Dogecoin is not a cryptocurrency you would expect to read about much in this column since it is not exactly an “institutional grade” asset. It has a market cap of over $8 billion at time of writing (less than 1/100th of bitcoin’s), no unique use case and no lively derivatives market.
But bear with me while I explain why it embodies two key themes impacting institutional interest in crypto assets: the role of “fundamentals,” and the likelihood of successful government bans.
You’re reading Crypto Long & Short, a newsletter that looks closely at the forces driving cryptocurrency markets. Authored by CoinDesk’s head of research, Noelle Acheson, it goes out every Sunday and offers a recap of the week – with insights and analysis – from a professional investor’s point of view. You can subscribe here.
The power of enthusiasm
At time of writing, Dogecoin (DOGE) is up almost 1,350% so far this year. Last week, rapper Snoop Dogg temporarily rechristened himself Snoop Doge. Kiss frontman Gene Simmons topped that with a “God of Dogecoin” tweet. Kevin Jonas of the Jonas Brothers joined in. Elon Musk has inspired so many Doge memes that it would be impossible to list them all here. This is getting fun in a wacky “whatever” kind of way.
But should “fun” drive value?
Why not? As we saw with the GameStop drama, the market’s understanding of “value” is shifting. The relentless rise of the stock market despite record uncertainty and risk, and the relatively new phenomenon of day-trader media stars, show that performance is increasingly a matter of message in a world where messages are coming at us thick, fast and everywhere.
Bloomberg columnist Matt Levine summed it up perfectly:
“Money and value are coordination games; what we use for money depends on the channels that we use to coordinate social activity. Once society was mediated by governments, and we used fiat currency. Now society is mediated by Twitter and Reddit and Elon Musk, so, sure,…