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 may argue this lawsuit’s request for damages is fairly doubtful. That stated, it does carry 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 Might 2021 look on SNL although, the coin has completed horribly.
Doge is down 90% since Musk’s look on Saturday Night time Stay. Apparently, the decline began the day of the present’s broadcast with Dogecoin dropping 30% in the course of 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 Looking for Alpha. In equity, I’ve what might in all probability be considered an antagonistic view towards Dogecoin. On this article, I am going to assist that view with my rationale.
What’s Doge purported to be?
I believe to essentially perceive what Dogecoin is in 2022, we’ve 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 brand to focus on the whimsical nature of the coin. Because the coin’s growth, Palmer has distanced himself from the mission totally 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 alternate, 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 turn out to be an extremely profitable meme in crypto and on Twitter (TWTR). Nonetheless, I cannot 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’ve actual, verifiable information that exhibits it merely is not being extensively 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 value historical past, Dogecoin’s greatest 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 believe justifies them as cost community friends. The very first thing that I like to have a look at to guage if a community has any actual adoption is energetic addresses. Whereas uncooked addresses aren’t synonymous with distinctive customers, energetic addresses give us a tough thought of how many individuals are utilizing the networks for worth switch.
As could be anticipated, Bitcoin is the plain chief in every day energetic addresses. Although, lately, Litecoin has clearly distanced itself from the remainder of the pack instead coin cost community. Since this information is somewhat noisy, we are able to as an alternative look to annual averages.
Clearly, 2022 is incomplete, and it stays to be seen how the remainder of the yr performs out. However Litecoin is definitely the one cryptocurrency from this pattern that’s averaging extra every day energetic addresses than final yr. For a longer-term perspective, we are able to evaluate the YTD 2022 averages to the 2018 averages. I believe this can be a good comparability as a result of it provides us crypto winter comps:
Regardless of all the reputation and all the 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 may be the focus of the coin.
The centralization is regarding
For actual adoption as a peer-to-peer medium of alternate, 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 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 truly seen high 100 holder focus develop significantly during the last 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 steadily falling over time whereas Dogecoin’s has been doing the other.
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 anticipate Musk to tone it down in terms of Dogecoin posts and memes.
Because the lawsuit information, Musk has said on Twitter that he’d nonetheless assist Dogecoin. However supporting a coin’s growth and always 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 probably problematic Dogecoin posts. Does that imply the value of Dogecoin comes down? I am undecided. Once more, it relies on 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 rather a lot higher. You are not going to search 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 preserve an open thoughts.