Dogecoin (CCC:DOGE-USD) has been probably the most thrilling cryptocurrency of the spring.
The coin, initially created as a joke, then pushed as a tip, traded at lower than a penny in January. You would nonetheless get one for six cents in early April. Then small traders and Elon Musk of Tesla (NASDAQ:TSLA) acquired concerned and the worth skyrocketed to over 73 cents in early Could. Individuals talked of it going “to the moon.”
It didn’t. Dogecoin was buying and selling June 14 at about 32 cents. That’s nice information should you have been sitting on some on the pre-2021 worth. If you happen to purchased in on the peak of the growth, you misplaced the sport.
That’s the purpose. Dogecoin is a sport token. It’s not actual. However that does maintain some essential classes for actual markets.
Too A lot Money
The primary lesson is that there’s a lot of free money mendacity round.
The 2017 tax minimize and a number of rounds of Federal Reserve stimulus have pushed asset costs to the moon. If you happen to personal property, it’s completely satisfied days. If you happen to didn’t get in on the money giveaways, you’re out of luck. Good shares are at foolish costs, and houses are fully unaffordable.
However Dogecoin is reasonable. Individuals who purchased it for that cause have made critical cash. You would play the April run-up cheaply. Even as we speak you might personal about 10,000 DOGE for the worth of 1 share in Amazon (NASDAQ:AMZN).
Which means there are many sudden millionaires in Dogecoin. On Reddit this implies it’s “the folks’s coin,” a solution to stick it to the person.
However the man is now Musk. His tweets supporting Dogecoin despatched it increased. His Saturday Evening Stay look, the place he dissed Dogecoin, despatched it crashing. Musk is now price over $150 billion. Most if it got here throughout 2020, when Tesla jumped from beneath $100/share to a excessive of almost $900. SpaceX was estimated to be price $74 billion in April, and Musk owns about half of it.
Musk can transfer markets. However Musk doesn’t care. He treats markets as a joke, and traders as marks. This makes him a hero to those that imagine the sport is rigged. He appears like Robin Hood.
However he’s extra like Dennis Moore, the Monty Python character from a half-century in the past. Within the sketch, Moore steals from the wealthy till the poor he’s supporting turn out to be wealthy themselves, and the wealthy turn out to be poor. The punchline has him saying, “This redistribution of wealth enterprise is trickier than I believed.”
In different phrases, Musk is now “The Man.” He’s laughing at you, utilizing your individual cynicism in opposition to you. He’s not even an actual millennial. He was born in 1971, in apartheid South Africa, on the white aspect of the road. He turns 50 in two weeks. He’s creating what Wayne Duggan calls a pyramid scheme for the sheer enjoyable of it.
The Backside Line on Dogecoin
The success of Dogecoin factors to a worrying pattern in each the markets and society.
There’s an excessive amount of money chasing too few alternatives. There’s an excessive amount of provide and never sufficient demand. This makes traders straightforward to control. It makes the entire idea of cash appear foolish.
Cash solely has worth when it’s exchanged. It’s lively, not passive. Musk understands this. He’s utilizing his cash to construct big factories and launch spaceships. He’s not ready for a hero.
What might finish the reign of Dogecoin is the creation of actual demand, whether or not that’s for social good or one thing else. The cash in Dogecoin will both be used for one thing tangible, or it’s going to preserve taking place the drain.
On the date of publication, Dana Blankenhorn held LONG positions in AMZN. The opinions expressed on this article are these of the author, topic to the InvestorPlace.com Publishing Tips.
Dana Blankenhorn has been a monetary journalist since 1978. His newest e-book is Know-how’s Large Bang: Yesterday, Right now and Tomorrow with Moore’s Legislation, essays on expertise out there on the Amazon Kindle retailer. Observe him on Twitter at @danablankenhorn.