Of Doge and Coins

Foreword

In case it was not clear, this post is mostly a joke. It is definitely not advice of any form. If you read this post, and go away thinking that I should buy (or sell) X, no matter what “X” is, then please reread the post, in its entirety, including the Foreword. Repeat as many times as necessary until the conditional evaluates to false. If it takes more than a few hours, please feel free to take a break and eat some food (NB: This is not nutritional advice).

I’m just glad I managed to find time and squeeze this in on 4/20 (6). Hurray for small victories.

As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.

If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.

Dogecoin

As some may have heard by now, Dogecoin, a cryptocoin created in 2013 entirely as a joke, quadrupled in price in the last week or so, and since the start of 2021, it has grown by more than 68x. That’s 6,800%. At its peak, that was closer to 89x. 8,900%. In slightly less than 5 months. That really puts in perspective the “crazy” (after Doge, is it really crazy-crazy though?) ~70x rise of GME over a year. A year. For only 70x. What a loser.

More interestingly, this is the price of Dogecoin, priced in Bitcoin, since Dogecoin’s inception (1) :

Yes, Dogecoin beat Bitcoin by a mile — if you had sold all your Bitcoin, and bought Dogecoin when Dogecoin was created, you’d have done better. Much, much better. That really gives you something to think about (2).

Philosophically speaking…

If you’ve been following Bitcoin, and the whole crypto movement, you’ll quickly realize that there is a foundational group of believers, who have fairly convincing sounding theories and ideas that roughly go along these lines:

• Modern monetary/fiscal policies are inflationary.
• Modern monetary/fiscal policies tend to favor the wealthy and powerful.
• Cryptos (most of them anyway) are non-inflationary currencies (more accurately, assets) and some are even deflationary.
• Cryptos are decentralized, so nobody controls them.
• Cryptos are serious stores of value, and they should be treated as a serious alternative to existing financial assets.
• Some are even theorizing the replacement of the dollar by some crypto (typically Bitcoin) as the reserve currency.

Well, the problem is that Dogecoin is a crypto. It was explicitly started as a joke. And if you look at the chart above, it’s really hard, right now, to argue that the market favors Bitcoin over Dogecoin, at least in the short term trajectory sense (3). So much of the arguments above (most of which generally circle the idea that Bitcoin is a good investment), goes out the window.

So for all the prognosticating about how the Bitcoin faithful HODLers will become billionaires in a new Utopian crypto world… well, the Dogecoin quadrillionaires have forgotten how to count so low.

On the other hand…

The traditional finance community, the “Ivory Tower Elites” as some of the crypto faithful calls them, has traditionally (all puns intended, though clearly not very punny) mostly ignored crypto. For the most part, the whole of crypto was a joke and an anomaly, and the best way to treat an anomaly to your carefully crafted financial models, backed by 50 (or 100, 500, 1000?) years of data is to… well, ignore them and wait for the invisible hand of the market to do its thing.

Except that cryptos, most exemplified by Bitcoin, didn’t really went away. For more than a decade. It just kept going up (and down, and up, then down again, nope up again, but really down… and I guess up now?), and today, Bitcoin stands at roughly $55,000 per coin (+- $10,000. This post, after all, took me more than 10 minutes to type out). From essentially 0 in 2009.

And to kick the teeth of the “Ivory Tower Elites” in, just for giggles, along comes Dogecoin, essentially replicating Bitcoin’s meteoric rise in percentage terms for the past 4 years, in just 5 months.

And well.. I mean, it’s Dogecoin. Just pronounce it without giggling, I dare you. How’s that for serious finance.

Wouldn’t it be grand…

What is the best thing that can come out of all of these?

And might I remind you, that this is mostly a joke post. Nothing in this post is serious. Seriously, nothing is serious. Seriously.

Well, if you asked me, the best thing that can come out of all these is if cryptos really gains legitimacy, really becomes the global reserve currency, and really, really overthrow the fiat currencies of today. But, not just any crypto, oh no no no, not just any crypto, but none other than Dogecoin (4).

Yes, if Dogecoin were to become not just the face of crypto, but the crypto, the one to dethrone fiat currencies, that. would. be. awesome.

Imagine, on one hand, the crypto libertarians with their rousing philosophical takes, grand sounding theories, and ostentatious visions.

And then think of, on the other hand, the “Ivory Tower Elites”, with their decades, centuries, millenniums of foundational work built upon reams of data, recorded in dusty tomes of knowledge, etc.

And both of them are wrong.

No, fiat didn’t win. Bitcoin didn’t win. Dogecoin won. And instead of some stuffy old academic as the face of your economics/finance textbook, you get a picture of this:

I mean, I’ve read a few finance and economics textbooks in my day, and none of them have a picture even remotely more interesting than that. Like, every single one of those textbooks basically screams “FALL ASLEEP NOW”. Except, I guess, they can’t really be screaming, since screaming is loud, and it’s hard to fall asleep if someone is screaming. Really.

So yes. The best thing, to come out of all of this (5).

Footnotes

1. One of the Bloomberg commenters I follow, Matt Levine, has an interesting/humorous note about how to value Dogecoin, which you can read here. It’s the 2nd article on the page.
2. Another Bloomberg commenter I follow, Joe Weisenthal, had an article here, which provided the inspiration for part of this post. It’s the last article on the page.
3. To be more explicit, since Dogecoin’s inception in December 2013 (8 years ago), Bitcoin rose about 90x. Yawn. Dogecoin rose 90x since February. 2021. Less than 3 months ago.
4. That will teach you to ask of me, anything.
5. On the off chance that I, for once, predicted something correctly, if not terribly smart, let this post serve as a monument, immemorial, of my prescience.
6. I realized, belatedly, that while I started typing at around 10pm Eastern, I didn’t click “Publish” until just after midnight. That is annoying. But it’s really only a technicality. You see, while I’m living on the East Coast right now, I was originally from the West Coast. Where it’s 3 hours behind. So it’s really still just after 9pm. On 4/20. That’s totally how timezones work.