What is going on with Dogecoin? That is the question on the mind's of many. Elon Musk is often tweeting about it and it seems to be a favorite with the Robinhood™ crowd.
Source
That said, the token is all over the place (like most crypto). Without a clear path for the future, many are wondering what is in store for the #6 token as ranked by Coingecko.
Elon Musk Quickly Becoming Identified With DOGE
Nobody can deny the biggest name associated with DOGE is Elon Musk. Over the last few months, he Tweeted quite regularly about this token. It got to the point where many are wondering if he is manipulating the price.
In fact, there was a short time where many were associating Musk with cryptocurrency. Tesla's purchase of $1.5 billion really grabbed the market, pushing Musk into the spotlight as Bitcoin's biggest advocate.
This turned when he started to get blowback from Tesla's customer base over the acceptance of Bitcoin as payment. At the core was the alleged energy use of the mining of the token. This sent Tesla supporters into a frenzy.
Musk then reversed action and said Tesla would not accept Bitcoin as payment. He later amended that to propose that if Bitcoin mining became sustainable, then it would.
Over the last month or two, as the pullback bordered on a bear, many lost interest in what Musk was Tweeting about, at least as it pertains to Bitcoin. DOGE is still another story.
Many still hang on Musk's every move regarding the currency. This makes sense since it is really something that was just a hype machine. With little utility, we can see how this is necessary. The FOMO that can be set off with this token is well known.
Where Is The Utility?
Since Musk is the Pied Piper for the DOGE crowd, it is vital we keep an eye on him. Outside the hype, many do wonder what is the purpose of DOGE?
The challenge is that the currency started as a joke. It is a meme token that took off. Thus, many mistakenly believe that it should not be taken seriously.
Nothing could be further from the truth. DOGE exemplifies some very important features that could make it "legitimate".
To start, there is a serious network effect. Millions piled into buying this token. While we can laugh at those people for their foolishness, they did create a community that is large while having some dedicated members.
Also, it is necessary to remember that DOGE has the properties of being able to transmit value. Unlike a stock that is pumped, cryptocurrency has the ability to be transferred. Hence, like Bitcoin and everything else, DOGE could be used as a payment system.
Which brings us to value. This is a difficult topic since it is subjective which is exactly why DOGE has value. The community that hangs on Musk's every Tweet believes in it. It is no different than the early crowd which supported Bitcoin in the face of enormous opposition who looked down on the cryptocurrency as a scam or a joke.
Maybe They Know Something We Don't
About a month ago, I wrote a post looking at DOGE and this was a point I brought up.
Perhaps the DOGE people are onto something that the rest of us are missing. This was the first meme token yet was not the last. Since DOGE became popular, others have followed in its footsteps. Many of them saw their popularity rise, albeit not to the level of DOGE. Of course, they do not have Musk continually supporting them.
The reality is that agreement is all that is needed for DOGE to excel as a transfer of value system. If the people who support it use the token in that way, the network effort will take over. At this point, it is mostly speculators so we will have to see if they can make the transition.
A lot could be changed by Elon himself. If he decided to accept DOGE as a payment for Tesla, that would instantly provide credibility. It also would have the heads of economists all over the world exploding. How could a meme coin be used as payment for something tangible? That might start to reframe their reference towards money.
Either way, like most cryptocurrency, DOGE is hindered by its lack of use cases. The community is made up, from what it looks like, by a bunch of speculators. These tend not to be very loyal when things turn sour. We already saw DOGE lose some of its luster as the recent downturn happened.
The challenge is that many of these people are not experienced traders. Even worse, they are not really accustomed to cryptocurrency. As we know, the swings can be large and hard. The runups can be incredible yet the reversals painful. It is not an arena for the weak.
We still live in a world where celebrities are revered. As long as people like Musk along with Snoop to promote DOGE, people will follow. Naturally, this could create a self-fulfilling prophecy where enough individuals keep propping up DOGE until it truly does become something.
Be Careful Of Elon's Power
Musk is not stranger to criticism. He is also very willing to enter arenas where it is obvious he has little understanding. Instead of learning before he speaks (Tweets), he simply piles in like he is the foremost expert.
The key to understand is that, over time, he does become very knowledgeable. In the early days of Tesla, he was met with many detractors. That company was laughed at and considered dead on arrival. There was no way they would produce a car. Well, they did.
Then the narrative framed Tesla as a niche company, no way they could mass produce a car. Well they did.
Now they are trying to reach the million cars in a year level. Few are saying they are not going to reach it.
What is interesting is that not only did Musk believe all along, he created a ton of Tesla "fanboys". Somehow he was able to inspire others to believe also.
Many will scoff at this yet it is a powerful mechanism. Could Musk do the same with DOGE? He may well keep it in focus until they figure out how to truly utilize it. As Tesla showed, a lot can happen when you have millions following you. That can be great for business.
In the end, I think DOGE is great for cryptocurrency. Full disclosure, I do not hold any DOGE nor do I plan to. However, attention is a wonderful thing and Elon is bringing a lot of it. He is introducing cryptocurrency to millions of people around the world. Few who follow Tesla are unaware of either Bitcoin or DOGE at this point.
While this might not bring people rushing in to buy, it does get the awareness going. Some might point to the FUD that is generated because of his actions but I dismiss it. That was going to happen anyway. If Musk was not doing FUD-worthy things, they would find something else (or just make it up). Either way, the purveyors of FUD will keep at it no matter who is involved.
Hence we might as well get some publicity out of it.
Ultimately the future of DOGE is going to depend upon the community. Long term, the question is what utility is there for DOGE? If developers start incorporating the token into different things, then there is the potential to tap into. Of course, Musk Tweeting that DOGE is going to be accepted by Tesla would be a huge step forward. It could also trigger another visit from the SEC if he is holding the token.
For the time being, it appears, that the near-term fate of DOGE is interwoven with Musk. He is becoming so identified with the token that it is going to be tough to separate the two. Thus far, it worked out for holders of Tesla stock.
Could the same happen for DOGE hodlers? We will have to see.
If you found this article informative, please give an upvote and rehive.
gif by @doze
logo by @st8z