We’re in rarefied territory when the price of anything that is traded – on Wall Street, on exchanges, on eCommerce platforms, heck, even tulips of manias past – spike by double-digit percentages, with regularity. It used to be bitcoin, and now it’s a joke coin. But the warning signs that are flashing are no laughing matter.
You know Dogecoin, of course – that crypto that has a dog on it. Championed by Elon Musk, among others. At this writing, the price is about 68 cents, up 27 percent in the session, and nearing all-time highs. That’s after a roughly 40 percent rally earlier in the week.
For those of you keeping score, the year-to-date rally has generated returns of more than 13.8 percent…oh, wait. We meant 13,800 percent. Yes: thousands of percentage points.
More Than Ford
At that level, the market cap is roughly $86 billion. Ford’s market cap is, very roughly, $45 billion. We note this because, on Wall Street, market cap is shorthand for what a company is “worth” – think of it as a weighting that ascribes value (or dollar signs) on the part of investors in a holding’s standing in the economy, and (in the mindset of traditional investing) a claim on future earnings. According to that logic, Dogecoin is “worth” more, and perhaps has arguably brighter prospects than an automaker that serves the world and actually makes things.
There are those who think that Dogecoin – and really, all cryptos – are the wave of the future, primed to disrupt the current financial services and commerce landscapes. And if that were true, then perhaps – in keeping with the “disruption” theme – Dogecoin does indeed deserve its heavier weighting on the Street vs. Ford. And because Dogecoin now has a market cap that stands only behind bitcoin, Ethereum and a few others, the implication is that Dogecoin might overtake scores of other digital currencies.
And maybe the hype is just hype, feeding off itself in a chamber that is echoing rather loudly at the moment. Many proponents across social media (Elon Musk and Mark Cuban among them) have been touting the coin, cheerleading for it to touch $1. That would be a psychological barrier of sorts, which would prove some sort of point to the rest of the world, maybe just that it can get there.
Then there are those who see Dogecoin as a wave in a sea change, shaking up commerce. Cuban had this to say in a tweet:
As long as more companies take doge for products/services, then Doge can be a usable currency because it MAY hold its purchasing value better than a $ in your bank. If interest rates skyrocket or the amount spent falls or stagnates, so will Doge. Yes, a joke is now legit
— Mark Cuban (@mcuban) May 2, 2021
And as reported by CNBC this week, billionaire investor Mike Novogratz has said that “when you think about the whole spirit of what this crypto revolution is, there’s something pure in what dogecoin has done. It’s a little bit of a middle finger to the system. People are unhappy with the current financial system. They just are.”
Here, then, is a bifurcation of sentiment among those who have been bidding the price of Dogecoin up, willy nilly. On one side are those who are buying because others are, who are churning to get to those psychological $1 milestones. But then, what happens next? Does at least a significant swath of holders simply take their profits and go home, driving down the price?
Then there are those who think, as Cuban and Novogratz maintain, that Dogecoin, like cryptos in general, represents a way to sidestep the current financial structure, through direct transactions and anonymity and the absence of traditional financial services intermediaries. But to be adapted and adopted in mainstream commerce, with these swings, it’s hard to see how Dogecoin really finds its way into wider acceptance in commercial settings.
And here’s another wrinkle: Live by the tweet — and the pump (of a crypto like Dogecoin) — die by the tweet. The SEC (which has been examining whether offerings like XRP are currencies or securities), among other regulators and watchdogs, may draw a finer bead on the frenzy of touts and shoutouts that drive prices higher on no news. Congressional hearings may loom at some point — particularly if things come crashing down and greater scrutiny hastens declines.
And then the joke (coin) may not be so funny anymore.
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