am continuing to write puts on coin, now at the 250 level, essentially at the money, to average down, to aggregate more, to balance off the risk of 0388.HK
overall program remains to divest of the fiats, because they are funny
bloomberg.com
Dogecoin Is Up Because It’s Funny
Matt Levine
7 May 2021, 00:44 GMT+8
Much efficient very marketLook I enjoyed GameStop as much as anyone. It was dumb fun, it seemed to say something weird and alarming but not too serious about financial capitalism, nobody got too badly hurt, it had some good characters, it kept us entertained for a while. Non-fungible tokens are exasperating, but in an interesting way. I thought the deli was pretty good. Financial news in 2021 is incredibly stupid, sure, but I can take pleasure in it.
But Dogecoin … man, I don’t object to Dogecoin; the basic thing of “Dogecoin is a parody of Bitcoin that is now worth a lot of money” is fine, that is funny, fine fine fine. It’s just, I mean, here’s a whole article of this stuff:
A potential trigger for the latest leg up: Tesla Inc. co-founder and crypto fan Elon Musk is appearing on Saturday Night Live this weekend, spurring speculation he may talk up Dogecoin again on the comedy show. “When you think about the full spirit of what this crypto revolution is, there’s something pure in what Dogecoin has done,” Mike Novogratz, founder of Galaxy Digital Holdings, said on CNBC. “I worry that once the enthusiasm rolls out, there are no developers, there’s no institutions coming in. But it’s got the moniker of the people’s coin right now and it’d be very dangerous to be short.” The overnight gain took Dogecoin’s one-week advance to 118% and its value to $87 billion in Wednesday trading, according to CoinMarketCap.com data, eclipsing the largest exchange-traded gold fund and even stocks like Fedex Corp. and Snap Inc. A year ago, the asset was worth just $315 million. … “At some point, something is just real,” said Sam Bankman-Fried, the Hong Kong-based chief executive officer of the FTX crypto exchange. “If Dogecoin is stupid and valueless, it shouldn’t be worth $90 billion. How about gold or Bitcoin or euros? Our collective imagination has given them value, and now we just think about them having value.” Dogecoin, started in 2013 as a joke based on the Shiba Inu breed of dog, may become so accepted by the mainstream it might evolve into a payment option at retailers, Bankman-Fried said. At Blockfolio, a firm owned by FTX that helps users manage their crypto portfolios, trading volumes are spiking with Dogecoin’s every gain, a sign it’s become essential to the whole ecosystem. ... While it’s difficult to assign firm reasons to Dogecoin’s ascent, a few factors have fueled the gains. On April 20, a day normally associated with pot, some users got #DogeDay trending to push up the price. Celebrities from Musk to the Dallas Mavericks’ billionaire owner Mark Cuban also jumped on the bandwagon. The Gemini crypto exchange backed by the Winklevoss twins announced Tuesday it will soon enable trading of the coin.
Just imagine traveling 10 years back in time and trying to explain this to someone; just imagine what an idiot you’d feel like. “There’s going to be this online currency that people think is a form of digital gold, and then there’s going to be a different online currency that is a parody of the first one based on a meme about a talking Shiba Inu, and that one will have a market capitalization bigger than 80% of the companies in the S&P 500, and its value will fluctuate based on things like who is hosting ‘Saturday Night Live’ and whether people tweet a hashtag about it on the pot-joke holiday, and Bloomberg will write articles and banks will write research notes about those sorts of catalysts, and it will remain a perfectly ridiculous content-free parody even as people properly take it completely seriously because there are billions of dollars at stake.”
For that matter, imagine being me, now, and trying to say something interesting about this; just imagine what an idiot I feel like. I hope Elon Musk is funny on SNL! That will make the value of Dogecoin go up! Me, I want to write about dynamic hedging of inverse exchange-traded notes on volatility indexes, but that’s not how finance works anymore. “Don't forget to pencil in the SNL opening as a key market event risk for next week,” tweeted Bloomberg’s Tracy Alloway.
In the last dumb, dumb year I have proposed two very dumb theories of financial markets, both of which seem relevant to Dogecoin:
The boredom markets hypothesis says that people will buy stocks when buying stocks is more fun than other things they could be doing for fun.The Elon markets hypothesis says “that things are valuable not based on their cash flows but on their proximity to Elon Musk.”Are those hypotheses self-limiting in some way? The point of the BMH (boredom markets hypothesis) was that as pandemic lockdowns eased, people would go back to doing things that are actually fun, and spend less time day-trading stocks. But I did not fully reckon with the possibility that people would spend the pandemic lockdowns not just trading stocks, but also making it more fun to trade stocks. Partly that is by making the trading experience more fun and social, with Reddit boards and sea chanteys to make your favorite stock a bit more exciting. Partly it is by finding more fun things to trade than stocks; why buy Tesla Inc. stock when you can buy an imaginary coin named after a Shiba Inu meme that Elon Musk will tout on ‘Saturday Night Live’? Partly it is just through the traditional way that trading is sometimes fun: Everything keeps going up, so it is fun to buy the things because you make money.
I suppose the boredom-driven rally ends through some combination of
(1) people can do normal fun things again and
(2) like, Dogecoin drops for fundamental reasons (?) and it stops being free money all the time?
The point of the E'MH (E-prime MH, Elon markets hypothesis, to distinguish it from the efficient markets hypothesis, which owns the rights to “EMH”) is not too dissimilar: Elon Musk combines the concepts of “get rich” and “have fun” in an unusual way. I once wrote:
Musk is the richest person in the world, and in a dynamic, fun, traveling-to-Mars sort of way. It makes sense that his pronouncements have a certain religious character, that his tweets can endow arbitrary objects with mana. If the richest person in the world tweets “Gamestonk!” then I think that means that, if you buy GameStop stock, you will partake in his wealth and dynamism at a remove; you will get rich and have fun doing it. (Not! Investing! Advice!)
Again, when his advice stops working to make people rich, or when there are more fun things to do, this effect should lessen. Also I just can’t imagine this schtick working forever? Even if he keeps doing funny things, the cumulative effect is sort of deadening; his 1,000th bizarre tweet is going to be less funny than his first.
Here is a 22-page research note about Dogecoin. An excerpt:
Dogecoin is a codebase fork of Luckycoin, which itself was a codebase fork of Junkcoin, which was a codebase fork of Litecoin, which in turn is a codebase fork of Bitcoin. … [Founder Jackson] Palmer commented that “initially we thought it would just make the viral rounds on social media, attract a few miners for fun and then slow down. But something really interesting happened — it went from being a humorous take on cryptocurrency to actually driving mainstream awareness of the topic.”
That’s sort of profound, isn’t it? Basically the way things work is:
Assets trade among participants in some niche market; that niche might be early-adopter crypto enthusiasts or Reddit traders or alumni of the wrestling team at a New Jersey high school or whatever you want. The assets have prices that may or may not make sense to you, but that make sense to people within the niche.
Some event causes one asset in the niche ecosystem to break out into the public consciousness: One joke cryptocurrency is really funny, one Reddit meme stock is really funny, one stock traded by the New Jersey wrestlers is really funny, etc. “It’s really funny” seems to be essential here: The way to attract mainstream attention to some niche asset is mostly by making the mainstream laugh.
The mainstream attention attracts buyers: People say “oh that thing is funny, and it’s specifically funny that it is a traded asset with a high price, I should buy it.” So the price for that one funny asset shoots up until it doesn’t make sense to anyone.
On this theory, Dogecoin’s status as a joke is what makes it valuable. Litecoin is sort of the original fork of Bitcoin, the more sensible and serious parent of Dogecoin, the second-best Bitcoin as it were. It has a total market cap of about $23 billion now. Being the second-best Bitcoin is sort of meh. Being the funny Bitcoin — the hilariously worst Bitcoin, even — gets attention, and attention is the most valuable thing in the world. |
