“I’m excited about my Mother’s Day gift,” Maye Musk said. “I just hope it’s not dogecoin!”
“It is,” Elon Musk replied. “It sure is.”
What seemed like a harmless Saturday Night Live show had a drastic effect on the stock market last week. Many did not know what to expect when CEO of Tesla and SpaceX, Elon Musk made an appearance as “The Dogefather”. The outcome was not favourable as stocks ran red a few hours later.
Part I: How it started
It is the year 2013, a bitcoin is worth about a thousand dollars and everyone can’t stop talking about it. Billy Marcus and Jackson Palmer think that the world is taking cryptocurrency way too seriously, so they create Dogecoin as a cryptocurrency joke, a way of making fun of Bitcoin. The logo of the coin is the meme of a Shiba Inu dog that is popular at the time and the word “doge” is a misspelt form of “dog”. Marcus and Palmer just want to play around and have some fun, along with other members of the doge community (or “Shibes” as they are fondly called).
Fast-forward to the year 2021, their not-so-serious idea takes a different turn. The Dogecoin is no longer a joke as its value, according to Kraken’s recent market report, has gained more than 500% and despite the price swings of the coin, it has recorded a monthly volatility reading of 442%. On the 5th of May, the capitalization of Dogecoin at the stock market exceeded 85 billion dollars. The coin has grown such rapidly that in April, the stock trading app, Robinhood was so overwhelmed by the surge of interest in dogecoin that it started to experience a malfunction and eventually, a partial outage. Now, Dogecoin is said to be the fifth-largest cryptocurrency by market capital. Who would have thought?
The majority of the buzz surrounding dogecoin can be attributed to Elon Musk and a few other celebrities (like Snoop Dogg and Gene Simmons). Musk in his comical tweets has been vocal about his admiration for the coin and this has always affected its performance in the market.
Part II: How it is going
“The appearance over the weekend had been expected to mark a watershed moment for Doge, but comments from Musk sparked a sell-off in doge” – Simon Peters, an analyst at eToro
On the 28th of April, Elon Musk, via a tweet calling himself The DogeFather, announced that he would be hosting Saturday Night Live. After this tweet, the price of dogecoin shot up by 32%, as many watched in anticipation, knowing that any action from Musk could affect the market, positively or negatively. The Daily Mail reported that Elon Musk’s appearance on the SNL show was the third most-watched episode and had an average of 7.3m viewers, thereby boosting the ratings of the show. These figures give an insight into the amount of influence Musk wields as the richest man in the world.
During his appearance, Musk claimed that Dogecoin was “the future of currency”. “It’s an unstoppable financial vehicle that’s going to take over the world”, he said. He then proceeded to call it a “hustle”. This statement, uttered by Musk led to a 30% drop in the price of the coin by the end of his appearance on the show.
Before the show, DOGE had been trading for $0.65. However, within 45 minutes of Musk’s appearance, the price of the coin dipped by 22% from $0.66 to $0.52, and the following morning, it further dropped to $0.43. This was not the result that the public was expecting!
Part III: Salvaging the remains…
Despite DOGE’s drop on Saturday, experts predict another rise. In what may be viewed as an attempt to salvage the situation, the Geometric Energy Corporation via a report on Sunday announced that the launch of SpaceX Falcon 9’s trip to the moon, also known as DOGE-1 Mission to the Moon, will be solely funded by Dogecoin.
Samuel Reid, the CEO of GEC stated: “By officially using DOGE for a transaction of such importance, the Geometric Energy Corporation and SpaceX have solidified DOGE as the financial unit used in the lunar agreement of space business”
Now here is where things get a bit more interesting: On Wednesday, Elon Musk released a statement on Twitter, informing the public that Tesla will no longer be accepting Bitcoin as payment for its cars. He also added that Tesla will not be selling any more bitcoins to the public. Musk stated that the reason behind his company’s decision was a response to “the rapidly increasing use of fossil fuels for bitcoin mining and transactions”.
Shortly after his announcement, members of the doge community started to make use of the hashtag #dogefortesla, suggesting that Musk’s boycott of Bitcoin might be to show favour to DOGE. While this is a speculation, it is not surprising why some may think that, as Musk hinted in a tweet on Tuesday, Tesla may soon accept payments in dogecoin. This was done through a Twitter poll he conducted in which over 3.9 million people voted and 78.2% were in favour of the coin being accepted as a legal tender for Tesla’s products.
While the issue of crypto mining and energy consumption still surfaces, dogecoin stands a better chance compared to bitcoin. There are currently about 128 billion dogecoins in circulation and it has no upper threshold compared to Bitcoin which has 18.7 million coins in circulation and a threshold of 21 million. Also, dogecoin is easier to be mined than bitcoin which uses a lot of computing power and consequently, energy. Should Musk be looking for an alternative to the bitcoin solely for this reason, DOGE might just be the right fit.
What’s Next?
It is important you know that cryptocurrencies are extremely volatile, therefore it is difficult to predict the rise and fall of the trading prices on the stock market. Musk attested to this when he said during the SNL that: “cryptocurrency is promising but invest with caution“
Anyone who wants to invest in dogecoin must be aware of the risk involved because unlike bitcoin, dogecoin is more community-driven with a less solid structure.
Given, Dogecoin looks like the new and hot kid on the block. However, should you choose to buy or invest in it, you must take note of its extreme volatility and the sentiments that are tied to its trade. While it might be doing well right now, it is not guaranteed that this will be the case in the long run.
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