Elon Musk has been tagged with a $258 billion class action lawsuit. The declare is for damages on account of Musk’s promotion of Dogecoin (DOGE-USD) on social media. Since Dogecoin’s market cap by no means truly reached $90 billion, you would argue this lawsuit’s request for damages is fairly doubtful. That stated, it does deliver Musk’s on-line pleasure for Doge again into the general public consciousness. Musk has been a fan of Dogecoin up to now. He is tweeted about DOGE fairly a bit and even accepts it as fee for items bought from his Tesla retailer already. Since Musk’s Could 2021 look on SNL although, the coin has achieved horribly.
Doge is down 90% since Musk’s look on Saturday Evening Stay. Apparently, the decline began the day of the present’s broadcast with Dogecoin dropping 30% through the telecast. For higher or worse, there’s clearly a hyperlink between Elon Musk and Dogecoin. Regardless of DOGE’s high 10 crypto market capitalization, I’ve by no means coated it on Searching for Alpha. In equity, I’ve what may in all probability be considered an antagonistic view towards Dogecoin. On this article, I will help that view with my rationale.
What’s Doge purported to be?
I feel to essentially perceive what Dogecoin is in 2022, we’ve got to know the complete historical past of the coin. Dogecoin was created by Billy Markus and Jackson Palmer roughly 8 years in the past. DOGE was forked from the Litecoin (LTC-USD) blockchain and was meant as a parody of cryptocurrencies. Because the coin’s existence was largely supposed to be a joke, an image of a canine was chosen for the brand to focus on the whimsical nature of the coin. For the reason that coin’s improvement, Palmer has distanced himself from the venture solely and is a really vocal skeptic of absolutely anything associated to cryptocurrency; together with preliminary coin choices and NFTs.
Whereas the core operate of DOGE as a blockchain-based asset now’s supposedly as a medium of trade, in actuality, the token has been higher at fulfilling its authentic intention of being a parody. You are not going to get any argument from me that Dogecoin has turn out to be an extremely profitable meme in crypto and on Twitter (TWTR). Nevertheless, I cannot try and worth Dogecoin as a meme. I do not know that Dogecoin’s “meme worth” is actually quantifiable past what the market cap says it’s. As a funds community, we’ve got actual, verifiable information that exhibits it merely is not being broadly used as a foreign money for peer-to-peer funds.
On chain metrics
As a PoW (proof of labor) cryptocurrency with a number of years of worth historical past, Dogecoin’s largest friends from a funds perspective are in all probability Bitcoin (BTC-USD), Litecoin, and Bitcoin Money (BCH-USD); the latter two of that are Bitcoin forks. And once more, Dogecoin is a fork of a Bitcoin fork. So there is a relationship between all of those cash that I feel justifies them as fee community friends. The very first thing that I like to take a look at to guage if a community has any actual adoption is lively addresses. Whereas uncooked addresses aren’t synonymous with distinctive customers, lively addresses give us a tough concept of how many individuals are utilizing the networks for worth switch.
As could be anticipated, Bitcoin is the apparent chief in day by day lively addresses. Although, not too long ago, Litecoin has clearly distanced itself from the remainder of the pack as a substitute coin fee community. Since this information is a little bit noisy, we are able to as a substitute look to annual averages.
Clearly, 2022 is incomplete, and it stays to be seen how the remainder of the 12 months performs out. However Litecoin is definitely the one cryptocurrency from this pattern that’s averaging extra day by day lively addresses than final 12 months. For a longer-term perspective, we are able to examine the YTD 2022 averages to the 2018 averages. I feel this can be a good comparability as a result of it offers us crypto winter comps:
Regardless of the entire reputation and the entire mentions from influencers like Elon Musk, Dogecoin’s community adoption is barely forward of the place it was 4 years in the past. A part of the issue could be the focus of the coin.
The centralization is regarding
For actual adoption as a peer-to-peer medium of trade, you’d need to see a foreign money that does not endure from pockets holder focus. The extra a foreign money is concentrated to high pockets holders, the extra centralized that foreign money actually is. Within the case of Dogecoin, it is a extremely centralized foreign money with the highest 100 wallets holding 68% of the token provide.
That is far and away the worst of the fee community crypto friends that we’re highlighting on this article. Of the 4, Dogecoin and Bitcoin Money are the one two cash which have truly seen high 100 holder focus develop significantly over the past 3 years.
Whereas it is also truthful to level out that Bitcoin’s high 100 holder focus is barely above the place it was 3 years in the past, zooming out additional exhibits Bitcoin’s focus has been progressively falling over time whereas Dogecoin’s has been doing the alternative.
What’s the worth of a meme? That is the query Dogecoin holders ought to ask themselves. Regardless of its comparatively low charges, Dogecoin is not actually getting used as a foreign money on-chain. Whereas I do not personally suppose Elon Musk has a lot to fret about from a category motion lawsuit perspective because it pertains to Dogecoin, I do surprise if the added warmth from joking about DOGE on Twitter means we are able to count on Musk to tone it down in relation to Dogecoin posts and memes.
For the reason that lawsuit information, Musk has said on Twitter that he’d nonetheless help Dogecoin. However supporting a coin’s improvement and always tweeting about it aren’t essentially the identical factor. Musk does appear to have his palms full with different initiatives and possibly does not want the added grief of doubtless problematic Dogecoin posts. Does that imply the value of Dogecoin comes down? I am unsure. Once more, it depends upon how a lot you worth a joke and its cultural significance.
I do not personally suppose Dogecoin is value anyplace near $8.3 billion both as a meme or as a funds community. For the aim of investing in crypto belongings, I like dozens of different cash lots higher. You are not going to seek out Dogecoin in my shared portfolio on BlockChain Reaction. Nevertheless, if the community exercise in Dogecoin modifications drastically for the higher, I will definitely maintain an open thoughts.