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 truly reached $90 billion, you possibly can 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 Might 2021 look on SNL although, the coin has finished horribly.
Doge is down 90% since Musk’s look on Saturday Evening Dwell. 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 will help that view with my rationale.
What’s Doge imagined to be?
I feel to actually perceive what Dogecoin is in 2022, we’ve got 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 spotlight the whimsical nature of the coin. For the reason that coin’s improvement, Palmer has distanced himself from the challenge fully 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 could be 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 turn out to be an extremely profitable meme in crypto and on Twitter (TWTR). Nevertheless, I can’t 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 reveals 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 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 have a look at to evaluate 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 day by day energetic addresses. Although, just lately, Litecoin has clearly distanced itself from the remainder of the pack instead coin fee community. Since this information is a little 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 energetic addresses than final 12 months. For a longer-term perspective, we will examine 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 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 could be 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 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 reveals Bitcoin’s focus has been regularly 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 will count on Musk to tone it down in terms of 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 continually tweeting about it aren’t essentially the identical factor. Musk does appear to have his fingers 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 will depend 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 property, I like dozens of different cash rather a lot higher. You are not going to seek out Dogecoin in my shared portfolio on BlockChain Reaction. Nevertheless, if the community exercise in Dogecoin adjustments drastically for the higher, I will definitely preserve an open thoughts.