Dogecoin, which started as a meme currency in 2013, has created waves and is up a whopping 26,000% over the last six months. The cryptocurrency could continue to be volatile over the weekend as Elon Musk appears on the SNL (Saturday Night Live).
Musk has been among the celebrities who have endorsed the meme cryptocurrencies. Billionaire investor and Dallas Mavericks owner Mark Cuban is among the celebrities who have endorsed dogecoin.
Elon Musk on Dogecoin
Talking of Musk, with a cult-like following and over 53 million Twitter followers, he has the ability to influence asset prices. His infamous tweet on taking Tesla private triggered a buying spree in Tesla which was followed by a crash. The matter reached US SEC’s (Securities and Exchange Commission) door which put restrictions on Musk’s tweets while he had to quit his position as the company’s chairman even as he continues to be the all-powerful CEO. However, Musk continues to tweet on different assets including dogecoin. He also mocks SEC as “Short Seller Enrichment Commission.”
Musk versus SEC
Last year, Musk tweeted that he finds Tesla’s stock price too high. It was probably the rare instance when a company’s CEO had called the stock overpriced publicly. As expected, the tweet led to a sharp fall in Tesla stock. It’s a different matter altogether that Musk defended the company’s valuation after it had run multifold from the levels that he termed it as “too high.”
Musk featured in GameStop drama as well
Musk’s ability to influence asset prices is not limited to Tesla or for that matter only stocks. He also put his hat in the ring amid the massive rally in GameStop stock with the “Gamestonk” tweet that sent the gaming retailer’s stock soaring. Celebrity fund manager Chamath Palihapitiya also tweeted about GameStop. He made quick bucks on the stock and donated that to a charity.
After Musk tweeted in support of Signal App as an alternative to Facebook, his fans bought the stock of Signal Advance stock and the OTC traded company skyrocketed. The only issue was that it wasn’t the Signal app that Musk was referring to, which is not even publicly traded. As you would have guessed, Signal stock crashed after the humongous rally and now trades below $2, down sharply from its 52-week highs of $70.85. A lot of retail investors would have lost money in the mania.
Dogecoin prices have surged
Meanwhile, those on bought Dogecoin after Musk’s endorsement have no reason to complain. The cryptocurrency is probably the best performing asset over the last six months and even eclipses the massive rise in other cryptocurrencies like bitcoin and Ethereum.
Incidentally, Musk also helped push bitcoin to a record high by adding it to his Twitter profile. Tesla later said that it has invested $1.5 billion in bitcoins. The company sold some of these in the first quarter to net over $100 million in profits which helped it post record profits.
During the company’s first-quarter earnings call, Tesla said that bitcoin was a good alternative for it to park its excess cash given the low yields on other instruments. It found bitcoins attractive as it could higher yield on its surplus cash without “taking on additional risk or sacrificing liquidity.”
Tesla invested $1.5 billion in bitcoins
While there is no denying the liquidity part, I find the argument on “risk” intriguing given the massive intraday volatility that bitcoin witnesses. The digital currency has come off its recent highs and could potentially wipe off Tesla’s entire profitability in a bad quarter.
Meanwhile, ahead of his SNL appearance, Musk has also advised caution on cryptocurrencies. “First of all, I think people should not invest their life savings in cryptocurrency. To be clear, I think that’s unwise,” said Musk.
Dogecoin is much more than meme currency now
Meanwhile, retail traders betting on dogecoin are beating the best of Wall Street fund managers. “The joke is on Wall Street this time,” said Mati Greenspan, portfolio manager and founder of Quantum Economics. He added, “What you have is a situation where teens on TikTok are outperforming even the smartest suits by thousands of percentage points.”
Avi Felman, Head of Trading at BlockTower Capital echoed similar views and said that “Dogecoin is like this kind of big F-U to the system.” He added, “It’s like, ‘Yeah, this thing can have value, too. And I’m just going to buy it, because I’m going to buy it.”
Notably, while bitcoins are capped at 21 million, there is no upper limit on dogecoins. While some merchants have begun accepting dogecoins, and its fans even started a campaign to get Amazon to accept dogecoins, its appeal is still lower than that of bitcoins.
Dogecoin is worth more than many leading US enterprises
Dogecoin’s market capitalization surged past $92 billion. Several memes have been floating around on how the joke cryptocurrency is valued higher than leading US enterprises. Meanwhile, Musk is not the only one who has raised caution on cryptocurrencies. Amid the frenzied rally in cryptocurrencies including dogecoin, Bank of England Governor Andrew Bailey said that investors should be prepared to lose all their money as “they have no intrinsic value.”
Bailey said, “I’m going to say this very bluntly again,” “Buy them only if you’re prepared to lose all your money.” The U.K.’s Financial Conduct Authority (FCA)had also expressed similar views on cryptocurrencies earlier this year.
FCA has warned on cryptocurrencies
“Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money,” the FCA said in January. It added, “If consumers invest in these types of product, they should be prepared to lose all their money.
Berkshire Hathaway chairman Warren Buffett is another prominent critic of cryptocurrencies. Vice-chairman Charlie Munger also came down heavily on cryptocurrencies amid the rally in names like dogecoins.
“I don’t welcome a currency that’s so useful to kidnappers and extortionists and so forth. Nor do I like just shuffling out a few extra billions and billions and billions of dollars to someone who just invented a new financial product out of thin air,” said Munger. The nonagenarian added, “I think I should say modestly that I think the whole damned development is disgusting and contrary to the interests of civilization, and I’ll leave the criticism to others.”
Dogecoin in focus as Musk appears on SNL
Coming back to dogecoin, it could be volatile today as Musk appears on the SNL. Musk became the world’s richest person briefly this year amid the rally in Tesla stock. He has also unlocked billions of dollars as stock options amid the rally in Tesla’s rally. He does not get a salary or bonus from the company and all his payout is linked to Tesla reaching pre-set milestones including the market capitalization.
Many have been critical of Musk’s appearance on the SNL. Tesla does not allow a union and has faced scrutiny over its labor policies. This comes despite Musk’s assertion of being a “socialist.” He had also supported Andrew Yang’s candidacy in the 2016 US Presential elections.
Tesla and Musk have been controversial
Many have also been critical of frequent crashes related to Tesla’s Autopilot including the most recent one in Texas. A Tesla car which was apparently on the Autopilot, crashed last month in Texas leading to the unfortunate death of two passengers.
Harris County Precinct 4 Constable Mark Herman said that “no one was driving the vehicle at the time of impact.” He however added, “It’s still under investigation.”
On its part, Tesla claims that its autonomous driving is not fully autonomous yet and advises users to keep their hands on steering all the time. Tesla has gradually increased the price for its FSD (full self-driving) to $10,000 and Musk sees the price rising to $100,000 eventually.
Tesla Autopilot crash
The question came up during the company’s first-quarter earnings call also. Martin Viecha, Tesla’s Senior Director of Investors Relations summed up questions from retail investors on a recent crash in a Tesla car in Texas when the Autopilot was allegedly on. Martin pointed to a “question from retail investors is, does Tesla have any proactive plans to tackle mainstream media’s imminent, massive and deceptive click-based headline campaigns on safety of autopilot or FSD for a specialty PR job of some sort.”
Musk responded by referring to “really just extremely deceptive media practices where it was claimed to be autopilot where this is completely false” adding that “those journalists should be ashamed of themselves.”
Can Dogecoin cross $1
Meanwhile, all eyes will be on dogecoin today as bulls might want to take the meme cryptocurrency above $1 which has been a cherished dream for many dogecoin bulls.
Commenting on dogecoin’s future, Mike Bucella, BlockTower Capital’s general partner, said “The real value is in today’s meme-driven culture, and doge represents the network value of memetics, which may prove to be enormous.” However, he added, “If at some point, the doge community decides to implement a burn or new supply mechanism, via a protocol hard fork, then this value will have a higher likelihood of being retained long-term.”
How to buy dogecoin
You can trade in cryptoassets like dogecoin through any of the best cryptocurrency brokers. An alternate way to play the cryptocurrency theme could be through buying stocks of companies that mine bitcoin.
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