Musk, memes and May madness: Is Dogecoin the new GameStop?

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Dogecoin

With the value of the Dogecoin increasing in value by 88% last week alone – it is just the latest cryptocurrency platform to see another dramatic surge of interest. As part of this, Business Leader spoke to a series of experts in order to get a greater understanding of what it all means for investors and the future of the crypto space.

Dogecoin has become the new GameStop, with frenzied trading potentially going to deliver a bloody nose to novice investors, warns the CEO of one of the world’s largest independent financial advisory and fintech organisations. The warning from Nigel Green, the chief executive and founder of deVere Group, comes as the market capitalisation of Dogecoin hit almost $45bn on earlier this month, and its price has risen by 400% recently.

The memecoin was created in 2013 as a joke, poking fun at the rise of established digital assets such as Bitcoin. Dogecoin was inspired by the popular Doge meme, which offers the image of a Shiba Inu looking sideways at the camera with raised eyebrows.

Green says: “Dogecoin is the new GameStop. The out-of-favour bricks and mortar videogame retailer rocked Wall Street in January when a group of small-scale mainly inexperienced investors, led by a frenzy on Reddit, sparked a historic short squeeze where they drove up its stock prices.

“Since Reddit lifted its ban on the discussion of three cryptocurrencies – Bitcoin, Ethereum and Dogecoin – activist investors and also some celebrity investors on social media have been urging others to invest their cash into Dogecoin – their new pet populist bandwagon.

“In the same way that the GameStop frenzy was pitched as a battle-play of ‘Wall Street versus The Little Guy’, Dogecoin is being pitched as a battle-play against the well-established crypto giants like Bitcoin.

“But this is not typically the way reasoned, savvy investors should strategise to create and build their portfolios in order to reach their financial goals.

“We can expect many novice retail investors – who may not have the financial resilience needed – to get burned in the Dogecoin frenzy – in the same way they did with the GameStop one.”

The deVere CEO says that investors should avoid being drawn into the hysteria driven by social media and look at the fundamentals of the different cryptocurrencies.

“It’s very hard to compare Dogecoin with the likes of Bitcoin, which runs on ground-breaking tech and has a limited supply giving it scarcity value, amongst other valuable attributes; and Ethereum, which is solving real-world issues and providing in-demand business solutions. For these reasons, amongst others, they are attracting huge institutional investment.

“Whereas we can assume that many people have been buying Dogecoin, not because they think it has any real value, but because they hope others will get FOMO (the Fear of Missing Out), jack the price up, and then they can sell off and make a quick profit.”

Green reiterates a message he gave in January at the height of the GameStop mania: “If you do want the thrill or novelty of chasing big gains led by activists on social media, you really should make sure that you have a sound, diversified, long-term financial strategy established in place first.”

Dogecoin bounces higher on a fresh wave of speculation

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown shared her thoughts with Business Leader about the frenzy surrounding the cryptocurrency as we head into May.

Dogecoin has bounced higher, fueled yet again by chatter across internet forums, with influencers pushing the cryptocurrency higher.

As we saw with the GameStop frenzy earlier in the year, traders have once again adopted a game mentality, trying to propel the price higher using hashtags and rallying cries on internet forums.

Once again the potent mix of social media and easy access to trading in the cryptocurrency has led to heightened speculation.

Dogecoin, which began life as a joke has risen by around 450% over the past week. Although at around 40 US cents, it’s still a tiny fraction of the eye watering price of Bitcoin, it’s now among the most valuable currencies in the crypto world.

Investors should be extremely cautious about getting caught up in this herd mentality because Dogecoin is very much a speculative bet whose valuation has no reliable basis. Demand has come from traders trying to ‘game’ the system and others hoping to benefit from future price rises rather than use the coins as a means of exchange. Predicting the point at which demand subsides and prices begin to fall is very difficult, if not impossible and people risk getting their fingers seriously burnt.

Is Elon Musk the Reason Dogecoin is ‘going to the moon’?

It’s no surprise that many believe Elon Musk is the main influence on Dogecoin.  However, in the past 90 days, Dogecoin has actually been searched more times than Elon and there appears to be no correlation between the two when it comes to interest.

In fact, Dogecoin has nearly double the searches compared to the famous entrepreneur.

graph

Dogecoin Worldwide (data in order of interest and represents the past 6 months)

  1. United States
  2. Turkey
  3. Canada
  4. Netherlands
  5. Singapore
  6. Australia
  7. Nigeria
  8. Ireland
  9. New Zeland

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