After Gamestop, now Dogecoin: Young investors make a joke currency more valuable than Adidas.
Wo in God’s name was Elon Musk? When his followers urgently needed him last Tuesday, as they waited longingly for a sign from their Twitter master, Musk made no noise. For months, the head of the electric car manufacturer Tesla had drummed for the digital currency Dogecoin, called it “the people’s cryptocurrency” and enticed young investors to buy more and more of it. But when hundreds of thousands in Internet forums like Reddit had agreed to “Dogeday” on Tuesday in order to drive the Dogecoin rate to much loftier heights than the Gamestop share a few weeks ago, Elon Musk kept quiet. Was it possible that he didn’t mean it all that seriously, but rather mocked his fans all the time?
Yeah, it was just fun. And everyone could have known. At the end of January, when he first appeared in the Clubhouse chat app, the Tesla boss announced that he would make jokes about Dogecoin at every opportunity that should also be understood as such. Musk accepted mistakes: “The most entertaining and ironic result would be if Dogecoin became the future world currency.”
It will never get that far. But it is ridiculous enough that the Dogecoin (pronounced “Doschkeun”) is more valuable than all German banks that are listed on the stock exchange. And above all because a huge swarm of small investors is betting on it. Just as the masses committed themselves to the shares of the computer game retailer Gamestop weeks ago, drove the price up and thus nullified the bets of hedge funds on falling prices with concentrated power, so they are now gambling with the crypto currency. But this time it’s not about wiping out the supposedly bad hedge funds and making money in the process. With the new hype, everything revolved around fun and speculation on quick profits from the start. This is “also an effect of cheap money,” says Martin Schmidt, managing director of the consulting and investment company Postera Capital, which specializes in crypto investments, with a view to the central banks.
Up until a few days ago it looked as if the young gambler’s bill was paying off. While the cryptocurrency was only worth half a dollar cents at the beginning of the year, it has risen by more than 8,000 percent to a record high of almost 44 cents since the beginning of the year (see grafic). Because suddenly many investors wanted to buy the cryptocurrency, the system even temporarily failed on the popular Robinhood trading platform. All of a sudden, Dogecoin had reached a fabulous market capitalization of more than 50 billion dollars and was not only on a par with Twitter, where many people eagerly cheer for the digital currency with funny pictures (see picture collage above). But Dogecoin was even worth more than established DAX companies like Adidas and Bayer.
For the past Tuesday, the young investors had targeted a new high of at least 69 dollar cents. But the motto “Dogecoin to the Moon” was followed by a rather rough landing on the ground of facts. Advocates like Elon Musk, rapper Snoop Dogg and Gene Simmons, singer for rock group Kiss, didn’t budge, and the mass of retail investors weren’t powerful enough for the price to tumble again. A market capitalization of currently more than 30 billion dollars – about as much as Gamestop was worth at the height of the hype – nevertheless consider currency analysts of German banks to be a bad joke. And for a joke with an announcement.