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Dogecoin, a cryptocurrency that started as a joke
In the middle of the night last Thursday, one day after he pledged to be taking a break from Twitter, Elon Musk tweeted one word: “Doge.”
What does that mean? Like seemingly so many things of late, it starts with an internet meme, this one about a cute-looking Shiba Inu and deliberately mangled grammar, and ends with a highly manipulated financial instrument making a rich person a lot of money. “Doge” is shorthand for a joke cryptocurrency based on the meme named “Dogecoin,” which launched in December 2013. It has been lurking in the periphery of the Bitcoin world ever since. Dogecoin, unlike other crypto assets with a presumed mission of democratizing finance, was never supposed to be anything more than a gag. But with his tweet, and the handful that followed, Musk put Dogecoin back on the map, an example of how completely insane our financial markets have become.
Over the next two days, Musk went on a Dogecoin-related tweeting spree. He posted a Lion King–inspired meme of him lifting the Shiba Inu doge, the cryptocurrency’s de facto logo and mascot, above his head. He proclaimed, “Dogecoin is the people’s crypto,” and committed to a life lived with “no highs, no lows, only Doge.” The result was a one-day 50 percent spike in the value of the coin.
It wasn’t the first time Musk has pumped Dogecoin, or any other dubious investment for that matter. Musk’s tweet about GameStop—simply, “Gamestonk”—sent the GameStop craze to its feverish peak; his tweets about various other securities have corresponded to immediate and pronounced spikes in their values, even when they weren’t clearly in references to those companies or currencies.
Musk, CEO of Tesla and now the world’s richest man, has generously been referred to as a powerful “market tipster,” though a less charitable person might call him a master market manipulator. As such, he has been in hot water with the Securities and Exchange Commission not infrequently. He settled with the SEC, agreeing to pay a $20 million fine and step down as Tesla’s chairman, over fraud charges in 2018. He’s proudly declared in interviews that he does “not respect the SEC.”
With that track record, it’s hard not to wonder who has benefited from Dogecoin’s meteoric rise, which Musk single-handedly landed in the financial news cycle. At latest count, the coins have a value of roughly $6 billion all told, thanks to that dramatic recent rise.
According to Blockchair, a website with a running tracker of top cryptocurrency wallets, Dogecoin is held in overwhelming proportion by just one person. One solitary address has nearly 37 billion Dogecoin. That’s more than five times the next-largest owner, and amounts to almost 30 percent of the total supply of Doge, which counts 127 billion coins in circulation. Of course, a 50 percent spike on a holding that large is substantial. At 5 cents a coin, which the currency shot past late last week, that holding would have been worth $1.85 billion. In late January, before this flurry, it was worth less than 1 cent per coin.
At this point, it’s impossible to know who’s holding that jackpot of Doge. Could it be Musk? Is it one of his friends? As a matter of mathematics, it’s a fellow billionaire, and they do tend to know each other—after all, there aren’t that many of them.
The price of Bitcoin also shot up recently after Musk said that he was a “supporter” of the cryptocurrency in an interview on Clubhouse, the new and increasingly popular social media app. Musk, who has endorsed Bitcoin before, has also identified himself as a Bitcoin owner, though not in large quantities. In 2020, he said he had just 0.25 BTC.
The SEC has previously investigated and prosecuted scams in cryptocurrency, a wildly deregulated realm rife with scandal and skullduggery. The SEC has also investigated Musk before, of course. It will be interesting to see if they pick this up. The agency declined to comment. An email to Tesla went unreturned.
Of course, Musk has said his market-moving tweets, in stocks and crypto, are not meant to be taken seriously. In fact, in that same Clubhouse interview, Musk said his comments about Dogecoin were “really just meant to be jokes.”
But that defense hasn’t played that well in the eyes of the SEC in the past. Musk’s $20 million settlement, which brought an additional $20 million fine for Tesla, was born out of a joke as well, when he pledged to take his company private at $420.69 per share. It’s always just a joke. Musk is a 49-year-old man with six children.
At this point, it’s impossible to know who’s holding that jackpot of Doge. Could it be Musk? Is it one of his friends?
Whether or not he’s closely tied to Dogecoin, or whether he or any of his contemporaries benefited from his tweets, the fact that those questions remain proves the need for more regulation of our out-of-control speculative financial markets. That means a more robust SEC and an activist leader of Joe Biden’s Office of the Comptroller of the Currency, which will be tasked in some part with regulating a Wild West cryptocurrency sector. The debate over that position has flared up in recent weeks, as Biden’s presumed pick, Michael Barr, has drawn the ire of progressive Democrats and organizations in Washington. Barr has advised fintech company Ripple in the past; it has its own unregistered cryptocurrency, which has been the subject of SEC investigation.
Questions of market manipulation have dominated the news cycle lately, with the GameStop spike and the spasm of Reddit-based day traders. But much of that concern has targeted low-dollar, high-volume users of Robinhood, when in fact, the largest beneficiaries of that movement were billionaire hedge funders.
The Dogecoin cycle is much the same. Its logic-defying spikes have been attributed to impetuous rubes online. But the largest beneficiaries, and the people behind its movement, have been billionaires. What’s actually going on there? It would be nice to have some answers.
