The free-falling cryptocurrency market is not stopping Elon Musk from continuing his support of dogecoin, and he will continue to buy and hold the meme coin.
“A lot of people who are not that wealthy have encouraged me to buy and support dogecoin,” Musk told Bloomberg at the Qatar Economic Forum in Doha. “I’m responding to those people.”
Dogecoin surged an estimated 9% in a few hours on Sunday (June 19) following Musk’s tweet about his support of dogecoin, Bloomberg reported.
The meme coin was up more than 12% in the past 24 hours to $0.05788 on Monday, according to CoinMarketCap data on Tuesday (June 21).
Musk’s support of crypto on social media has triggered fluctuations, boosting bitcoin’s price last year as well as dogecoin’s value. He said he owns bitcoin, ether and dogecoin and will continue holding them.
More U.S. consumers told PYMNTS that they know about dogecoin than ether, the No.2 cryptocurrency with a market capitalization of $375 billion. That’s nearly 20 times dogecoin’s $19 billion market cap.
Nearly 37% of the respondents to PYMNTS 2022 U.S. Crypto Consumer study named dogecoin among the cryptocurrencies they had heard of but not purchased, compared to 30% who said that about ether.
Dogecoin has been Musk’s favorite crypto, with Tweets featuring the coin that have included his children and having his SpaceX put a “literal Dogecoin on the literal moon,” Bloomberg reported.
Musk is facing a $258 billion federal lawsuit alleging that he and his companies engaged in a pyramid scheme with dogecoin, according to media reports. Plaintiff Keith Johnson plans to represent a class of people who have lost money investing in dogecoin.
No ‘Diamond Hands’ Doge
Earlier in the week, Tesla sold three-fourths of its Bitcoin holdings to pad up its cash reserves. The automaker was one of the first mainstream companies to accept Bitcoin as a viable payments option in February 2021.
Crypto markets commentator Sharat Chandra believes this could be one of the reasons for the crypto community’s tepid response to Elon Musk’s latest comment in favour of Doge.
“Musk is no longer advocating the ‘Diamond Hands’ approach to Bitcoin. Crypto maximalists, therefore, aren’t responding positively to ‘Dogefather’s’ public comments on Dogecoin,” he told Business Today.
Chandra said, “Tesla’s second-quarter earnings report revealed that Tesla has liquidated approximately 75 per cent of its Bitcoin holdings to purchase fiat to shore up its balance sheet by $936 million in cash.”
Bear market trend
Smit Khakhkhar, Tech Diligence at Delta Blockchain Fund, told Business Today that the current lukewarm response of the crypto community to Musk’s comments can be attributed to the general reluctance of investors around investing in a bear market.
He said, “During the height of the bull market, price movements were sensitive to Elon’s tweets and comments. Now, due to the fall of crypto prices, there’s fear among crypto investors. This could be a reason that the markets are not sensitive to his comments anymore.”
And, it’s not just Dogecoin. The impact of the bea r market is visible in the case of cryptocurrencies such as Ethereum, according to Khakhkhar.
He says, “Due to the downturn, the market is not sensitive to respond to even highly anticipated news like ETH 2.0 merge date confirmation.” Ethereum has plummeted to $1,000 levels from $4,000, the value at its all-time high.
Around $2 trillion worth of wealth has been wiped out from the cryptocurrency markets over the past eight months. Bitcoin crashed to $20,000 levels in July this year from its all-time high of $69,000 in November 2021.
‘Beginning of the end’
There have been previous signs of Musk’s declining influence on the crypto community. Earlier this month, when it was announced that The Boring Company, one of his infrastructure development companies, would start accepting Dogecoin as a valid payment option, he tweeted in favour of the decision.
Previously, tweets such as this would trigger massive rallies in the price of Dogecoin. But this time, the prices did not react much. Chandra stressed, “It might be the beginning of the end of Musk’s disproportionate influence on crypto.”
Dogecoin’s sensitivity to Musk’s tweets
When Musk revealed in January that Tesla would start accepting Dogecoin as a valid payment option to buy merchandise, the cryptocurrency zoomed over 40 per cent.
The crypto token rallied around 15 per cent in April when he said that if he acquired the microblogging site Twitter, he would try to integrate Dogecoin as a viable payment option. The response was even stronger when he declared later that month that he would buy Twitter; Dogecoin shot up 30 per cent.
But Dogecoin prices have also reacted negatively to Musk’s comments. In May 2021, during an appearance on the late-night comedy show Saturday Night Live, Elon Musk called Dogecoin a “hustle” and the cryptocurrency plummeted over 35 per cent.
The distrust of crypto investors in Musk took a legal turn last month when Dogecoin investor sued Musk, Tesla, and SpaceX for $258 billion. Johnson accused Musk of operating the crypto as a pyramid scheme. As per the complaint, “Musk used his pedestal as ‘World’s Richest Man’ to operate and manipulate the Dogecoin pyramid scheme for profit, exposure, and amusement.”
A salutary tale
One high profile Dogecoin retail investor believes the good times will return. Nicknamed the SlumDoge Millionaire, Glauber Contessoto used his life savings of $188,000 to buy DOGE in February, 2021. He sold his Tesla and Uber stocks to buy the token. And he did so in part because of Musk’s social media promotion.
In a matter of months, his holdings were worth almost $3 million. Contessoto became somewhat of a poster boy for the ordinary people who’d made it big with Dogecoin. He did interviews with the New York Times and other outlets, and told them he wasn’t planning on selling. He didn’t.
More recently, he said his holdings were worth around $230,000 and admitted he regretted not taking profits. “While I’m still up on my initial investment, what I do regret is not taking out some of the profit as cash,” he wrote in a Newsweek article. “If I could go back in time, I probably would have taken out $1 million or $500,000.” He remains hopeful DOGE will recover.
Other investors can’t even say they’ve broken even. They feel betrayed by Musk. Some have mounted a $258 billion lawsuit against Musk and various of his companies. Originally tabled by one disgruntled investor, other investors have now joined the fray. The suit claims Dogecoin investors have lost over $80 billion and that Musk presented Dogecoin as a legitimate investment “when it has no value at all.”
Does Dogecoin have a future?
Dogecoin has come a long way. Originally created as a joke, the token now has an $8 billion market cap and the Dogecoin Foundation is working hard to retroactively engineer a purpose for what was once a joke crypto. On the plus side, it is a recognized brand — more so than many other digital currencies, and the foundation has made some progress on several fronts.
Dogecoin could gain traction as a form of payment. The foundation is working to, for example, actually register its trademark, and push through necessary technological developments. But it faces stiff competition, not only from within the crypto world, but also from outside.
For example, the U.S. government is considering its own digital dollar. These so-called govcoins or central bank digital currencies (CBDCs) could threaten payment cryptos. CBDCs would go against a lot of the original ideology behind Bitcoin. But they’d also offer many of the benefits — low fees and speedy transactions — without the volatility and risk.
Musk loftily claims he continues to support Dogecoin for the people. But he’s not helping the Dogecoin Foundation to actually build a future for the coin. It was originally said that one of his advisors, Jared Birchall, would represent Musk on the foundation’s advisory board. But Musk tweeted that this is not the case, and neither he, nor Birchall have any CBDCsCBDCsCBDCs to the organization.
If you only have a small amount of money to spare, don’t gamble it on a high-risk crypto. Look for low-risk investments that can help you build wealth for the long term. It’s one thing to buy crypto and hold a small amount as part of a balanced portfolio, but it’s quite another to go all in on Dogecoin because Elon Musk tweeted about it.