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Dogecoin (CCC:DOGE-USD) was the most exciting cryptocurrency of spring.
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Originally created as a joke and then handed out as a tip, the coin traded for less than a cent in January. At the beginning of April you could still get one for 6 cents. Then small investors and Elon Musk from Tesla (NASDAQ:TSLA) stepped in and the price skyrocketed to over 73 cents in early May. People talked about it going “to the moon”.
It didn’t. Dogecoin was trading at around 32 cents on June 14. This is great news if you were to sit on some for the pre-2021 price tag. If you bought in at the height of the boom, you lost the game.
That is the point. Dogecoin is a game token. It’s not real But that holds some important lessons for real markets.
Too much cash
The first lesson is that there is a lot of cash lying around.
The 2017 tax cut and several rounds of Federal Reserve stimulus have driven asset prices to the moon. If you have assets, those are happy days. If you haven’t participated in the cash giveaways, you’re out of luck. Good stocks come at stupid prices, and homes are completely unaffordable.
But Dogecoin is cheap. People who bought it for this reason made a lot of money. The April run-up could be played cheaply. Already today you could own about 10,000 DOGE for the price of a share Amazon (NASDAQ:AMZN).
That means there are plenty of sudden millionaires in Dogecoin. On Reddit, this means it’s “the people’s coin,” a way to stick it to the man.
But the man is Musk now. His tweets supporting Dogecoin took it higher. His appearance on Saturday Night Live, where he turned down Dogecoin, caused him to crash. Musk is now worth over $ 150 billion. Most if it happened in 2020, when Tesla jumped from under $ 100 per share to a high of nearly $ 900. SpaceX was valued at $ 74 billion in April, with Musk owning about half of that.
Feed cynicism
Musk can move markets. But Musk doesn’t care. He treats markets as jokes and investors as brands. This makes him a hero to those who believe the game is rigged. He looks like Robin Hood.
But he’s more like Dennis Moore, the Monty Python figure from half a century ago. In the sketch, Moore steals from the rich until the poor he supports get rich themselves and the rich get poor. The punch line makes him say, “This reallocation of wealth business is trickier than I thought.”
In other words, Musk is now “The Man”. He laughs at you and uses your own cynicism against you. He’s not even a full millennial. He was born on the white side of the street in apartheid South Africa in 1971. He’ll be 50 in two weeks’ time. He’s just creating what Wayne Duggan calls a pyramid system, just for fun.
The conclusion to Dogecoin
Dogecoin’s success points to a worrying trend in both markets and society.
There is too much money to hunt down too few opportunities. There is too much supply and too little demand. This makes investors easy to manipulate. It makes the whole concept of money seem silly.
Money is only of value when it is exchanged. It’s active, not passive. Musk understands that. He uses his money to build huge factories and launch spaceships. He’s not waiting for a hero.
What could end Dogecoin rule is creating real demand, be it for social causes or something else. The money in Dogecoin will either be used for something tangible or it will continue to go down the drain.
At the time of publication, Dana Blankenhorn held LONG positions at AMZN. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s posting guidelines.
Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, Essays on Technology, available on the Amazon Kindle Store. Follow him on Twitter at@danablankenhorn.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
