22 April 2021

Dogecoin.D

How a meme moved markets

When H.G Wells asked “Has the world gone mad? Or have I?” he probably wasn’t referring to crypto. Yet, here we stand, in the midst of the space’s meteoric ascension to mass adoption, staring down the barrel of a $50bn meme.

That Dogecoin, a smiling Shiba Inu with an unlimited supply, has scaled the rarified heights of the Top 5, is a stark reminder that the crypto market, even with its new institutional custodians and a total cap in excess of $2Tn, is still rooted in a tangle of cultural phenomena that trades in memes as much as tokens.

There’s no way to couch it. While hundreds of projects have worked tirelessly for years to garner recognition through committed development, this bull season’s arguably brightest moon has been ushered in by an army of streamers atop the shoulders of a bored multi-billionaire with a penchant for shitposting. The yawning chasm between projects focused on building disruptive technologies and those fuelled purely by social engagement was brought into stark relief as Doge began its Herculean climb last week, rising from $0.08 to a high of $0.45 in a matter of days, riding a 100% daily candle to a jaw-dropping $66bn valuation. In doing so, the humble doge claimed frontiers not yet grazed even by ancient behemoths like Ford and The Marriott Group.

So this is our present situation. On one hand, a wealth of institutional interest from global investment firms and tremendous strides in blockchain technology, on the other, the world’s most expensive prank, writ large. If you’re confused, don’t worry, I challenge you to find someone who isn’t.

The market maintained its commitment to high drama over the weekend, with Bitcoin plummeting from its All-Time-High above $64k to a low of $51k on Sunday. In a bizarre confluence of climactic events, the network’s hashrate almost halved for a short period due to power outages in China, while a 9000 BTC sell-off on Binance resulted in the liquidation of $9,3bn in longs.

Entering the crypto market tends to be a trial-by-fire, but last week’s newcomers should be lucky to still have their eyebrows intact.

Gazing out at a sea of tentative recoveries, it appears that this week has been marked by a cautious optimism as investors rally to reclaim the bullish momentum that has dominated 2021 so far. From a macro perspective, the weekend’s dump could serve as a much needed correction, representing a -13% drop in the wake of a run in excess of 600% YTD.

Even as some semblance of stability returns to the market, with large and mid cap tokens similarly observing rapid retracements after a spell of dizzying gains, doge remains an anomaly. Having shed 30% of its $0.45 ATH, the token has enjoyed consolidation around $0.30 in a show of strength that likely saw several Bloomberg terminals being thrown out the windows of exasperated traders.

It’s been said that in a bull market everyone’s a genius, but last week’s market action left seasoned traders with their pants down, deflating over-bloated egos and slashing a red pen across days and weeks of carefully curated technical analysis.

As crypto continues its onward march to mass adoption, it’s inevitable that the growth to come will be fraught with bigger, stranger, events that lay bare the complex dynamics of an emerging asset class driven chiefly by younger generations. Doge’s ascension is just another chapter in the canon of crypto’s absurd history.

One thing is clear, though, as we anticipate the next fix of high-wire volatility: those in it for the tech have clearly failed to anticipate TikTok.