Image source- ElonMuskTweet
In 2013, Jackson Palmer had 2 tabs open on his computer- One was CoinMarketCap and the other was the biggest meme of 2013, Doge. He combined the two and jokingly commented “Investing in Dogecoin – pretty sure it’s the next big thing”. The comment caught the attention of Billy Markus who contacted Palmer to turn the joke into a reality. Together, they created DogeCoin as a fork of Luckycoin, which was a fork of Litecoin, which was a fork of Bitcoin.
Doge was launched with no roadmap and no whitepaper. It did not bring any innovation to the world of cryptos. It didn’t pretend to. It didn’t apologize for it. It in fact flaunted it. DogeCoin owned its ridiculousness.
What the creators thought was an outrageous idea however caught the popular imagination as a friendly alternative to the dense and esoteric bitcoin.
This coin that launched in Dec'2013 as a joke at a price of 0.02 cents touched an all-time high of 7.6 cents at the end of Jan’2021.
So what caused the recent spike?
When investors from a subreddit message board, r/WallStreetBets, squeezed the last drop out of GameStop shorts, bringing billion-dollar hedge funds down to their knees, Wall Street intelligentsia had the audacity to defend those hedge funds (that had gambled away investor money by shorting 140% of total underlying shares of a stock), and then criticize retail investors for market manipulation.
After protecting the hedge funds directly with bailout funds and indirectly with actions like stopping buying of GameStop shares on various retail platforms, Wall Street added insult to injury with patronizing comments about how retail should be banned from such trades for their own good. They didn’t understand investments and hence needed to be protected from themselves.
Retail investors then thought to themselves that these Wall Street guys who slept through Risk Management 101 in whatever Ivy League school they attended, are lecturing us on stock market fundamentals after we noticed and acted upon an opportunity and defeated hedge funds in their own game? Fine. We’re going to own it.
In this backdrop, what could be a better candidate for an asset that Wall Street would sneer at than Doge?
- Started as a joke.
- Used a meme for a logo.
- Did not boast of any innovation.
- Has not had any software upgrade since 2015.
=> And so they pushed it up?
Here is the one-year price chart.
Image Source - Coingecko
No longer a joke
Let me be transparent that I do not own any Doge and do not plan on owning any either. However, there is something in the argument that you don't need cutting edge technology for a currency. Monetary instruments build value through network effects. This somewhat explains why Bitcoin, despite no major technology upgrade is bigger than all other cryptos combined. I'm beginning to agree with Jay Hao, CEO of OKex that Doge is no longer a joke.
My collaborator in this article, the mystery Bitcoin OG behind the Twitter handle @BitcoinIsThePin, is far more bullish than me. In his words, "I'm in with a substantial amount that I can afford to lose. SUCH WOW".
Despite everything about DogeCoin that doesn’t make sense, it actually has a few things going for it:
1. Fair mining - Similiar to bitcoin, Doge did not have any pre-mine or ICO. The token distribution, therefore, has been very fair. This also removes any threat of the SEC calling it an "unregistered security". Every coin has been mined and not allocated.
2. Lindy Effect - Lindy effect is the idea that the older something is, the longer it is likely to survive. Doge is among only 4 cryptocurrencies launched before 2014 that are still among the Top 20 by market cap. DogeCoin which started in 2013 is older than Ether. It is listed on most exchanges and supported by most wallets.
3. Network secured with high Hash Rate - The greater the hash rate of a blockchain, the greater its security. Bitcoin has a massive hash rate of 150 million TH/s. After bitcoin, there is a sharp drop in hash rate. Ethereum is at 350 TH/s, Litecoin is at 293 TH/s and Doge is at a respectable 215 TH/s. Yes, Doge does not have the same level of security as bitcoin but it really isn’t that bad. I suspect the high hash rate is because of the high block rewards it offers miners.
4. Strong Community - The Doge community has been very involved right from the beginning. In the first month of launch, several Doge wallets were hacked. The Doge community raised funding to make whole every wallet that had lost money. The Doge Foundation is a non-profit that has supported initiatives like funding the Jamaican bobsled team in 2014 and the creation of clean water wells in Kenya. With both creators having left the project, the community has been able to keep the project thriving with creative marketing that displays a deep insight into investor psychology.
5. Entertainment value - In the future I see portfolio managers adding a few percentage points to valuations for meme worthy names like Doge and Sushi. Tweets from Elon Musk who is probably on a power-high that he can create and destroy billions with a joke, TikTok video by James Galante that $25 invested in Doge will become $10,000 if Doge reaches $1, or endorsement from porn stars like Mia Khalifa who accept payment in it, will keep Doge in the news, and increase its recall value
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