By James Mackintosh

When President Trump gets in on a new online moneymaking idea, his followers often pile in -- but two out of the last three times, they went on to lose bigly.

Now the first family is trying again and the idea, at least, is intriguing. Unfortunately for fans, the Trump venture into a "crypto treasury" stock is also set up so the president and his family cash in first.

The president's ventures have so far been a disaster for investors who were slightly late to buy into them. Trump Media & Technology Group, operator of the Truth Social short-message network preferred by the president, is down 52% even from just before his deal went through and it changed its ticker to @DJT. It is down 73% from the peak the following week.

Those who bought into his $Trump memecoin in the first few minutes of its launch in January last year have done well, but those who bought after the first day lost a lot of money -- it is down about 90% from its high on the day he was sworn in. One consolation, of sorts: They would have lost even more in $Melania.

The success is the Trump digital trading card, a nonfungible token featuring mocked-up images of Trump with various superhero, space and sporting backgrounds. Sold for $99 each, it has a current floor price -- the lowest in the set -- that is above $200. Again, though, those who bought at the wrong time could have paid a floor of almost $800, according to NFTPriceFloor, and individual sales in the past week range from $82 to $846.

The new idea is a variant of the runaway success of Michael Saylor's MicroStrategy, now renamed Strategy, a so-called Bitcoin Treasury company.

Strategy accumulates bitcoin, using debt and new stock issues to keep on buying more. It already owns more than 3% of all bitcoins, worth $70 billion.

Supporters claim there is an "infinite money glitch." Strategy stock trades at a premium of about 35% to the value of its bitcoins. Every time it issues new stock at a premium, it adds value for existing shareholders, which shows up in an increase in the amount of bitcoin per share.

Add in leverage -- some of it using smart financial engineering to take advantage of the premium -- and the huge rise in bitcoin, and it pushed Strategy earlier this month to be briefly among the top 100 most valuable U.S. companies.

Not surprisingly, copycats have emerged, the first family among them. What's not to like about infinite free money? Well, several things worry me about the infinite glitch and the Trump take on it.

1) By buying Strategy, new shareholders are overpaying for bitcoin. They could easily buy the cryptocurrency for themselves directly or via an ETF 35% cheaper. The much-touted rise in bitcoin per share happens because it exploits investors' willingness to overpay for Strategy's shares.

Strategy's strategy is, in effect, trading against its new shareholders. This unusual approach can only work so long as investor demand for the idea exceeds the supply of shares from Strategy and its copycats. The premium has already dropped a lot as it has been exploited by Strategy and if it disappears, the whole approach comes to an end.

2) Strategy is moving the price of bitcoin itself. The company is now so big that its issuance and purchases might be what has pushed up the price of bitcoin recently. If it ever needed to sell to raise cash for its debt repayments, bitcoin is likely to take a hit.

3) The presidential version of a Crypto Treasury has crucial differences to Saylor's. Instead of owning bitcoin, the Treasury company will own the WLFI token from World Liberty Financial, co-founded by Trump and his sons. World Liberty has taken a significant stake in Alt5 Sigma, and, as part of the company's $1.5 billion fundraising effort to buy the token, Eric Trump has been appointed to the board. WLFI is due to become tradable in September and gives a maximum of 5% of the votes in governance of USD1, the dollar stablecoin that is WLF's business.

Now, it is true that bitcoin has value only because other people think it has value. But it does at least have a history and a following, and a cap on how many bitcoin can be created. WLFI's governance rights over USD1 perhaps give it some minuscule value, though it is hard to see why anyone should care, given it doesn't offer a share in the profits of World Liberty. Clearly the main reason to want WLFI is to show public support for Trump. Owning Alt5 Sigma won't do that, unless the stake is so big it has to be disclosed.

The benefits for Trump are clear, though. Quite apart from owning a very large chunk of WLFI, a Trump-affiliated company is entitled to three-quarters of the value of any WLFI sold by WLF.

4) The history of stocks trading at a big premium to their investments is terrible. Crypto Treasury stocks are similar to closed-end funds, minus the regulation. Funds that offer access to something otherwise not available can trade at a big premium, because buyers can't otherwise get in. Two extreme examples were the Taiwan Fund and Destiny Tech100.

At its launch in 1986, it was hard to invest in Taiwan, which helped the Taiwan Fund go to a premium of three times its assets. It now trades at a discount. Similarly, Destiny Tech100 owns direct or indirect stakes in hot private companies such as SpaceX and OpenAI that investors want access to, which helped it to attain an insane premium of 20 times its assets after listing last year, before falling back. It is still at a fat premium.

But when there is an alternative, or a way to arbitrage the stock against the assets, it is much harder to get a premium, since investors are generally unwilling to overpay. As Owen Lamont, a portfolio manager at Acadian Asset Management, points out, crypto treasury stocks are unusual candidates to trade at a premium because there is no barrier to buying the underlying crypto they own.

"This phenomenon violates every principle of finance," he said. "Before, people had to do complicated things to bamboozle investors. Now they can just do the simple thing."

One final chart to finish shows the general risk of buying into the next exciting thing -- and again is Strategy.

After its dot-com high shortly before Saylor agreed to a multimillion-dollar settlement with the Securities and Exchange Commission for overstating earnings, the stock took until November last year to make any gains.

Be careful with financial engineering, be careful about profiting from political connections, and remember there is no such thing as a perpetual motion machine, even in finance.

Write to James Mackintosh at james.mackintosh@wsj.com

(END) Dow Jones Newswires

The $Trump memecoin was launched in January this year. "The Trump Family Cashes In on 'the Infinite Money Glitch,'" at 11 p.m. ET on Aug. 23, incorrectly said it launched last year.

(END) Dow Jones Newswires

August 24, 2025 11:34 ET (15:34 GMT)

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