“The Dogefather SNL May 8,” Tesla’s CEO tweeted, promoting his appearance on Saturday Night Live next week.
In reaction, the media yelped, yowled, and howled.
Dogecoin’s price jumped 20% to $0.32, almost as satisfying as a delicious bone, but still 28.89% below its all-time high of $0.45 set earlier this month.
The hefty percentage changes in the past aren’t statistically meaningful for anyone but the joke coin’s true believers because it’s from a tiny foundation.
When Dogecoin reaches $1, how will Musk and the press react?
The Flea-Free News’s possible headline: Would Dogecoin be the first cryptocurrency to reach Mars before SpaceX?
The amount of Bitcoins that can be created is limited to 21 million, although there is no limit on the number of Dogecoins that can be created—perhaps a wry reference to the Federal Reserve’s quantitative easing program in the United States. There are currently 120.3 billion mutts on the loose.
Dogecoin was created in 2013 as a joke on the internet.
“An entire generation of investors is speculating on their own meme currency, which is essentially a parody of money,” said Seeking Alpha, a crowd-sourced content service for financial markets. “Behind Dogecoin is a rebelliously nihilistic and perhaps dangerous idea that meme money is no more real than actual currency. It may be a joke, but it’s a powerful one.”
Despite this, some people seem to take Dogecoin seriously, as shown by its $39.9 billion market cap and $7.5 billion trading volume in the last 24 hours. Small investors who don’t understand Dogecoin’s expected yuks may be at risk.
Musk has said his tweets about Dogecoin are “just meant to be jokes,” but the market reacted positively after he called Dogecoin his “fav cryptocurrency” and “the people’s crypto.” He even mused about the possibility of Dogecoin becoming the world’s currency.
Musk has put over $1 billion into Bitcoin, and according to one economist, his benefit from the cryptocurrency would surpass his electric car company’s income in 2020.
Musk isn’t the only billionaire who is having a good time with Dogecoin.
Mark Cuban, owner of the Dallas Mavericks of the National Basketball Association, revealed last month that the team would recognize cryptocurrency as payment for tickets and merchandise.
The story was picked up by Forbes.com, Bloomberg, BusinessInsider, CoinDesk, and the New York Post, implying that Cuban is well-versed in the ways of money and the media.
At the time, Cuban tweeted, “Dogecoin is less than a dime. You can buy $1 worth or $10 worth (and) have fun watching it all day every day. Literally, and I say this with all seriousness, it’s the best entertainment bang for your buck available.”
Cuban said that he purchased Dogecoin for his son to teach him about market powers.
“It’s fun, it’s exciting and it’s educational,” he noted.
The real world is where Cuban makes his money.
In 1999, he sold Broadcast.com for $5.7 billion to Yahoo. Since then, the service has been discontinued. Cuban purchased a controlling interest in the Mavericks for $285 million in 2000. The team won the NBA championship in 2011 and is now valued at $2.3 billion by Forbes.
The “Greater Fool” principle might be unfamiliar to some small investors dabbling in Dogecoin.
It’s simple: as long as interest remains high, savvy traders will gladly pay $50 for an overvalued stock because they know it can be sold to the greater fool for about $65 a share.
However, since the price of Dogecoin is so volatile—it was created as a joke, after all—the “Greater Fool” principle does not apply. Is Dogecoin, in short, a bubble, mirage, or delusion? Is crypto more or less resilient to long-term market forces if it is a delusion?
If those who take it too seriously, hang on too long, and are bitten in the next downturn, the answer does not matter.
Dogecoin, whose tokens feature a smiling Shiba Inu, a hunting dog from Japan’s mountainous regions, gained 3.02 percent to $0.31 in mid-day trading on Thursday.
Bitcoin supporters, on the other hand, claim it has developed into a distinct asset class, as shown by large investors’ and institutions’ buy-and-hold strategies.
Bitcoin traded at $53,640.35 in mid-day trading on Thursday, down 15.96 percent from its all-time high of $63,829.14. Despite this, according to CoinDesk, the cryptocurrency is up 83.27 percent this year.
Market Sentiment of Dogecoin
Despite a strengthening economy and increasing inflation, the Federal Reserve will maintain its easy money policies.
Since March 2020, the country’s central bank has held interest rates near zero, and it appears that they will do so until at least 2023.
Consumers and homebuyers will profit from this, but small savers will suffer.
“The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world,” the policy-making Federal Open Market Committee said Wednesday in a statement.
“Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened,” the statement read. “The sectors most adversely affected by the pandemic remain weak but have shown improvement. Inflation has risen, largely reflecting transitory factors.”
Consumer prices increased 2.6 percent in March, the highest rise year-over-year since August 2018.
As part of its effort to keep business and consumer borrowing costs down, the Fed will continue to buy at least $80 billion in US Treasury bonds and $40 billion in mortgage-backed securities per month.
The Federal Reserve has stated that interest rates will remain low until the labor market has completely recovered.
According to the US Bureau of Labor Statistics, the unemployment rate dropped to 6% in March, down from 14.7 percent in April 2020, but still higher than the 3.5 percent recorded in February 2020, before the economy shut down in an attempt to stop the spread of COVID-19.
Earnings at S&P 500 firms are expected to rise to their highest levels since 2008-2009, when the subprime housing market collapsed, pounding the economy but resulting in a solid recovery.
Stock futures soared ahead of Thursday’s market open, boosted by the possibility of $1.8 trillion in new federal spending. However, the Dow Jones Industrial Average, S&P 500, and Nasdaq were all marginally lower in mid-day trade.
The 10-year Treasury bond yield increased to 1.66 percent. As prices fall, yields increase.
Is the Fed willing to risk a rise in inflation in order to keep the economy on track? Or, as the Fed claims, is the recent rise in consumer prices “transitory”?
The short answers: It seems so, but we’ll have to wait and see.