“Some are born mad, some achieve madness, and some have madness thrust upon ’em.”
When the author Emile Autumn wrote this riff on Shakespeare a decade ago, one wonders if she ever envisaged a day when a Shiba Inu-inspired cryptocurrency would sweep the globe. Perhaps, but I have my doubts.
Either way, madness has very much been thrust upon us.
This is a guest essay from cryptocurrency researcher John Mac Ghlionn for The Node, CoinDesk's daily roundup of the most pivotal stories in blockchain and crypto news. You can subscribe to get the full newsletter here.
Dogecoin, a decentralized cryptocurrency, is a “satirical alternative” to the more serious cryptocurrencies, like ethereum and bitcoin. However, it’s important to remember that satire is, in many ways, an exaggerated edifice built upon a foundation of reality. With bitcoin, the first-ever cryptocurrency, Satoshi Nakamoto implemented a highly sophisticated framework for decentralized finance to flourish. Bitcoin is a serious digital currency, and bitcoin enthusiasts tend to be serious people.
Dogecoin, on the other hand, is a meme coin. It’s a joke. It was designed to generate a few laughs. Now, however, doge has generated a cult-like following. And Elon Musk has played a huge role in facilitating the coin’s rise in status.
On May 7, after climbing more than 26,000% in value since its inception, doge had a market capitalization of roughly $92 billion. With “The Dogefather” scheduled to host “Saturday Night Live” the next day, the rise was expected to continue.
Things, however, took a nasty turn when Musk, during a segment dedicated to doge, admitted that it was little more than a “hustle.” Almost immediately, the cryptocurrency’s price plunged by more than 30% in value. Twenty-four hours later, obviously feeling guilty about the joke (a Freudian slip?), Musk took to Twitter. He was seeking redemption.
The Tesla CEO, who appears to enjoy “breaking” the internet, posed a rather provocative question to his 42.2 million followers: “Do you want Tesla to accept Doge?” And 77% of respondents said “yes.” Almost immediately after the tweet, doge’s value increased by 10%.
Is doge the future of finance? After all, fate loves irony. With dogecoin, however, there is just one problem, and it’s a major one. The problem is Elon Musk.
No Musk, No DOGE
If he passes away tomorrow, the cryptocurrency will die the quickest of deaths. This logic, I argue, is also applicable to Tesla. If Musk goes, so, too, will the allure of Tesla.
This is why bitcoin, for all its flaws, is a far more stable alternative to DOGE. Nobody knows who Satoshi is. Is “he” an individual? Is “he” a group of people? Is “he” alive? All of these questions are somewhat interesting, but they are irrelevant when it comes to bitcoin’s stability. Whether or not Satoshi is around doesn’t matter in the slightest. Bitcoin is the star of the show. Furthermore, its success is not tied to the sentiments of one individual.
Whether or not Musk, the most successful entrepreneur in the world, is serious about dogecoin is debatable. Nevertheless, doge’s value is not. The Musk tweets and the exaggerated value of dogecoin display all the characteristics associated with a classic pump-and-dump scheme. Musk almost single-handedly has artificially inflated doge’s price, but the artificial inflation can’t go on forever. Eventually, like Icarus falling to his death, doge’s price will spiral downward, swiftly and unceremoniously.
Now, I understand that it’s very easy to get carried away with the hype. You might have heard about the 33-year-old man from Los Angeles who recently became a millionaire after investing in dogecoin. Glauber Contessoto invested most of his life savings, somewhere in the region of $180,000, in doge. Most people don’t have that sort of money lying around. More recently, a managing director at Goldman Sachs in London reportedly left the financial institution after making a fortune on doge. Like Contessoto, one assumes Aziz McMahon, who was with the brokerage firm for 14 years, also invested a small fortune in the cryptocurrency. This part of the story, somewhat predictably, gets omitted from the “get rich quick” narrative. There is little room for nuance in the world of canine-inspired lunacy.
But nuance is the very thing that is needed. Caution must be exercised. A positive correlation exists between dogecoin’s value and Elon Musk’s Twitter activity. If the tweets decrease in frequency, doge’s value will dip. If the positive tweets stop, doge will die.
This is the Catch-22 situation doge finds itself in. It can’t survive without Elon; at the same time, doge has become far too reliant on the entrepreneur for “cultural oxygen.” When it comes to whether or not doge survives, Elon Musk will decide. After all, he is the cryptocurrency’s judge, jury and potential executioner. His verdict is all that really matters.