So What the Hell is Dogecoin?

Honestly, I have no idea. It’s now the 6th largest digital asset by market cap, even though it started off as a purposeful joke (really, read the history) and there doesn’t seem to be a single reason to own or use DOGE.

That said, at this point, I’ve learned to be open-minded about EVERYTHING rather than laugh and dismiss. Unlike pass-thru tokens and asset-backed tokens, which actually accrue real economic value to token holders via revenues and utility, cryptocurrencies (including Bitcoin) exist solely to protect purchasing power and to transact in a fast, cheap and trustless manner without a financial intermediary (like a bank or brokerage). And even though Bitcoin has hundreds of other traits that are superior to DOGE and every other cryptocurrency (security, developers, history via longest chain, infrastructure, brand, wallet dispersion, decentralization, etc), at their core, they are still simply belief systems -- so if a handful of crazy people want to will DOGE into the mainstream, who are we to stop them? With exceptionally high interest on social media, spurred somewhat by Elon Musk’s regular and mysterious DOGE tweets, DOGE has become the 2nd most popular cryptocurrency on Twitter, accounting for 23.2% of total crypto tweets.

So will DOGE actually succeed? There is almost no chance that it does. But, for all you math majors out there, one minus almost no chance equals some small chance. And the market is telling you what that chance is. The total market cap of all tokens in the cryptocurrency sub-asset class is $1.25 trillion, of which Bitcoin makes up $1.07 trillion (or 86%). Dogecoin is $43 billion, representing 3.4% of the total digital currency market cap. So the market is basically pricing in DOGE’s odds of succeeding at 3.4% (with XRP, LTC, XLM, BCH, etc priced with slightly greater than 10% chance, combined). Now, those odds seem way too high to anyone who studies blockchain usage, but again, this market has taught us not to bet against underdogs. One can look at Gamestop (GME) for proof that social investing is often more powerful than fundamentals. Essentially, these other cryptocurrencies are perpetual call options with infinite time to expiration, a 0 risk-free rate, and high volatility… which makes them attractive long-tail options.

Somewhat surprisingly, there really isn’t much of a buzz about COIN in the traditional debt and equity world (perhaps that’s because the sell-side is too busy counting losses from the Archegos blowup to focus on actual profits from financial institutions). By foregoing the traditional IPO in favor of a direct listing, the market lacks an underwriter selling this to institutional investors, and without a roadshow or underwritten process, it’s just not on every investor’s radar yet. And we don’t have a lot of public data to suggest how direct listings of well known companies will trade -- Spotify (SPOT) traded straight up in 2018 while Slack (WORK) shot up and then traded down for the next six months in 2019. There is a good chance COIN could take some time before finding a real market base.

BLOCKCHAIN INSIGHT & ANALYSIS FOR SOPHISTICATED INVESTORS What the Hell is Dogecoin? Optionality and Free Markets That's Our Two Satoshis Week-over-Week Price Changes (as of Sunday, 4/18/21) Wait, DogeCoin Drove The Market Higher? Before we get to one of the craziest and swiftest weekend selloffs on record, we have to talk about cryptocurrencies. Contrary to popular belief, currencies are just one of many sub-sectors in the digital assets market, but it just so happens to be the largest and most well known due solely to Bitcoin’s inclusion in this sub-sector. Most of the other legacy currencies from 2017 (XRP, XLM, BCH, BSV, LTC) have not found anywhere near the audience Bitcoin has, or anywhere close to the traction DeFi, Web 3 and other sub-sectors have. Yet these assets continue to boast large market caps due simply to their growth and popularity amidst traders long before other digital assets existed, and before anyone knew or understood how to value digital assets. Normally, as Bitcoin goes, so do the other currencies, but last week was a bit of an anomaly. The Currency sub-sector gained +7% week-over-week, while Bitcoin itself was -6%. Dogecoin (DOGE) drove these gains, with a staggering +374% week-over-week move, rising to a $43 billion market cap. And many other currencies followed suit in what can only be described as a knee-jerk reaction to the gains in DOGE. A trader likely logged into Robinhood (where DOGE trades), saw huge outsized gains in DOGE, and immediately snap bought the only other tokens from the limited pool of assets available on the Robinhood app -- causing large gains in LTC, BSV, BCH and ETC as well. And just like that, you have a Bitcoin-less rally, while the efficient market hypothesis gets thrown out the window because different buyer bases have different access to different tokens depending on which venue they trade. Source: Messari So What the Hell is Dogecoin? Honestly, I have no idea. It’s now the 6th largest digital asset by market cap, even though it started off as a purposeful joke (really, read the history) and there doesn’t seem to be a single reason to own or use DOGE. That said, at this point, I’ve learned to be open-minded about EVERYTHING rather than laugh and dismiss. Unlike pass-thru tokens and asset-backed tokens, which actually accrue real economic value to token holders via revenues and utility, cryptocurrencies (including Bitcoin) exist solely to protect purchasing power and to transact in a fast, cheap and trustless manner without a financial intermediary (like a bank or brokerage). And even though Bitcoin has hundreds of other traits that are superior to DOGE and every other cryptocurrency (security, developers, history via longest chain, infrastructure, brand, wallet dispersion, decentralization, etc), at their core, they are still simply belief systems -- so if a handful of crazy people want to will DOGE into the mainstream, who are we to stop them? With exceptionally high interest on social media, spurred somewhat by Elon Musk’s regular and mysterious DOGE tweets, DOGE has become the 2nd most popular cryptocurrency on Twitter, accounting for 23.2% of total crypto tweets. Somewhat surprisingly, there really isn’t much of a buzz about COIN in the traditional debt and equity world (perhaps that’s because the sell-side is too busy counting losses from the Archegos blowup to focus on actual profits from financial institutions). By foregoing the traditional IPO in favor of a direct listing, the market lacks an underwriter selling this to institutional investors, and without a roadshow or underwritten process, it’s just not on every investor’s radar yet. And we don’t have a lot of public data to suggest how direct listings of well known companies will trade -- Spotify (SPOT) traded straight up in 2018 while Slack (WORK) shot up and then traded down for the next six months in 2019. There is a good chance COIN could take some time before finding a real market base. So will DOGE actually succeed? There is almost no chance that it does. But, for all you math majors out there, one minus almost no chance equals some small chance. And the market is telling you what that chance is. The total market cap of all tokens in the cryptocurrency sub-asset class is $1.25 trillion, of which Bitcoin makes up $1.07 trillion (or 86%). Dogecoin is $43 billion, representing 3.4% of the total digital currency market cap. So the market is basically pricing in DOGE’s odds of succeeding at 3.4% (with XRP, LTC, XLM, BCH, etc priced with slightly greater than 10% chance, combined). Now, those odds seem way too high to anyone who studies blockchain usage, but again, this market has taught us not to bet against underdogs. One can look at Gamestop (GME) for proof that social investing is often more powerful than fundamentals. Essentially, these other cryptocurrencies are perpetual call options with infinite time to expiration, a 0 risk-free rate, and high volatility… which makes them attractive long-tail options. Continue Reading About Crypto Optionality Arca, Headquarters, Los Angeles, California Unsubscribe