Elon Musk has been tagged with a $258 billion class action lawsuit. The declare is for damages because of Musk’s promotion of Dogecoin (DOGE-USD) on social media. Since Dogecoin’s market cap by no means really reached $90 billion, you may argue this lawsuit’s request for damages is fairly doubtful. That mentioned, it does convey 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 cost for items bought from his Tesla retailer already. Since Musk’s Could 2021 look on SNL although, the coin has carried out horribly.
Doge is down 90% since Musk’s look on Saturday Night time Dwell. Curiously, the decline began the day of the present’s broadcast with Dogecoin dropping 30% throughout the telecast. For higher or worse, there’s clearly a hyperlink between Elon Musk and Dogecoin. Regardless of DOGE’s prime 10 crypto market capitalization, I’ve by no means lined it on In search of Alpha. In equity, I’ve what might most likely be considered an antagonistic view towards Dogecoin. On this article, I am going to assist that view with my rationale.
What’s Doge imagined to be?
I feel to essentially perceive what Dogecoin is in 2022, we have now to know the total 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 emblem to spotlight the whimsical nature of the coin. For the reason that coin’s improvement, Palmer has distanced himself from the mission completely and is a really vocal skeptic of absolutely anything associated to cryptocurrency; together with preliminary coin choices and NFTs.
Whereas the core perform of DOGE as a blockchain-based asset now could be supposedly as a medium of trade, in actuality, the token has been higher at fulfilling its unique intention of being a parody. You are not going to get any argument from me that Dogecoin has change into an extremely profitable meme in crypto and on Twitter (TWTR). Nonetheless, I can’t try to 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 have now actual, verifiable knowledge that exhibits it merely is not being extensively used as a forex for peer-to-peer funds.
On chain metrics
As a PoW (proof of labor) cryptocurrency with a number of years of value historical past, Dogecoin’s greatest friends from a funds perspective are most likely 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 cost 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 can be anticipated, Bitcoin is the plain 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 cost community. Since this knowledge is a bit noisy, we will 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 will evaluate the YTD 2022 averages to the 2018 averages. I feel this can be a good comparability as a result of it provides us crypto winter comps:
Regardless of the entire recognition 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 is perhaps 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 forex that does not endure from pockets holder focus. The extra a forex is concentrated to prime pockets holders, the extra centralized that forex actually is. Within the case of Dogecoin, it is a extremely centralized forex with the highest 100 wallets holding 68% of the token provide.
That is far and away the worst of the cost community crypto friends that we’re highlighting on this article. Of the 4, Dogecoin and Bitcoin Money are the one two cash which have really seen prime 100 holder focus develop significantly during the last 3 years.
Whereas it is also truthful to level out that Bitcoin’s prime 100 holder focus is barely above the place it was 3 years in the past, zooming out additional exhibits Bitcoin’s focus has been step by step 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 forex 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 will anticipate Musk to tone it down in the case of Dogecoin posts and memes.
For the reason that lawsuit information, Musk has said on Twitter that he’d nonetheless assist Dogecoin. However supporting a coin’s improvement and continually tweeting about it aren’t essentially the identical factor. Musk does appear to have his fingers full with different initiatives and possibly would not want the added grief of doubtless problematic Dogecoin posts. Does that imply the worth of Dogecoin comes down? I am unsure. Once more, it is determined by how a lot you worth a joke and its cultural significance.
I do not personally suppose Dogecoin is price wherever 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. Nonetheless, if the community exercise in Dogecoin adjustments drastically for the higher, I am going to actually hold an open thoughts.