Two words: Elon Musk — and two more words: Shibetoshi Nakamoto — explain it all.
Key Points
- Dogecoin’s creator just warned against “scammers” on the internet.
- So naturally traders bid up the value of Dogecoin 29%.
- Only one thing is for certain: When Elon Musk tweets about cryptocurrency, crypto prices go up.
What happened
Is a new guard replacing the old in cryptocurrencies? In early Thursday morning trading, as of 9:45 a.m. EDT, the price of Dogecoin (CRYPTO:DOGE) is surging 29% and Shiba Inu (CRYPTO:SHIB) is up 27%. Bitcoin (CRYPTO:BTC) on the other hand — the granddaddy of cryptocurrencies — is up a much more modest 4.1%.
What’s up with that?
Image source: Getty Images.
So what
At the most basic level, what’s happening here is momentum trading. Dogecoin got a profile lift yesterday when Elon Musk (a well-known crypto booster) engaged in a bit of Twitter banter with “Shibetoshi Nakamoto,” the pseudonym used by Dogecoin creator Billy Markus.
In the initial riposte, Nakamoto tweeted to his fans that “there are no promises in crypto, except from scammers.”
there are no promises in crypto, except from scammers.
the people telling the truth will tell you that it’s just all about risk. your profits only come from other people taking their own risk. if you lose money, you paid for someone else’s risk.
ultimately, that is your choice.
— Shibetoshi Nakamoto (@BillyM2k) October 27, 2021
To which Musk promptly replied: “If I send you 2 Doge, will you promise to send me 1 Doge?” (Musk was presumably riffing on the J. Wellington Wimpy cartoon quip, “I’ll gladly pay you Tuesday for a hamburger today.”
If I send you 2 Doge, will you promise to send me 1 Doge?
— Elon Musk (@elonmusk) October 27, 2021
Left out of the joke, Bitcoin continued its seemingly inexorable rise today, gaining the aforementioned 4.1% and reaching a total global market capitalization of nearly $1.2 trillion.
Now what
If you find long-term investing boring, and trading to be entertainment, then all this good-natured joshing on the internet naturally elicits a chuckle. It’s surely more fun to trade on tweets than to dig through the details of stock filings on the Securities and Exchange Commission’s database.
Buried lower in the comment stream on Twitter, however, was this cryptic warning from Nakamoto about the risk of buying coins of dubious value and infinite supply, on the hopes a greater fool will come along and pay you more for it:
anyone who falls for this absurdly obvious scam kinda deserves to lose their money
— Shibetoshi Nakamoto (@BillyM2k) October 27, 2021
It’s not clear which specific coin Nakamoto is warning is a “scam,” although the fact that Shiba Inu just hit a total market capitalization of $42.8 billion, surpassing Dogecoin at $40.1 billion and making Shiba Inu the world’s eighth-largest cryptocurrency, may be instructive.
All I can say is: The fact that we’re watching a frenzy of trading in imaginary money right here in the middle of earnings season, where Microsoft just reported a 49% jump in profits and Alphabet‘s earnings just rocketed 71%, is more than a little bit weird.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Bitcoin, Microsoft, and Twitter. The Motley Fool has a disclosure policy.
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