How far can Dogecoin and Shiba Inu coins go? – Quartz

In 2013, a new cryptocurrency, Dogecoin, was hit as a joke poking fun at the speculative frenzy surrounding Bitcoin. Then last August, an anonymous developer created the coin Shiba Inu, the dog mascot of Dogecoin, using the previous prank. Somewhere along the way, the internet gags got very real.

The two ‘memes’, as they are called, are now the 9th and 10th most valuable cryptocurrencies by market cap with a collective value of $ 79 billion. On Wednesday (October 27), Shiba Inu briefly exceeded the value of the eight-year-old dogecoin for the first time. The coin has skyrocketed on speculation that it could be listed on the Robinhood exchange.

The crypto market is full of antics. But coins are among the riskiest and most confusing investments. While other cryptocurrencies have at least one declared intention, such as bitcoin (form of payment) or ether (currency for Ethereum, a blockchain enabling decentralized applications such as contracts), coins are themselves. quite explicitly a collective joke.

Experts say the coins, although they have no underlying purpose, accumulate value solely based on speculative market demand. While speculation has driven up the prices of many assets over the past year, including memes stocks, cryptocurrencies, non-fungible tokens, and other collectibles, the prices of meme coins are on the rise. now the most recent. Many retail investors will be burned if they fall and when they fall.

Dogecoin, coin of Shiba Inu and FOMO

Cryptocurrency values ​​are skyrocketing. The price of bitcoin, the leading cryptocurrency, has nearly doubled since early 2021, while the ether coin has quintupled. Smaller coins, including Dogecoin and Shiba Inu coins, saw an even more drastic movement.

Dogecoin is cheap, at just $ 0.23 per coin, but the Shiba Inu coin is even cheaper: $ 1 will buy you almost 14,000 coins as of October 28. There is essentially an unlimited supply: a quadrillion of Shiba Inu coins (that’s 15 zeros). This allows retail investors to accumulate hordes of coins at a lower cost, a principle that is emphasized in Shiba Inu’s white paper – or “raster paper” (pdf) as its anonymous author Ryoshi calls it. His rivalry against Dogecoin is perhaps the biggest motivator behind the Shiba Inu coin project.

Dogecoin was originally intended to tip creators online and the developers behind Shiba Inu are rolling out a “decentralized exchange” around the coin and other tokens, called ShibaSwap, the point of the Shiba Inu coin and dogecoin. is not clear. But Shiba Inu’s motivation is clearly to dominate the dog-themed coin market through collective action.

“We have earned the nickname of Dogecoin Killer because the value of SHIB is primed and ready to exceed the value of Dogecoin,” Ryoshi writes. “Even though SHIB never reaches $ 0.01, between our advertising and our utility, SHIB will be proportionately worth more than the popular canine memecoin.”

The project has attracted investors in part because, as bitcoin, ether, and other established cryptocurrencies become more expensive, cheaper coins provide an opportunity to generate disproportionate early returns (and losses). . The logic behind these returns, however, is the psychology of an asset bubble, not the fundamentals. “People put their money in bitcoin … because they hear other people making a lot of money and there’s this fear of missing out, so they don’t want to be left behind,” said Itay Goldstein, professor of finance and economics at the Wharton Business School at the University of Pennsylvania. Even cheap parts capitalize on the same FOMO.

Coins even support critics’ argument that the crypto market, as a whole, is primarily a vehicle of speculation with no real use. “For [meme coins] having value is a bad statement about how people value a coin without really understanding what it does, ”says Eshwar Venugopal, professor of finance at the University of Central Florida. “I don’t think the average investor in the cryptocurrency market really cares about what this project does, but rather speculation.”

Merav Ozair, blockchain expert and fintech professor at Rutgers Business School, fears this could have serious consequences for the entire crypto space. “I’m afraid it will break down, explode in the face of people who took the risk, and then give a bad name to anything that has to do with blockchain and cryptocurrency,” she declared. “People don’t pay attention to real use cases. “

Memes reshape finance

Internet memes can basically be any element of popular culture online, although they are better known as viral jokes, pictures, or videos. As their influence in pop culture and politics has grown for decades, their influence in finance has only just begun. In 2021, meme stocks like GameStop and AMC Entertainment turned heads after retail investors on Reddit and Discord’s WallStreetBets forums banded together to inflate the stocks of short sellers they said were undervaluing. the actions. (A hedge fund, Melvin Capital, lost 53% of its investments in January 2021.)

Now, communities on Reddit, Twitter, and other social media seem to be growing similarly around coins, increasing their values ​​more and more. The key distinction – and the risk to investors – is regulation. Public companies must provide financial information and quarterly statements. While GameStop’s skyrocketing stock prices show how online chatter and collective action can drive stock prices up (even disconnected from its underlying value), the company is generating real income and assets. Coins themselves are investment vehicles with no real activity or product. And the lack of regulation in the United States means that consumers don’t know much about who is in charge of certain cryptocurrencies or what their basic finances look like. Even basic mandatory financial disclosures will bring a “radical change” to the way cryptocurrency projects are rated by consumers, Venugopal said. Transparency, in other words, could wipe out the riskiest investments.

The value of the cryptocurrency remains a bit of a mystery, Goldstein said. Experts still don’t fully understand how cryptocurrencies should be priced, fundamental knowledge that could protect consumers from speculative bubbles. “It’s easier to analyze stocks because we have frameworks that we can lean on,” Goldstein said. “The problem with cryptocurrencies is that you really don’t know what the price should be. In a sense, almost anything can be justified.

Comments are closed.