Analyses
07
Feb

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Elon Musk and Dogecoin

Elon Musk is these days a person almost everyone knows. He seems to have a hand in many different fields, both on earth and in space. At least Musk’s companies don’t lack grandiosity – the companies owned by him have helped Ukraine in the war against Russia with Starlink and SpaceX has launched Tesla into orbit around the earth.

If you have followed Musk’s activities in recent years, you may have noticed that his ambitions are limitless. In his latest venture, Musk bought the Twitter messaging service at the end of 2022 for $44 billion, accompanied by various lawsuits and a wide-ranging media storm. The price tag of 44 billion dollars did not startle Musk much, because according to Forbes, the man’s total wealth was around 145 billion dollars at the beginning of 2023.

Despite his wealth, Musk is seen as a humble philanthropist by many. Musk is also a known fan of the meme cryptocurrency Dogecoin. In this article, we’ll explore his comments and plans regarding Dogecoin and other cryptocurrencies.

Elon Musk and the Dogecoin craze

Musk is known for his cryptic tweets regarding Dogecoin. These tweets have historically caused widespread speculation, often leading to a sharp rise in the price of Dogecoin.

In December 2020, Musk tweeted briefly and succinctly: “One Word: Doge”. A single tweet seemed to have a huge impact on Dogecoin investors’ buying appetite, and the currency’s trading volume exploded from around $2,000 per minute to nearly $200,000 per minute!

Understandably, the increased buyer base also led to a significant increase in the DOGE price. Thanks to Musk’s tweet, December 20, 2020, was quite a profitable day for Dogecoin investors. The price of the coin moved up from $0.0039 to approximately $0.0046.

The move might not sound that strange, but a price development of almost 14% within one day, caused by one tweet, is an achievement worth raising your hat to.

The graphic below shows the price of Dogecoin between 2020 and 2023.

dogecoin

Musk’s Dogecoin banter by no means ended there, and the man would publish several more Dogecoin-related tweets in the coming years. As he kept tweeting more about Dogecoin, the market began to speculate on Musk’s true intentions for the project.

One of the biggest sparks to start a flurry of speculation was certainly Musk’s May 2021 Twitter poll, where he hinted at the possibility of buying Tesla with Dogecoin.

As expected, the tweet received an overwhelmingly positive response from crypto investors and Tesla customers, with almost 80% of respondents voting in favor of the currency’s introduction.

Musk is also known as a man of his word, and Tesla started accepting Dogecoin as a means of payment, albeit only for fan products. The same announcement also said that Musk’s space logistics company SpaceX would start accepting Dogecoin for payments in the near future.

Dogecoin’s success in recent years can be attributed at least in part to Elon Musk’s tweets. His comments have at least caused big moves, even if the DOGE price hasn’t been able to establish new heights for longer periods. Dogecoin might have started as a meme, but Elon Musk has brought credibility to the project.

Critics are of the opinion that there are far better blockchains than Dogecoin available. This hardly fazes Musk. It says something about the man’s dedication to Dogecoin that Musk also adopted a Shiba Inu dog as his pet in 2021. Shiba Inu is the symbol of the Doge meme and Dogecoin.

Elon Musk and other cryptocurrencies

Although Elon Musk is seen as Dogecoin’s biggest advocate, Musk’s crypto adventure is by no means limited to Dogecoin. Elon Musk has tweeted diligently about Bitcoin as well.  Although you can still buy Tesla fan products with Dogecoins, Bitcoin has also played a significant role in the company’s history.

Tesla’s actual main products, meaning its electric vehicles, were briefly available for buying with Bitcoin in 2021. Accepting bitcoins as a means of payment was, however, a short-lived decision for Tesla. The company received an avalanche of criticism due to the energy consumption of the Bitcoin mining network.

Tesla still has over 10,000 bitcoins in its balance sheet worth over 200 million dollars.

As we can see from the tweet below, Musk is a pro at fueling speculation. The last part of the presentation deals with Twitter’s plans for payments, and the slide is left completely blank in terms of content. Intentionally or not, crypto investors understood the mandate, so to speak, and edited screenshots of Musk’s original tweet began circulating on Twitter.

The Shiba Inu dog visible in the tweets, symbolically representing Dogecoin, was exactly what Dogecoin fans would have hoped to see in Twitter’s original plan. Knowing Musk’s history, it could just as well have been a screenshot of the original presentation.

Even if the tweet is a joke that builds good buzz around Dogecoin, it would not be surprising to see Musk accept Dogecoin as a means of payment for Twitter as well. It even seems a pretty logical decision for Musk to make before stepping down as the CEO of Twitter eventually.

Elon Musk’s Twitter deal

Elon Musk has also set the ball rolling elsewhere during his short ownership of Twitter. It’s not a small surface repair, but a renovation of the entire company’s structures from the basement to the attic.

The list of changes is far too long to go through in its entirety in this article. From the point of view of users of the service, the biggest change is probably the way Twitter’s verified accounts – “Blue Tickers” – operate and how they are granted to users. This took place almost immediately after Musk was appointed CEO.

The previous model for awarding a Blue ticker required the user to have a large following and approval from Twitter. Today, Blue ticker can be bought on Musk’s Twitter, and practically anyone who has enough money in their account to pay for the monthly service can get it.

However, the change did not happen completely without problems, and soon users started creating “verified” accounts with pocket money. Musk realized the problem quickly, and the terms of use of the Blue tick were changed. Previously, anyone could buy a Blue tick for any account with any name. Today, buying a Blue tick involves a similar confirmation process as before, and e.g. accounts imitating public figures will be removed from the service quickly.

The impact on investors

Elon Musk has changed Dogecoin. Even if he’s not actively involved in Dogecoin’s development, the coin is no more the small meme project it was five years ago. Musk has given Dogecoin so much more credibility and has acquired millions of new fans for DOGE.

It was quite remarkable that Dogecoin kept its top 10 ranking position during the entire bear market of 2022. It shows many many dedicated holders the coin has. The Twitter deal has also given new opportunities to speculate with Dogecoin. If Musk makes Dogecoin an official means of payment for Twitter, the price could explode to new heights.

It is very important to remember that the only way to make major profits with meme coins is to buy them before everyone else wants to buy them. Those who bought Dogecoin in the 2018-2019 bear market got 1000x profits later on. It might not be a bad idea to take a punt on Dogecoin while the bear market is going on and nothing happens. This could reward investors handsome later on.

One thing you should remember, though. The market cap of Dogecoin is now over 10 billion dollars. Even if it would be 50 % lower DOGE was still one of the major cryptos. It’s not the same for a one-billion-dollar coin to make a 10x move compared to a ten-billion-dollar coin. So much investor money is needed for the DOGE even to double in price now compared to its early days.

Hence, it’s no realistic to have 100x or 1000x expectations for Dogecoin when it is one of the top 15 cryptocurrencies. If you are looking for the next 100-bagger in crypto you better go at least 100 places lower in rankings.

Photo:  Flickr / Thomas Hawk

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