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 mentioned, 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 Might 2021 look on SNL although, the coin has finished 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% throughout 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 lined it on In search of 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 imagined to be?
I believe to actually 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 meant to be a joke, an image of a canine was chosen for the emblem to focus on the whimsical nature of the coin. Because the coin’s improvement, 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 change, 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 change into an extremely profitable meme in crypto and on Twitter (TWTR). Nonetheless, 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 actual, verifiable knowledge that exhibits it merely is not being broadly 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 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 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 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, just lately, Litecoin has clearly distanced itself from the remainder of the pack instead coin fee 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 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 will examine the YTD 2022 averages to the 2018 averages. I believe this can be a good comparability as a result of it offers 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 change, you’d wish to see a forex that does not undergo from pockets holder focus. The extra a forex is concentrated to high 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 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 honest 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 regularly 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 assume Elon Musk has a lot to fret about from a category motion lawsuit perspective because it pertains to Dogecoin, I do marvel if the added warmth from joking about DOGE on Twitter means we will count on Musk to tone it down in the case 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 improvement and consistently tweeting about it aren’t essentially the identical factor. Musk does appear to have his palms full with different tasks and doubtless does not want the added grief of probably problematic Dogecoin posts. Does that imply the value of Dogecoin comes down? I am unsure. Once more, it will depend on how a lot you worth a joke and its cultural significance.
I do not personally assume Dogecoin is price 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 modifications drastically for the higher, I am going to actually maintain an open thoughts.