- COVER STORIES
The Affair Of Elon Musk And Dogecoin
- Doge started as a joke but Musk’s support made it the talk of the town.
- The coin’s price rose 200x before crashing down 70% from all-time highs.
- Musk advisor Birchall and Vitalik Buterin joined the Dogecoin foundation.
- Momentum peters out. This Doge might be too old for new tricks.
Who let the dogs out?
“To the moooon!”, was the rallying cry of the Dogecoin community after Tesla CEO Elon Musk tweeted about the dormant cryptocurrency in late December 2020. “One word: Doge” was the whole tweet. This was followed by a 40% price jump in the next 24 hours.
One word: Doge— Elon Musk (@elonmusk) December 20, 2020
Flocking to their star, the community called Musk “Dogefather” with heart-warming affection. Fuelled by what-the-f$!"sm, greed and Musk's tweets, the coin went on a 200x tear to the moon before plunging back to Earth in a 70% drop. Its current price is still 80x its pre-Elon (but also pre crypto boom) level.
A passing glance at GitHub show’s the last updates to Dogecoin core on August 21st then February 28th, 2021. Two minor updates in more than a year. Oops!
Who let the dogs out?
Billy Markus (ex-IBM) and Jackson Palmer (ex-Adobe) developed Dogecoin (DOGE) in late 2013 in the form of an open source project. They copied the technical base from Litecoin, itself a modified Bitcoin clone. In fact, Dogecoin and Litecoin are so similar that they can be mined together. The same computations used to solve the puzzle for a Litecoin block can also solve a Dogecoin block. It was intended to satirize the hundreds of altcoins released and the pervasive greed. The name itself was a misspelling of - yes - doggy!
The #1 meme of the year, according to Wired, was an image of a Shiba Inu dog with some text in Comic Sans. Adopted to be the project's face and mascot, it added mirth and popular appeal to the project right out of the gate.
Used on Reddit and Twitter to tip authors, the low fees and fast transfers enabled a fun way to say: “That was cool!” in the form of a cryptocurrency transaction, which also delivered some actual value. This could be how Musk first got exposed to the coin.
Not all was fun and games, however. Co-founder Billy Markus “gave away and/or sold all the crypto he had in 2015 after getting laid off and seeing his savings dwindle. Markus said that he earned enough from the crypto sales to buy a used Honda Civic and the only Dogecoin he has now is what he has received through tips”, writes marketrealist.com.
Reddit community r/dogecoin has always seen itself as the happy and light alternative to crypto’s often high-brow seriousness and cloak-and-dagger security talk. With Musk rooting for Doge, they exploded into a firework of joyful dog memes. Pitch this against the backdrop of recent r/wallstreetbets success in squeezing the titans of finance with GameStop’s stock.
Could Doge be the next way to stick it to the man? Why should success have to be so serious, anyway? Being part of a fun revolution definitely piqued Musk’s interest.
Elon Musk is in no need of an introduction. The 50-year-old centi-billionaire is heralded as the “Thomas Edison of our times”, a gifted engineer, extraordinary entrepreneur and force-of-nature meme lord.
His simple tweet on 20 December 2020, “One word:Doge”, lit trading volumes up like a match lights up gasoline. The price jumped 40% and investor sentiment increased by 78% in just 24 hours! This puzzled the crypto world. Why had Musk picked Doge?
Elon’s tweet found a ready base of Doge holders cheering the coin on. And cheer on, they did. On Reddit, on Twitter, on TikTok… Everywhere.
Suddenly, the coin was on the map of every retail crypto investor. Jumping on a hype train wasn’t attractive to some, but many others thought: “If Elon likes it, it must go to the Moon! Maybe even Mars!”
After the initial 40% jump, the price flatlined; for a full month. Then, at the beginning of February, the Dogecoin price exploded 50x. This eye-watering rise whipped the cryptocurrency market into a frenzy, and as a result, it doubled again! Mid April saw the next rally up another 8x to $0.40.
Musk timed the market perfectly and turbo-boosted gains by tweeting the Doge Meme. Still the Doge’s breath ran out after reaching a tantalising price of $0.70, and then crashed, hard. It went down 70% to around $0.20.
The Tie dug deep into Elon’s tweets and Doge. The correlation between coin price and tweet volume is breathtaking.
But why Doge?
Could Musk be the holder of the biggest Dogecoin Wallet, controlling 28% of the total supply? Currently this wallet is worth $8 billion, but it was “only” worth $80 million before December 2020. Making a cool - well - $8 billion in a year is plenty of motivation, even for Elon Musk.
Or is it “just for the lulz”? Possible, definitely possible. Famous for his irreverent tweets, he once got a slap on the wrist by the SEC for joking about taking Tesla private.
Whatever his raison d’Doge, Elon is steadfast in his commitment. He even gave his son Lil X some coins, and the “toddler hodler” doesn’t plan on selling, Musk reveals:
It’s true, x is a toddler hodler. Never once has he said sell!— Elon Musk (@elonmusk) July 12, 2021
The Dogefather engaged with the coin’s developer community and provided some ideas on how Doge should move forward. He stipulated: “Ideally, Doge speeds up block time 10X, increases block size 10X & drops fees 100X. Then it wins hands down.” This met with the most exalted of high brows from crypto royalty. Blockchains pose their own, very unique, problems, and traditional engineering approaches fall short, they pointed out.
So does Doge have a future? Will Musk lose interest and drop his support?
What’s the fundamental value of a given cryptocurrency? This question has puzzled, and haunted, the crypto world since Satoshi published Bitcoin’s white paper in 2009. One measure of fundamental value is in the stuff built on top. Ethereum powers more thriving projects than any other cryptocurrency. Just looking at De-Fi on ETH, you find billions of dollars in value locked. That’s the sign of a healthy cryptocurrency.
How much of De-Fi uses Doge? Exactly 0, nada, zilch. Doge doesn’t allow smart contracts, as the programs running on the blockchain are called. No smart contracts, no De-Fi. What about NFTs then? Well… nope! No Doge NFTs.
Perhaps Doge is the NFT, the most democratic of all NFTs, since you only need cents to take part.
This might just be the strongest argument you can make for the coin. Hold Doge, display the Shiba meme and participate in the fun on r/dogecoin and on Twitter for the sense of belonging and companionship.
$100 will get you a couple of hundred DOGE and legit participation. Compare that with $150k+ to buy an entry-level CryptoPunk and the narrative of the “people’s coin” gets pretty convincing. Mark Cuban summed it up perfectly:
The point about DOGE that people miss is that DOGE's imperfections and simplicity are it's greatest strengths. You can only use it to do 2 things: Spend It or HODL It. Both are easy to understand. And it's cheap to buy. Which makes it a community anyone can join and enjoy.— Mark Cuban (@mcuban) August 15, 2021
Is Doge a good investment?
The coin has been around since 2013. You could call it a veteran by crypto standards. On average, 32,000 addresses were active every day in 2021, a Doge’d record.
On-chain, Doge is being adopted by new investors at a level not seen since the late-2017 bull market, with new investors increasing their share of supply from 9% in July 2020 to 25% in August 2021 pic.twitter.com/W782qNhyMW— Philip Gradwell (@philip_gradwell) August 16, 2021
To much tail-wagging, Vitalik Buterin and Musk advisor Jared Birchall announced they would be part of the newly reinstated Dogecoin foundation’s board less than a week ago. Now that is seriously good news. Buterin hinted at interest in Doge on Ethereum a while ago, and he’s never been shy of memes.
Doge will be around for a lot longer. It has a broad user base, genuine fans in high places, and a happy, active community. But it will likely not go to $1 per coin. Instead, it will move in tandem with the leading cryptocurrencies, Bitcoin and Ethereum, around today's levels.
The biggest threat to Doge is the fractionalization of star-quality NFTs. When it gets cheap to own part of a Punk or an Ape, this dog might suddenly look ancient.
Nothing in this article constitutes professional and/or financial advice. The content is provided exclusively for informational and/or educational purposes. Nothing is to be construed as an offer or a recommendation to buy or sell any type of asset. Seek independent professional advice in regards to financial, tax, legal and other matters.