Dogecoin boosted as Elon Musk flags DOGE payments for Tesla merchandise
Dogecoin (DOGE) prices shot up on Friday as Elon Musk announced that Tesla would start accepting the cryptocurrency as online payment for merchandise.
Musk rates DOGE over Bitcoin, particularly as a payment option, due to its lower electricity consumption.
He told Time magazine: "Fundamentally, Bitcoin is not a good substitute for transactional currency. Even though it was created as a silly joke, Dogecoin is better suited for transactions.”
Buyer beware
Dogecoin has become the new GameStop, with frenzied trading potentially delivering a bloody nose to novice investors, Nigel Green, CEO at financial advisory and FinTech organisation deVere Group, argued last year.
The memecoin was created in 2013, 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.
GameStop, an out of favour bricks and mortar video game retailer, rocked Wall Street in January 2021 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,” Green commented.
“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.”
Green expects many novice retail investors to get burned in the Dogecoin frenzy – in the same way they did with GameStop.
He said 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, jack the price up, and then they can sell off and make a quick profit.”
Green concluded with a message he gave at the height of the aforementioned 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.”
