When influencers spread enthusiasm and confusion at the same time
Elon Musk has a lot to answer for when it comes to cryptocurrency. His ability to influence millions with single tweet must be a source of considerable envy amongst wannabe influencers the world over.
He’s one of a few key players in the world of Bitcoin whose names are in the headlines constantly. He recently changed his Twitter profile so that it simply read ‘Bitcoin’ — that gesture alone prompted the price of a single Bitcoin to climb beyond $40,000 for the second time this year.
It turns out that through his antics he was teasing that Tesla was in the process of investing $1.5billion of its corporate treasury in Bitcoin. After that investment had been announced in the media, the price climbed higher and continues to nudge at the door of $50,000.
For Bitcoin investors like me, such interventions and influence are welcomed. Large-scale corporate endorsement brings Bitcoin forward in the public conversation which will hopefully encourage people to get educated on the topic. That in turn should help Bitcoin to become more widely accepted or at least more universally tolerated. The increase in value is also welcome for those who are holding it for the long-term.
His enthusiasm isn’t reserved for Bitcoin however. In recent weeks Elon has tweeted regularly about his affection for another cryptocurrency — Dogecoin.
A ‘joke’ with an $8billion market capitalisation
If Bitcoin were analogous to a Tesla Model S in automotive terms, then Dogecoin would seem to be the equivalent of Herbie — the Disney movies’ VW Beetle with a mind of its own. It was originally conceived for the amusement it creators rather than out of a serious desire to create something new or genuinely useful.
Instead of trying to paraphrase the definition of Dogecoin off Wikipedia, I’ll quote it directly:
“Dogegoin was invented by software engineers Billy Markus and Jackson Palmer, who decided to create a payment system that is instant, fun, and free from traditional banking fees. Dogecoin features the face of the Shiba Inu dog from the “Doge” meme as its logo and namesake.”
Bitcoin was conceived to establish a completely new paradigm for digital currencies — an unregulated and decentralised financial system and a new inflation-proof digital store of value. Dogecoin was originally conceived as a joke.
More than just a meme
Like Bitcoin, Dogecoin has grown wildly since its launch.
While its market capitalisation is roughly one hundredth the size of Bitcoin, there are many more of them in existence — 113 billion out of a total of 127 billion have already been mined compared to around 19.6 million Bitcoin out of its 21 million total. While it was created on the basis of humour and named after a meme, it’s clear that there is a serious and valid place for Dogecoin.
It has evolved since its conception in 2013 to allow peer-to-peer payments to be exchanged between Dogecoin users. It’s also now widely traded on crypto-exchanges. In January 2021 thanks in part to Elon Musk and his mischievous tweets (as well as fallout from the GameStop episode) the value of Dogecoins climbed by 800%. It has its following of fanatical owners and users and many are enthusiastic having bought and sold it to capitalise on the boom prompted in part by Musk’s comments on Twitter.
Dogecoin is just one of many hundreds of different so-called altcoins but on the relative scale of merit and credibility, it’s up there close to Bitcoin and Ethereum. At a conceptual level, altcoins are more analogous to monetary tokens that are acknowledged by their user-base to possess value and can be exchanged on a peer-to-peer basis. I think of them as digitised and encrypted versions of fairground tokens, monopoly money or Schrute buckswhere Bitcoin is the ‘serious’ currency — the dollar, euro or GBP.
In the future altcoins may have less of an active part to play in replacing the inner-workings of global financial systems, but there is likely a place for them nonetheless. After all, our world has existed for hundreds of years without reliance on a single currency — why should there not be room for multiple cryptocurrencies too?
I don’t have any particular problem with Dogecoin or any other cryptocurrency. I’m a relative newcomer to crypto investing and have decided to follow the advice of many that Bitcoin and Ethereum are the two main players at present — these are the only ones I feel comfortable investing with having tried to learn how they work. But it doesn’t mean I’m oblivious to the possibilities (and inevitably, the heightened risk of scams) associated with altcoins.
That investors have been able to make serious profits through investing in the likes of Dogecoin should help to cement the place of cryptocurrency as part of our financial system in the future.
Who let the Doges out (and did it help?)
The only bugbear I have with Dogecoin is that when Elon Musk and other unlikely celebrities including Snoop Dogg and Gene Simmons (formerly of rock band Kiss) mention it in the same breath and context as Bitcoin, it doesn’t help the seriousness with which the wider world views cryptocurrency. Collective understanding and mutual acceptance is short-enough in the crypto world as it is.
The level of understanding and engagement that most have about Bitcoin is relatively low to begin with. Many seem determined to latch onto its perceived shortcomings and weaknesses and state these angrily as reasons why Bitcoin is a fad that can’t be trusted.
Fear and cynicism dominate amongst crypto skeptics and many commentators (including those in positions of supposed authority and knowledge) are quick to use the nature of Dogecoin, the ‘joke cryptocurrency’ as a reason to disparage and undermine Bitcoin too.
There’s a lot of love amongst the cryptocurrency community for Elon Musk and the obvious belief he has in Bitcoin playing a big role in the future. That Tesla will soon accept Bitcoin in payment for its electric vehicles demonstrates this too — it’s not just a case of him seeking popularity on Twitter.
In my limited time as a crypto investor I’ve observed that there’s a great deal of polarised opinion in the space. Those who love and believe in it are vocal in their enthusiasm. Those who distrust it and don’t believe it has a future are equally vocal.
By its decentralised nature, cryptocurrency doesn’t have any single person or entity governing over it which is viewed as a positive. But equally there’s no central marketing department tasked with bringing the public on board with it either. As such, I think we all have a vested interest to help each other understand it better and I’m just not sure that mentioning one of the more controversial and comical cryptocurrencies in the same breath as Bitcoin is helpful or not?
All that said, I’ve learnt a lot about Dogecoin in the researching and writing of this story. If the slightly provocative tweets by Messrs Musk, Simmons and Dogg can be credited with encouraging myself and others to learn more about Dogecoin, then perhaps it’s not so bad that they’ve been so vocal!
Note: This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.