Elon Musk is doubling down on his Doge tweets, despite the recent SNL slump. But many question whether his tweets alone can bring Dogecoin back from the brink.
Is Musk just memeing? And, does that even matter in the age when investors are discussing “meme factors” of a given stock or digital asset?
The owner of Tesla and SpaceX (and one of the richest men alive) asked his Twitter audience whether Tesla should accept Dogecoin, a meme cryptocurrency originally devised as a joke.
Me after Tesla accepts Doge 🐶 pic.twitter.com/yoIcL7uWX2
— Jitin (@Jitin42069) May 11, 2021
One user responded with an image of Doge driving a custom Tesla Cybertruck with bundles of money in the trunk.
On Monday, Musk claimed that SpaceX would launch a satellite named “Doge-1”, named after the cryptocurrency.
While some may question whether these tweets are serious, they are still having an effect. Dogecoin recovered some of its losses after Musk’s SNL appearance.
This might come as a relief to Dogecoin investors who were hit by the recent Dogecoin slump, as Musk was apparently walking back his support of Dogecoin.
The tech billionaire recently warned prospective investors to “invest with caution”. Musk’s SNL performance also failed to bring about a Dogecoin rally, as Musk mentioned the coin, but did not pump it directly.
Bad jokes and no funny memes leading to a Doge crash absolutely makes sense to me. It’s like an earnings miss but for a new era.
— Michael Antonelli (@BullandBaird) May 9, 2021
Musk’s tweets have a history of moving the markets, including Etsy, GameStop and Bitcoin. And Musk seems to like it that way.
However, Musk apparently refrained from attempting to influence the market intentionally. Until Dogecoin.
After discovering that he could influence the price of Dogecoin, Musk began tweeting about the joke cryptocurrency regularly.
It is impossible to say whether Musk is actually trying to influence Dogecoin’s valuation. It could be that tweeting about Doge is just really amusing to him. But his fans are taking it seriously. Can Dogecoin really go to the moon?
ur welcome pic.twitter.com/e2KF57KLxb
— Elon Musk (@elonmusk) February 4, 2021
Cryptocurrency valuation is mostly determined by the currency’s popularity. This is something that investors call the “meme factor,” or the currency’s shareability, its ability to exploit the cultural zeitgeist to go viral.
Dogecoin had a high meme factor, at least if we go by the fascination Elon Musk has with it. This allowed Dogecoin to reach millions of investors and to jump 26,000% in six months.
Dogecoin’s meme value has helped carry it past thousands of “serious” cryptocurrencies. However, it will be increasingly difficult to replicate these gains.
As one investor pointed out, when a cultural phenomenon reaches SNL, that usually means it is at the peak of its popularity. And when SNL deals with investments, it might be time to sell out, just as JFK’s father shorted the markets after a shoeshine boy told him to buy.
Dogecoin has already made all of its easy gains. Now that it’s widely known, it will have to deal with issues that “meme value” cannot solve, such as competition with Bitcoin and Ether.
Both cryptocurrencies have the advantage of scarcity being built in their blockchain. Bitcoin has the advantage of being the first cryptocurrency, and Ether has the fact that it is used in the Ethereum network, which might be a model for the financial system of the future.
Investors will also have to come to terms with the fact that Musk might just get tired of Doge memes. Cultural trends come and go, and there’s no apparent reason why Doge memes would be an exception.
If Musk gets a kick out of moving the market, that effect will pass as well. Not even Musk has the ability to control how other people invest, and his tweets about Dogecoin are having diminishing effects. Once they stop having any effect at all, he might just get bored and move on.
While Doge will likely not go to the moon, unless Musk literally sends it there, but it might forever change how we view investing.