Dogecoin's popularity reflects big power shifts thanks to social media and twin financial crises. there is no more important story for the reimagination of cash , says CoinDesk's chief content officer.
In an unsightly week for markets, it’s striking the crypto news that caught even more attention within the mainstream media wasn't bitcoin’s whopping 24% drop from its peak early Saturday morning, but dogecoin’s spectacular rally earlier within the week. This week’s column dives into why that phenomenon, while literally built on a joke concept, isn't something to be laughed at. The surprising clout of the DOGE (+17.27%) mob speaks volumes about how power is being redrawn within the digital age.
And for this week’s podcast episode, we deliberately turn a blind eye to the number-go-up (and down) obsessions of the crypto market and mention what really matters: human dignity. Sheila Warren and that i ask Human Rights Foundation Chief Strategy Officer Alex Gladstein and a Sudanese activist who uses the pseudonym Mo and therefore the handle @SudanHODL for his podcast to speak about what bitcoin (BTC, +0.97%), as a “global neutral money,” can do for human rights.
Have a listen after reading the newsletter.
The Doge age
A part of me worried i used to be giving in to temptation by scripting this column.
There’s a clear concern within the CoinDesk newsroom that covering dogecoin could signal that we favor easy clicks from fanatics over the danger of encouraging bubble-fueled investments during a coin with no inherent technical advantages.
But then I read Max Read’s excellent piece on the longer term of cash from last week, which inspired a pleasant ny Magazine cover that asked the question, “Can I SPAC my Stonks With NFTs?” I now realize – hear me out – there’s no more important story about the reimagination of cash immediately than $DOGE’s crazy price surge. (See the chart within the next section.)
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Dogecoin mania, as exemplified by the cryptocurrency community’s failed quest in the week to urge its price above 69 cents on Tuesday in honor of a 04/20/69 date meme related to “national stoner day,” doesn’t just seem frivolous, it is. Yet, there’s real, serious money at stake.
In that sense, dogecoin’s wild ride encapsulates a crucial moment in human history. Society’s traditional “story” of cash is breaking down, where new, head-scratching concepts like SPACs (special purpose acquisition companies) and NFTs (non-fungible tokens) are flourishing, and where fun and games and mob-buying can overwhelm markets.
Doge is a component of an intense competition for meaning within the planet of cash , a testament to the 21st century power shifts fueled by two separate financial crises and by the increase of social media networks. Let’s explore them.
The story’s end
We start with the thought that cash may be a story.
Regular readers will know I’m a lover of Yuval Harari, whose bestselling “Sapiens” argued that human civilization is made on our capacity to arrange around commonly believed imagined concepts.
Harari’s samples of these constructed ideas included “the corporation” and “the nation-state,” among others that have enabled us to make complex societies. It’s money, though, he says, that’s “the most successful story ever told.”
Currencies don't have a core, intrinsic value. (Sorry, gold bugs, that applies to your favorite shiny metal the maximum amount to folding money and cryptocurrencies.) A currency’s value depends on shared belief therein value. That’s to not say certain sorts of money don’t have qualities that help its story resonate, which is why bitcoin are often described as “sound money” and dogecoin cannot. But without belief, all money is worthless.
For much of the past two millennia, the dominant story was that money’s value flowed from the sovereign because the state, empowered with taxation, had an overarching interest in optimizing the societal accounting function that's money’s true purpose. Then, more recently, within the era of paper money it had been the “good faith and credit” of the govt (rather than a hard and fast supply of gold) that might guarantee that value. Later, that story was enhanced by the thought politically independent central banks would maintain a currency’s value by managing its supply in society’s best interest.
Now, as we enter into a phase where state-backed money competes with both decentralized cryptographic money like bitcoin or dogecoin and with corporate money like diem (formerly libra) or Starbucks points, that narrowly defined story is falling apart. the primary catalyst came a touch quite a decade ago.
In his piece, Read traces the present breakdown to an interview then-Federal Reserve Chairman Ben Bernanke gave to “60 Minutes” in 2009 at the peak of the financial crisis. Asked if the Fed’s monetary injections into troubled banks were funded by taxpayers, Bernanke shook his head and said: “To lend to a bank, we simply use the pc to price the dimensions of the account that they need with the Fed.”
He was telling it because it had long been: The Fed creates money by adding to or reducing banks’ reserves. But to the confused masses grappling with financial meltdown it had been a revelatory challenge to the foundational story.
It revealed that the creation of cash isn't bound by some sacred rule of scarcity and is usually unrelated to the coins and banknotes that stand, in our collective imagination, as its representative units useful . It showed money as a digital accounting one entity can adjust through a couple of clicks on a computer.
Fast forward to March 2020 and a replacement crisis: COVID-19. Amid a tanking global economy and a desperate scramble for dollars, the Fed took its “quantitative easing” policy into overdrive, declaring it'll put as many fresh computer-based dollars as required onto banks’ balance sheets to debar financial collapse, with no upper limit on the program. It also expanded the category of assets it accepts reciprocally for those new dollars to incorporate corporate debt, exchange traded funds and other non-government instruments. It now seems the Fed will buy almost anything to prop markets.
Meanwhile, the “trillions” numbers attached to stimulus efforts during this new era of “QE infinity” are so unfathomably big that, as Bloomberg columnist Jared Dillian noted last spring, “money is losing its meaning.
This erosion of meaning is leading people to question money’s value, which is of course leading them to shop for other things. it's reflected within the surging prices for assets that appear to outsiders to be unhinged from real-world value: in bitcoin, in Gamestop stock, in NFTs and, yes, in dogecoin.
But before we get to Doge, consider another contributing factor: social media.
Leaderless online communities
Social media has challenged the central organizing structure of pre-internet society. Although the web has did not address wealth inequality in aggregate, the facility for anyone to publish, and to try to to so pseudonymously, has had a democratizing effect, empowering communities to get new stories around which to arrange .
This is meme culture. Social media enables the crowdsourcing of stories around memes, which successively generates new sorts of belief, a way of purpose and camaraderie. And thereupon , these communities can, for once, get up to the established order.
That’s what we saw within the GameStop phenomenon, where a 7 million-strong Reddit community drove up the worth of its favorite game retailer’s stock to impose huge losses on hedge funds that had tried to short-sell it on the view that its value was out of touch with reality.
The dogecoin phenomenon is analogous , with a key difference: there's no focus for a regulator or a strong Wall Street money manager to exert pressure against. this is often an enormous departure from the GameStop case, where regulators and personal equity funds essentially combined forces to prevent Robinhood, the WallStreetBets group’s favored trading app, from processing trades within the stock, causing its price to collapse.
With dogecoin, not only is there nobody responsible of the cryptocurrency, trading activity is spread across dozens of exchanges, a number of which are themselves decentralized.
Who or what would a regulator go after? Dogecoin was created – as a joke, literally – by someone who not only quit the project but the whole crypto movement. Like Bitcoin, there was no premine or initial coin offering creating pre-launch tokens for founders and there's still no identifiable team of leaders ready to manipulate dogecoin’s performance to its benefit and at the expense of others.
Marketing meets memes
For now a minimum of , this structure leaves the far-flung, fanatical Doge community to travel about its collective business of meme and buzz creation, stirring speculation within the coin.
Equally important, it’s creating unique opportunities for others to hitch their wagon to the present quirky, community-powered brand and its prevailing Shina Ibu logo: a picture of fun, of absurdist irony and of common interest – a brand fit the Gen-Z and millennial-led internet age. This is, in turn, giving rise to a replacement , symbiotic model for marketing as brands look to leverage the Doge community’s high-value engagement.
A defining moment came with Slim Jim’s imaginative Doge-driven social media marketing campaign. But the inspiration was laid within the youth of the dogecoin community, recounted recently by CoinDesk’s Ollie Leach, when enthusiasts spontaneously contributed to varied marketing campaigns to spice up the coin’s prominence. In 2014, there was a dogecoin-sponsored Nascar driver and, during a stroke of genius, the dogecoin-funded Jamaican bobsleigh team.
Dogecoin will never be what bitcoin is or aspires to be: a store useful , a worldwide reserve currency and a future medium of exchange for a decentralized economy. But during this unique convergence of memes, a fun brand, a robust community formation and a few powerful marketing clout, we see how the 21st century digital media economy is reconceptualizing money.
This doesn't mean you ought to invest in dogecoin. It does mean the Doge phenomenon matters.
Off the charts: Doge and therefore the goliaths
Today’s chart tracks dogecoin’s wild price ride against the performance of some well-established corporate names on Wall Street.
Just fortnight ago, dogecoin’s market cap was $8.3 billion, slightly below that of Hyatt Hotels. Then it started rising, not only beating out the hotel chain but also surpassing, in quick succession, the valuations of engineering giant Halliburton, banking conglomerate Credit Suisse and insurer Aflac. Then, last weekend, the $DOGE market cap rose above $45 billion to urge beyond that of 330-year-old British bank Barclays, before peaking on Monday at $53.98 billion, a hair above Swiss banking giant UBS.
Since then, dogecoin’s valuation has slipped back and was slightly below $40 billion on Thursday afternoon. That’s on par with asset management giant T. Rowe Price.
Not bad for a joke coin.
The Conversation: Bitcoin Vs Gold
Stansberry Research staged a much-anticipated debate in the week between MicroStrategy CEO Michael Saylor, who may be a prominent bitcoin advocate, and investor Frank Giustra, a lover of gold and a bitcoin skeptic. It got tons of attention.
Saylor, who crowdsourced his debate prep with the assistance of a sci-fi themed battle scene, opened with some big statements. He suggested that if a deity were to return down and style the right “God coin” system, Bitcoin would come closest to having an equivalent attributes. (For the record, he also provided an in depth description of how Bitcoin works and why he believes it's the very best sort of “sound money.”)
The imagery and hyperbole appeared to irk Giustra, who said the utilization of laser eyes and other crypto-insider jokes made Bitcoin “feel sort of a cult.” during a follow-up tweet, gold market media outlet Gold Telegraph chose to stress that time by superimposing alongside a video of Giustra a picture of a laser-eyed Saylor because the Pied Piper, leading a crowd to its demise.
Who won? Predictably, opinions divided along tribal lines, though bitcoiners seemed more confident of Saylor’s victory than gold bugs were of Giustra’s. Here’s podcaster and prominent bitcoin supporter Preston Pysh, whose Twitter feed was filled with snippets of the MicoStrategy CEO making “devastating” points against his opponent.
Relevant Reads: Regulation Rumors
The weeklong bitcoin price rout began last weekend in rather dubious fashion.
. As Omkar Godbole reported, bitcoin plunged $8,000 early Sunday to a three-week low of $52,148. This happened after the Twitter account FXHedge, which mostly posts all-cap headlines from mainstream news reports, published a since-removed tweet saying the U.S. Treasury was close to charge financial institutions over crypto-based concealment .
. The veracity of that report was questionable. As Nikhilesh De explained on CoinDesk TV’s "First Mover", it appeared somewhat associated with reports Friday that new Securities and Exchange Commission Chairman Gary Gensler was awaiting a report from Treasury Secretary Janet Yellen on the cryptocurrency industry before moving forward together with his agency’s own blueprint for the world . But Nik’s sources gave every impression that the story of an impending crackdown was unfounded.
. Maybe the reality wasn’t what mattered. As Kevin Reynolds acknowledged during a well-timed opinion piece later that day, the right recipe for a crypto sell-off had been prepared: the market had soared and new rookie investors were nervous. So when the FXHedge report combined with a CNBC tweet of a month-old story about Indian banning crypto and erroneous accounts that Coinbase CEO Brian Armstrong had sold most of this stock (when actually he’d only sold 1.5%), the market was primed to travel lower.
. Still, once that downturn had happened, bitcoin was unable to recover and on Thursday underwent another big downturn, this point doing so in sync with wider financial markets, which got whacked by reports the Biden Administration is getting to drastically increase capital gains tax rates. At the time of print, the leading cryptocurrency was poised to clock its worst week since mid-February. And as Brad Keoun reports, it “dominance” ratio had tellingly dropped below 50% of total crypto market cap as ether (ETH, -3.06%) and other altcoins were relatively less harmed by the declines.
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