Dogecoin (DOGEUSD) – the Shiba Inu dog-inspired cryptocurrency – started as a joke in 2013 but has slowly but gradually emerged as one of the most traded cryptocurrencies. When we read conservative market news, authors always emphasize that although Doge is very popular – not least thanks to its endorsement by such celebrities as Elon Musk and Mark Cuban – it is nothing more than a joke. Wait a minute, but what about the so-called meme stocks? Are they any better? Do jokes and memes have the right to live?
Meme stocks like GameStop and AMC Entertainment were mavericks that came out of nowhere and caught the investing world by surprise earlier this year. Meme stocks have no precise definition, but the idea is not hard to grasp. Common characteristics of these funny bunnies include sudden vertical rallies followed by volatile price swings on unusually high trading volume amidst apparent disconnection from their fundamentals.
By the end of last year, GameStop was trading at almost $20 a share. In late January, it hit $483. Its surge came alongside gains among peers that would go on to be identified as meme stocks, such as AMC Entertainment AMC, Koss and BlackBerry, as retail investors – utilizing much of Keith Gill’s advice, the guy who was, by the way, a Chartered Financial Analyst (CFA) and a licensed securities broker registered with FINRA since July 2012 with no disclosed regulatory infractions – that turned him into a folk hero – attempted to short squeeze whales – driven by market fundamentals big hedge funds. Whoever has tried to approach those exams knows how difficult they are and what extraordinary qualities they require to pass from a person. So calling Gill a maniac or degenerate is a self-deceit. No, he is not like that.
The action was attributed to members of online forums like Reddit, other social media users and residents of public trading platforms like Robinhood, who allegedly made up and shared memes to solicit, promote and build momentum behind these stocks’ artificial rallies. Retail investors are always keen to send stocks “to the moon” at cash out. This is their typical sole motivation of owning a stock. One of those names, GameStop, has been a struggling retailer of old fashioned boxed video games while the future – digital downloads, one download at a time – makes its business model hopelessly obsolete. As of this writing it is still valued at $15.9 billion dollars. Can investors lose everything while gaming with GameStop shares? Most likely, yes – if not everything, then a lot more than most of them can afford. Yet, there are no particular regulatory actions or even official precautions concerning the matter, and it’s up to us if we qualify this situation as a joke or threat.
Short sellers left GameStop stock months ago with stories like one engulfing ill fated Archegos that undermined stability of several top Swiss investment banks.
Pic.: Disconnect of Meme Stock Fundamentals from Their Performances
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Existence of meme stocks is a biggest joke by itself showing how deep the market’s angel fell. But the cohort of memes may appear even more populous if we track performances of some controversial stocks like cruise liners Carnival Corp. and Royal Caribbean Cruises at some points of their recent histories that couldn’t be explained by their negative financial performances amidst graphic shareholder addresses full of hopeful hopes and rosy forecasts.
Today the stock market is in a bubble; this is not a secret to most market participants. Most investors are ignoring it and just infatuated with the ride. They are playing Fool’s Gambit – waiting for a greater fool to buy their overvalued stock from them. And why not, greater fools have been showing up in droves for years. Low interest rates inflated the prices of all assets forcing everyone to take greater and greater risks.
Now let’s go back to Dogecoin’s “real joke in the joyful world” properties. Chainalysis recently said that new investors are adopting the token on a level not seen since late 2017. The new investors raised their share of supply from just 9% in July last year to 25% in August this year. So, we see a clearly revolving story resembling a classic investment case. Still a joke or jeopardy?
Having said that, verbal attacks on DOGE recently intensified as its predicted April-May demise failed to materialize. For example, a recent Motley Fool report highlights how little use the Dogecoin blockchain sees despite it being one of the seventh biggest cryptocurrencies by market cap. The report’s author also claimed that the altcoin’s value is largely propped up by the speculative actors like few wealthy individuals.
Meanwhile, in its recent in-house report Pitchbook admitted that venture capital firms ramped up their investments in the cryptos and crypto-development projects. In an article entitled “6 VC firms investing in blockchain and cryptocurrency” they list only a few largest of them, like headquartered in New York Digital Currency Group, NGC Ventures, headquartered in San Francisco Coinbase Ventures, headquartered in Menlo Park, CA Pantera Capital, headquartered in Sunnyvale, CA Plug and Play Tech Center and some others. Look at the chart below:
Meanwhile, Dogecoin seems to be perfectly aware of all its annoying weaknesses, and working hard to overcome them. Thus, the so-called Dogecoin Foundation has taken center stage as it strives to provide support for the token “through development and advocacy work” (end of quote). Billy Markus, the co-creator of the Shiba Inu-themed coin, was appointed as one of the board advisors of the Foundation. The organization was launched on August 16, providing a few interesting points in a statement that it is “looking to the future of the broader Dogecoin ecosystem” and is all set to announce new projects in the coming weeks.
The organization also aims to put in place a structure so as to hire full-time staff who will work towards faster integration and easier APIs for financial, social, and charitable projects that want to use DOGE. “Dogecoin has been established since 2013, has had millions of transactions on its network and is worth billions – anything new trying to claim the trademark of Dogecoin is doing so in bad faith,” explained Markus.
Meanwhile, the recent blockchain protocol optimization spree started by the memorable Proof of Stake (PoS) “London” Ethereum protocol update, eventually reached Dogecoin as well. Markus noted, however, that the adoption of the latest DOGE upgrade would not happen immediately. The so-called 1.14.1 update will be the first part of a two-stage update to lower the mining fees. His efforts were endorsed by another big fan of Dogecoin, Tesla’s CEO Elon Musk.
