.
Chris Hayes: Right. If governments start buying it, governments have so much money collectively, if they start buying Bitcoin, then number go up.
Zeke Faux: Yeah.
Chris Hayes: Again, no other reason than other people are buying it. It’s just number go up because other people are buying it.
Zeke Faux: Right. I mean, this seemed like a real pipe dream to me. I always said to them, all right, you got like a tiny Central American country to buy some Bitcoin. I’m kind of impressed. But what other country is going to trade real money from their treasury for Bitcoins?
And you know, cut to the Bitcoin conference this past year, they got Donald Trump to come live in person and deliver a speech in which, among other things, he said that if Bitcoin is going to the moon, the U.S. should lead the way. He didn’t want China to get the Bitcoins. China has banned Bitcoin. He said that the U.S. should establish a strategic Bitcoin reserve.
Chris Hayes: Meaning U.S. taxpayer dollars spent on Bitcoin, which will increase the value of that Bitcoin for existing Bitcoin holders, and also create a buyer, a kind of buyer of last resort that you could sell to in mass to liquidate your asset.
Zeke Faux: Yes. I mean, just him talking about this has driven the price up even more. I want to return to something that you said in the opening about Trump has kind of flip-flopped on this. He had said Bitcoin was a scam, as recently as 2021.
Chris Hayes: And we know he hates scams. I mean, obviously, this guy hates scams.
Zeke Faux: So the Bitcoiners actually made a concerted effort to get him to change his position. They realized there was an opening when Trump started selling his NFTs, like digital trading cards that had pictures of Trump looking really jacked and being an astronaut or a hunter, other cool jobs. And he made a few million bucks off that, and they thought, hey, I mean, he’s doing one crypto thing. Could we maybe get him into this Bitcoin world?
And the effort was led by David Bailey, who’s the head of Bitcoin Magazine, which hosts this Bitcoin conference that I’ve been talking about, this annual get-together for Bitcoin maximalists, like the craziest Bitcoin fans. And he got a group of wealthy Bitcoiners to commit to giving Trump a lot of money. He raised what he said was at least $25 million for the campaign.
And he has said himself, I’ll tell you what he said, “The campaign, they’re used to bullshit artists all the time, trying to sell them shit. If you want it to progress, you got to show him the money.” And he did. And then Trump came to the conference and said basically like their wishlist of things that a politician might say about Bitcoin.
It was shocking to me to see. I mean, I was in the audience for this speech and I thought maybe they’d get Trump to deliver a video address. Then I was like, he’ll come, but he won’t talk about Bitcoin. No. He’s saying like, “I’ll fire Gary Gensler. Bitcoin is going to the moon. The government should buy Bitcoin.”
Chris Hayes: Gary Gensler was the head of the SEC under Joe Biden, who was extremely crypto skeptical, and wanted to cordon it off in the entire financial system, and regulate it as well.
Zeke Faux: Yes. So the Bitcoiners were really happy with that speech, but then things took a turn for the worse, from their perspective, a few weeks later, which was when Trump launched the first of his two cryptocurrencies. On the one hand, these guys liked it because it’s kind of a helpful conflict of interest from their perspective. I mean, if Trump is launching his own cryptocurrencies, he’s probably going to follow through and deregulate crypto.
Chris Hayes: Right.
Zeke Faux: So that part is good.
Chris Hayes: Right.
Zeke Faux: But they didn’t like it because, in my opinion, they want Trump to promote their coins. And they’re a little mad that instead he is promoting his own coins. Trump, I think, figured out that the way to make money in crypto is not to gamble on number go up. The best way to make money is to sell your own made-up coins for real cash.
Chris Hayes: Okay. So this brings us to the second question. So, okay, originally, you have this anonymous guy, Satoshi, who comes up with this way to have this distributed currency and a public ledger on the blockchain. Then you get Bitcoin, which is a currency that can be exchanged there. Then you get a few others like Ethereum.
Now, the thing about money, like language, is that it’s a product of social consent, right? Everybody agrees to take money, certain currency. That means it has value. The same way that we all talk to each other, that’s how we produce language.
If you take the example of gold, gold does actually have some use cases. But, really, gold is gold, and the role it plays, because we all agree it has value. Okay, fine. So I can go with that long enough on like Bitcoin and maybe Ethereum. So it’s like gold and silver. There’s a few precious metals.
But what I just can’t get my head around is the launching of a coin. I just actually don’t understand, at the most basic level. If I, Chris Hayes, was like, okay, I got to get myself on some of his action or Donald Trump, I’m going to launch a coin. What does that mean and how does it work?
Zeke Faux: So back in the day, which is to say like a few years ago, it was actually kind of hard to create a new cryptocurrency. You had to be a coder. I mean, you could probably hire a freelancer for a couple thousand bucks, but it was a big hassle.
A lot of people who started cryptocurrencies would make promises that their cryptocurrency was going to do something special and that it would be valuable. This is a real example from 2017, Dentacoin, it’s going to be the cryptocurrency of dentists and this will revolutionize the back office of dentistry. In more recent years, crypto hasn’t found this use case. There’s not like a big mainstream use for any of these cryptocurrencies.
Chris Hayes: Yeah. No dentists have switched their back office payment systems to Dentacoin —
Zeke Faux: Yeah.
Chris Hayes: — to frictionlessly move money.
Zeke Faux: This idea that blockchain would change everything, that blockchain is going to revolutionize every industry. No one is even talking about that anymore.
What crypto is good for is crazy gambling. There’s a very big group of people around the world who have realized this is kind of fun. I like gambling on crypto. I know somebody who made a lot of money on it. Maybe I should try to find the next Bitcoin.
Trump’s crypto is a meme coin. What a meme coin means is that your new cryptocurrency does not promise to do anything. There is no expectation that this cryptocurrency could ever receive a share of any profits from any company.
Chris Hayes: Right. It’s not connected to some use case.
Zeke Faux: Right. So the first meme coin was Dogecoin, and this one had a picture of a dog on it. It was created as kind of a parody of Bitcoin, and it was trying to say, hey, look how dumb this is by my dog coin instead. That one boomed back in the beginning of the pandemic when Elon Musk started talking about it. And then in the last couple years, there’s just been an explosion of meme coins.
Chris Hayes: Okay. Wait. I’m sorry. I need to slow you down because I don’t actually understand it. When you say a meme coin, it’s like I just made a new blockchain Google sheet in the sky, and I start with some set limited amount of like Trump coins or Haze coins. Is that how it starts?
Zeke Faux: Yes. Now, what made it a little bit easier to do is that some of the newer blockchains, like Ethereum or like Solana, the spreadsheet has multiple columns. So you can piggyback on their spreadsheet and just add in a new column for Hayes coin and declare there’s now 1 billion Hayes coins and distribute that in whatever way you see fit.
Chris Hayes: Okay. So there were some technical changes that made it just easier to get on someone else’s Google Doc blockchain. You had to do less technical work to launch a meme coin.
Again, I just want to be clear, there’s no use case. It’s just a thing saying, I have created a thing that I say is a thing of value. Would you like to buy it? And if enough people say yes, then it has value.
Zeke Faux: Yes. I think you might be wondering like why is anybody doing this?
Chris Hayes: That is what I’m wondering, in fact.
Zeke Faux: Yes. I would say it’s like a consensual pump and dump scheme. It’s like a weird gambling game. When you announce Hayes coin, people will think back about other coins that have launched and they’ll say, hey, you’re pretty famous. You’re going to get some attention for this.
Chris Hayes: Right. So attention is the key, right? The key to the meme coin, I just want to be clear because I just wrote a book on this, the thing you’re really monetizing is attention. If you launch a meme coin and no one pays you any attention, you have nothing. It’s a pure monetization of the attention because you’re launching a coin. People will know about it online. They’ll talk about it. Maybe people will buy it. The more people buy it, the more the value goes up, et cetera. Yes?
Zeke Faux: Yeah. Some of this social coordination work has already been done for you by the other meme coins. There’s just this pattern that people see. They’re like, if I jump in early on someone’s meme coin and there’s someone who can get some attention, I’m not going to be the last one to do it. I can look at the history of Fartcoin, very successful one. PepeCoin.
Chris Hayes: Of course, the Fartcoin, PepeCoin. Yeah.
Zeke Faux: Hawk Tuah girl coin.
Chris Hayes: Well, I want to talk Hawk Tuah. We got to talk Hawk Tuah girl because I actually think that’s important on the list of example. I keep thinking about my poor dad listening. My dad, I’m trying to bring along on this, and I’m like, I don’t know how I could do it.
So, okay. It’s easier, technically, to launch it. You’re launching it based on some attentional vortex around you, and the pure gambling of it is just the pure speculation that when a coin launches, it will go up in value. And if you get in on the right floor and get off of the right floor, you can make the money.
Everyone collectively thinking that it is what is driving the money into it. So it’s a sort of self-fulfilling prophecy, right?
Zeke Faux: Yes. Now, sometimes, and this would be probably illegal, people will help this along by doing some manipulative trading at the beginning, like trading the meme coin between themselves to make it look like it’s going up or, to fake interest in the meme coin, or they’ll pay famous people to endorse the meme coin to get it going. But the people involved are not tricked that this is the future of finance. They think this is kind of like a fun gambling game.
Chris Hayes: Yeah. They’re just trying to time the bubble. Everyone who’s involved in this, they’re trying to time the bubble, right? They want to get in at $2 and get out at $10 before the thing explodes, if it does.
Zeke Faux: Exactly.
Chris Hayes: More of our conversation after this quick break.
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Chris Hayes: Okay. Now talk about how it makes the person launching the meme coin money, and maybe we can give the Hawk Tuah girl as an example.
So, again, quick refresher for people who have not had their brains poisoned by the Internet. There was a viral video of a young woman outside the streets of Nashville, Tennessee, I want to say. Late in the night, she’d had a lot to drink. She was asked about whatever special ability she has for people she’s intimate with. She says, “You got to spit on that thing, hawk tuah.” This went viral, the video. She became known as Hawk Tuah girl.
Hawk Tuah girl threw the first pitch out at the Mets baseball game. Hawk Tuah girl launched a podcast called Talk Tuah. She found different ways to monetize the attention that went with her virality, in which she said, “You got to spit on that thing, hawk tuah.”
One of the ways she attempted to monetize that attention was with a Hawk Tuah meme coin. Have I gotten that all right?
Zeke Faux: So far, so good.
Chris Hayes: Okay. So she’s going to launch a Hawk Tuah meme coin. Now, explain to me how this process works and what happened.
Zeke Faux: So I have to admit that I’m not an expert on the mechanics of her meme coin. But essentially, look, you’re not launching this meme coin out of the goodness of your heart.
Chris Hayes: Oh, really? Okay. It’s not a charitable undertaking?
Zeke Faux: Yeah. The way that you’re going to make money is you can make some money off the initial sale to the public, but you also reserve a lot of the coins for yourself. And at some point, this is a part of the game that people basically understand. The buyers of the meme coin, they sort of have this expectation that you will not immediately sell all of your coins because the demand for the coins is limited by your fame.
In general, the creator of the coin keeps so many coins that if they ever started to sell them heavily, they would overwhelm the demand from buyers and the price would be driven down practically to zero.
Chris Hayes: Right. Because you want to artificially constrain the supply, such that the demand outstrips that supply and drives the price up. But if you take the coins that you own and you put them into the same market, you’ve now massively expanded supply and you’ve driven the price down.
Zeke Faux: Yes.
Chris Hayes: So part of this is you launch a meme coin, let’s say there’s a hundred of them, just for mathematical purposes. What do you keep? Do you keep 80 of them? Do you keep 50? What percentage do you generally keep?
Zeke Faux: I think the crypto world would view it as fair if you kept, I don’t know, 10% or 20% for yourself.
Chris Hayes: Okay.
Zeke Faux: And if you go that moment, when you sell all your coins and everybody loses all their money, except for you, that’s called the rug pull. The crypto guys, when that happens to you, they call it getting rugged.
Her coin crashed very fast, and there was some dispute over whether she had rugged everybody. She claimed she didn’t. Some people said there was evidence that insiders were selling. I’m not saying she did this, but one thing you could do is before you tell the public that you’re launching this meme coin, you tell your buddy and they acquire a lot of the coins at a low price. And then they can make money selling, without it being obvious to everyone that you are dumping your coin.
Chris Hayes: The rug pull is important here because it’s how the pump and dump scheme works, right? I create this meme coin. I am the owner of a chunk of it. That helps with artificial scarcity.
Now, as the price goes up, on paper, I now have a lot of money, however many times the dollar value of each meme coin. But the moment I move to liquidate it so that I could get the actual cash, which is the important thing, not the coin, is the moment that I depress the value for everyone. So everyone who’s tried to go along for the ride, when the rug pull comes, their value crashes.
Zeke Faux: Yes. There’s kind of definitely not a legal contract, but there’s like an implicit promise from the creator of the meme coin to the buyers that you won’t do that for a while.
Chris Hayes: So this is fascinating. So there’s this norm of the pump and dumpness, is that you won’t rug pull too early, even though everyone understands that the entire name of this game is about timing this boom-bust. There’s nothing else of it, right?
Zeke Faux: Yes.
Chris Hayes: That’s the only thing that you’re doing.
Zeke Faux: It’s kind of new, but, honestly, it’s not so different from, you know, if you picture Jordan Belfort, the scammer who is in the Wolf of Wall Street, he’s on the phone telling people to buy this hot new stock. I mean, in that case, I guess some people might really believe him. But other people might think, hey, if he’s calling me, he’s going to call some more people.
Chris Hayes: Yeah.
Zeke Faux: The stock might go up. But, meanwhile, even back then, the game was that Belfort would secretly control most of the company whose stock he was selling, and that eventually, his real profits would come from —
Chris Hayes: Right.
Zeke Faux: — selling those into the market. The legality of these meme coins and rug pulls has not really been litigated yet. I just saw a lawsuit the other day where buyers of Peanut the Squirrel coin sued.
Chris Hayes: Yeah, sure. Yeah. So Peanut, the right-wing celebrity who died a very sad, tragic death, that won Donald Trump the election somehow.
Zeke Faux: Yes. And also prompted competing meme coins.
Chris Hayes: Well, obviously, it’s going to need more than one. Wait. So to go back hawk Tuah, this is an amazing conversation. So, again, I’m not accusing anyone of anything. I’m saying what people complained about. I think she said she didn’t do anything wrong, to be clear. What people accused her of doing was rug pulling too early, right?
Zeke Faux: Right. There’s a sense that if she didn’t sell too quickly and just maybe dribbled out her Hawk Tuah coins over the next few months or years, that she could turn a profit without ruining it for everybody else.
Chris Hayes: Right. So this is the basic dynamic of meme coins, which people are launching. So now, I think we’re properly set up to discuss the second Trump cryptocurrency, which was the meme coin he launched on the eve of his inauguration.
Zeke Faux: Yes. TRUMP, the official meme coin, and the crypto guys were kind of waiting for this. People were really ready. A lot of people had launched meme coins, hoping that they could get a nod from a Trump that would make their meme coin kind of the official TRUMP coin. Do you remember Martin Shkrelihe, the pharma bro?
Chris Hayes: I sure do.
Zeke Faux: Yeah.
Chris Hayes: Yeah.
Zeke Faux: So apparently this is true. He was talking with Barron Trump about launching a meme coin, but Barron thought better of it. So it came out of nowhere that Trump tweeted or Truth-Socialed that he was finally doing it, and here was this TRUMP coin and it’s now available for sale.
Another reason that crypto people are kind of mad about this is all the biggest players in crypto, at that moment, were at an inauguration party, listening to Snoop DJ. So it comes out and, initially, people are a little worried that Trump got hacked because it’s just such a good way to monetize attention that hackers have started. You hack someone’s Twitter, and then you use it to promote a meme coin.
Chris Hayes: Of course. Right. If you steal someone’s identity, you can steal the value of their attention and briefly launch a meme coin.
Zeke Faux: Yeah. Eventually, a lot of public information is available through these blockchains, and they eventually made some connections and realized that it seemed like the accounts doing this had connections to accounts that had done previous Trump crypto stuff, and this was likely legit.
So he said there’s going to be a billion TRUMP coins and I’m keeping 80% for myself, way more than you’re supposed to by meme coin gambler standards.
Chris Hayes: Okay.
Zeke Faux: The price of a single TRUMP coin shot up as high as $72 within less than a day. And at that price, Trump’s, on paper, his holdings were worth $57 billion.
Chris Hayes: Right. Because it’s 72 times 800 million because he said —
Zeke Faux: Yes.
Chris Hayes: — there’s a billion of these coins, right?
Zeke Faux: Yes.
Chris Hayes: Right. So there’s a billion coins and he’s taking 80% of them, right?
Zeke Faux: No. He did make money off the sale of the initial 200 million coins.
Chris Hayes: Wait. How?
Zeke Faux: So initially, the whole billion coins are his.
Chris Hayes: I see. So the initial sales all go into your pocket too. It’s just that if people are buying them before the value is going up, you’re not capturing all that extra value.
Zeke Faux: Yeah. So I’ve been talking to blockchain analytics firms to try to figure out how much Trump made on that initial sale.
Chris Hayes: Got you. As opposed to the paper value of his holdings.
Zeke Faux: Yeah. So it’s surprisingly hard to figure out because the initial sale of the coins went through a decentralized Solana exchange called Meteora, and the transactions are pooled in a way that’s hard to disaggregate. But it looks like he might have made 50 million bucks off the initial sale.
Chris Hayes: It’s not bad.
Zeke Faux: I want to note, this it’s very typical for crypt like this. There are a lot of smart people in crypto who have a lot of fun coming up with things like decentralized Solana exchanges. It’s just kind of depressing to think of all these smart engineers who could be doing other things, and are instead inventing —
Chris Hayes: Right.
Zeke Faux: — more efficient ways for us to gamble on TRUMP coin.
Chris Hayes: We’ll be right back after we take this quick break.
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Chris Hayes: So fundamentally, he made real actual money, let’s say $50 million. We don’t know the actual number. But then there’s the paper holdings, like what is the going trading value of the coin and his 80% of that. So 800 million times that dollar value. But the reason that’s not real money is that if he ever sold those in mass, it would destroy the value and he wouldn’t actually walk away with, whatever, $30 billion to $50 billion.
Zeke Faux: Yes. And because it’s on the blockchain, people would actually be able to see as soon as he started selling that big pile. That would create fear that he was going to sell the rest of the big pile, and the price would really tank. You’re sort of trusting him on this.
Chris Hayes: That never worked out poorly.
Zeke Faux: But the terms of the deal are that certain amounts of these coins are locked up for certain periods of time. So he’s agreed not to sell X number for three months, and you can sell some more in six months. There’s a whole schedule of when he can sell the coins.
Chris Hayes: Okay. So what does this mean? I guess at the end of this, he probably made 50 million actual dollars or we don’t know, but let’s say around there, which I think for most people listening to this, you think that’s a lot of money. I would like to have $50 million. For Donald Trump, it’s a lot of money too, although also it doesn’t mean for him what it would mean for you or I.
That said, so now what? What’s the deal with this coin? I guess my question is what happens to these coins after the launch? I get this sort of boom-bust cycle and the rug pull. But I’m just so flummoxed by what people are or aren’t buying with a given meme coin. Past the initial offering and the rug pull or whatever, like years into a meme coin, what’s determining the market for it?
Zeke Faux: So certain meme coins kind of graduate to this blue-chip status. It’s inexplicable, but people just keep trading them and the rug pull does not come.
Chris Hayes: Okay.
Zeke Faux: And so, Dogecoin is in that category.
Chris Hayes: No. It’s a blue-chip.
Zeke Faux: But in —
Chris Hayes: Yeah, it’s —
Zeke Faux: Yeah.
Chris Hayes: Dogecoin is a blue-chip meme coin. How many times have I said that in my life?
Zeke Faux: But Dogwifhat, they put a hat on the dog, and that has not crashed, or PepeCoin has been very strong.
Chris Hayes: How’s Fartcoin doing? Fartcoin strong? Chugging along?
Zeke Faux: Yeah. So, to me, it really is hard to explain.
Chris Hayes: This all sounds completely insane. I really feel at a loss here because I understand gambling, like I know a lot of people that gamble. I understand gambling. I understand investing and I understand there’s a lot of overlap between those two.
But in the case of gambling, if you’re gambling on an outcome, it’s just definitive what the outcome is. Like, the roulette wheel lands where it does. You bust or not on 21. The Chiefs hit the over or they don’t. Okay.
In the case of finances, there’s actual data that comes out. Like, you bet that Invidia is going to go up because they’re making this chip that AI depends on. And then they come out and they say, our quarterly earnings surpassed expectations. There’s even more demand, and the stock goes up.
In both of these cases, there’s something that you’re touching against in the world, that it has to connect to, that’s going to do something to the value. And I just can’t get my head around this instrument of pure gambling and speculation, which is wholly untouched by anything happening in the world that determines its value.
Zeke Faux: Yeah. I mean, you’re purely gambling on the whims of the other meme coin traders.
Chris Hayes: Right.
Zeke Faux: There’s a sort of a competition to get their attention because some people are famous like Trump or like you with Hayes coin, which I would like a —
Chris Hayes: Yeah. I mean, believe me —
Zeke Faux: I want a big allocation of that.
Chris Hayes: Believe me, I’m writing some notes to myself right here.
Zeke Faux: Yeah. But if you’re not famous, you try to get their attention, you have to speak their language. I was talking with a very good meme coin trader and I was complaining that I thought Fartcoin was pretty stupid and I didn’t find it funny. I’m just like, even my kids, it’s a dumb joke for them. I was like, why do you think this really got going with the meme coin traders? And he said, it’s so fucking stupid that’s why it’s good. Everyone fucking hates it. Of course, it’s at a billion-dollar valuation.
If you don’t understand this mindset, you will lose money trading meme coins. And if you do understand it, you’ll probably still lose.
Chris Hayes: Okay. So this seems like a relatively small pool of people trading this stuff.
Zeke Faux: Yeah. It’s a lot bigger than you would guess, but it’s not infinite. Now, the pool has been growing because the crypto exchanges, which used to be kind of cautious about introducing new coins and offering them to their customers, have become much more liberal about letting people trade any kind of junk they want.
One of the things you’re betting on when you buy a meme coin is whether it will get listed on these big crypto exchanges. Like, the minute that hits Robinhood, there’s a whole group of people who can now buy TRUMP coin, who were not going to go —
Chris Hayes: Right.
Zeke Faux: — buy it on the Meteora Solana decentralized exchange.
Chris Hayes: Right. Part of what these meme coins are competing for is to get taken up by platforms with much broader audiences who can then introduce them to larger pools of buyers that can then drive up the price, like Robin hood, you said was an example.
Zeke Faux: Yeah. Robinhood, Coinbase, Binance, these really big crypto trading apps. Because the way that most people interact with crypto, they’re not using the blockchain.
Chris Hayes: No. They’re using the apps.
Zeke Faux: They’re just trading it on an app like DraftKings or Etrade or anything.
Chris Hayes: People do lose money on this. I just want to be clear about this.
Zeke Faux: Yeah. I mean, in a best case scenario, this is a zero-sum game and it’s not because the insider is the one who’s taking a lot off the top for themselves.
Chris Hayes: Right. It’s less than zero-sum.
Zeke Faux: Yeah. And then, actually, a lot of people complained about losing money on TRUMP coin. The crypto guys were kind of joking about this, but they said, people are joking, bring back Gary Gensler. The president just rugged me.
Chris Hayes: So in terms of the TRUMP coin, you’re waiting for this uptake in adoption by the big platforms. That’s where people trade. Is the TRUMP coin on those platforms?
Zeke Faux: Yes, they were. Nearly every platform listed TRUMP coin pretty quickly. This is one of the ways that there’s a big conflict of interest, because the Securities and Exchange Commission, that’s the big financial regulator in the U.S., they’re currently coming up with new rules for the crypto markets. And the crypto industry has said, the rules are unclear. We want new rules.
Now, the new rules that they came up with, could very easily have placed some restrictions on this kind of gambling. Now, do you think that the new SEC chairman will create rules that will make TRUMP coin illegal?
Chris Hayes: Right.
Zeke Faux: I think definitely not. This is why, typically, presidents do not run gambling games as they prepare to take office. I mean, I’ve been picturing Trump lining the National Mall with Trump slot machines being like, hey, you’re here to hear my speech. Why don’t you play some Trump slots?
Chris Hayes: Yeah.
Zeke Faux: And by the way, the take on these slot machines is 80%.
Chris Hayes: Right. Yeah. That’s such a great point. I mean, the other thing I worry about, Annie Lowrey wrote about this in The Atlantic, of just his cultural power leading more and more people to invest, not just in TRUMP coins but in crypto, and what would happen if there’s a mass crash? Again, we’ve seen this.
I don’t know if you’ve ever read the classic work on this by Charles Kindleberger, “Manias, Panics, and Crashes,” which is an amazing book and was written years and years ago, and it’s about financial crashes basically. And they all have the same stampede. The bubbles and crashes, they work in the same group psychology. They’re sort of moments of mob whims, and mass action, and contagion and virality. This is all true before we had this stuff. The reason that we regulate the financial sector so heavily is because of precisely these dynamics. And one wonders about, as the scale of this grows, more people are putting their money in this like real genuine devastation.
Zeke Faux: Yeah. I mean, when the price starts falling, there’s no floor. This is based on nothing. If it’s just based on number grow up, when it starts to go down, it could keep falling all the way to the bottom.
If you’re talking about a share of stock, these companies all have real assets. And at some point, some buyer would come in and say, hey, you guys are panicking. You’re selling your Apple stock too cheaply. I’m going to buy it up because I know they have a pretty good business. There’s no like buyer of last resort for Fartcoins.
Chris Hayes: Right. And there’s no reason to think that once the bubble pops on Fartcoin, that there’s some value there we can rescue, the way you might with, like you said, like a company, or even distressed assets like homes that were foreclosed or whatever. Once it’s gone, it’s gone.
Zeke Faux: Yeah. So when I was researching my book, I went to the Philippines, which was kind of early to the crypto craze, and they had this crazy bubble there that was in a cryptocurrency called Smooth Love Potions. They were tied to a mobile game called Axie Infinity. That was kind of like Pokemon, but when you battled, you would earn Smooth Love Potions.
This got so popular that millions of people were playing. People were quitting their jobs to just play Axie Infinity all day, and the price of Smooth Love Potions really climbed because the idea was that you needed some Smooth Love Potions to get your monsters and get in the game. But, inevitably, the price crashed.
And when I went there and I met people who had taken out loans to buy these Smooth Love Potions and get in the game. I met a woman who lived in an alley near this feeder creek, and she was considering leaving her children with her in-laws and moving to Dubai to get a job to pay off the debt she’d incurred buying these crypto monsters.
Yeah, I’m sure some people are buying TRUMP coin on their credit card. Their gambling does cause real harm, even if the collapse of TRUMP coin would not take a financial system.
Weird side note with Axie Infinity, part of the reason it crashed is that it was hacked by North Korea and Kim Jong Un made $600 million, which he used for his nuclear program from hacking Axie Infinity.
Chris Hayes: No.
Zeke Faux: True story. The U.S. government said so.
Chris Hayes: $600 million worth of this stuff?
Zeke Faux: In exchange associated with the game held other cryptocurrencies as well. It was hacked by North Korea and they made off with $600 million. And the U.S. government says it’s used for the nuclear program.
Chris Hayes: Dude, you can hear my just wide-eyed, jaw-drop reaction to all this. But I do think it’s going to be one of the most important beats in this new term. So I’m very grateful Zeke Faux of Bloomberg, author of “Number Go Up: Inside Crypto’s Wild Rise and Staggering Fall,” for walking us through that.
And dad, if you listened, just text me afterwards. If you have any questions, I’ll text him to Zeke. I hope we did a good job. Zeke, thanks so much.
Zeke Faux: Thank you, Chris.
Chris Hayes: Once again, great thanks to Zeke Faux. I have to say I’m picking my jaw up off the floor. I know I sound like Grandpa Simpson here, but this world really spins my head, I got to say. He’s got a great book about crypto. It’s called “Number Go Up: Inside Crypto’s Wild Rise and Staggering Fall.” And then he keeps reporting for Bloomberg and you can read his writing there.
You can email us, withpod@gmail.com. Get in touch with us using the hashtag #WITHpod. Follow me on Threads, Bluesky and what used to be known as Twitter, all with the handle, chrislhayes. Be sure to hear new episodes every Tuesday.
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