Crypto is conflicted. 

Leading projects, including Bitcoin and Ethereum, have attracted significant attention from Wall Street, which now, at last, is taking cryptocurrency’s value propositions quite seriously. 

And then you have the dog coins, the meme coins, the joke coins: starting with dogecoin (DOGE) and its knock off, shiba inu (SHIB). 

The ever-institutionalized digital asset industry pretends it’s above such nonsense, but these tokens remain some of the most valuable. Both DOGE and SHIB are within the top 15 cryptocurrencies by market capitalization — the former nearly worth more than venture capital darlings Solana and Polkadot combined.

It’s an uncomfortable quirk, one increasingly exacerbated by Elon Musk. 

Ever since the SEC targeted the maverick billionaire for influencing Tesla’s stock price with his tweets, Musk has turned engagement-farming dogecoin diehards into sport, leading to a clear correlation between the Tesla founder’s tweets and the price of DOGE.

Musk has tweeted about dogecoin dozens of times over the past few years — sending it higher more often than not, albeit typically temporarily. It makes some degree of sense: traders lust for short-term price signals to pump and dump so-called shitcoins, trapping naively eager newbies into dangerous momentum plays in an infamously volatile asset class. 

So, quelle surprise that DOGE more than doubled this week as Musk prepared to take over Twitter following his long-awaited $44 billion leveraged buyout. And queller surprise-plus that Musk tweeted a picture of his pet Shiba Inu rocking a smock with a giant Twitter logo as that pump reached its crescendo, further fanning the pungent odor of speculatory bear market shenanigans.

It’s a pump driven by the frothy DOGE faithful pining for Twitter to integrate their favorite token for microtransactions and payment processing more broadly. This is despite the social media giant already supporting tips in bitcoin and ether for more than a year. And there’s a potential new avenue: Musk’s plans to charge for verified accounts. 

Wary, seasoned investors might look to value Dogecoin by its fundamentals. Musk was once interested in supporting Dogecoin development, its developers say, back when Tesla was eyeing its first bitcoin purchases. The idea was to work with its few remaining builders to optimize its throughput, fleshing out its potential utility as the meme-currency of the internet.

Throughput is not exactly a pressing concern for the network, considering practically nobody uses it (Dogecoin’s transactions are almost 90% lower than Bitcoin’s; boomer-chain Litecoin sees three times the amount; and even bygone network Ethereum Classic boasts about double.)

An open secret of crypto, though, is that clear fundamentals are inherently bearish for most blockchain valuations. Price discovery and related volumes are still mostly driven by pie-in-the-sky concepts of what might one day become of a favored protocol.

Still, sans-network effects, centralization of supply could prove a worthy reference. Half of all DOGE belongs to just 10 wallet addresses, 35% of which is custodied directly on Robinhood and Binance — one click away from sell-side order books. 

Zooming out, the top 100 Dogecoin addresses control, ironically, 69% of supply. The top 100 bitcoin (BTC) addresses, meanwhile, command less than 16% of all BTC in circulation. 

These stats should concern all DOGE holders, especially last year’s millionaires who’ve turned their stacks into their savings. A small number of whales have turned Dogecoin into a zero-sum game of hot potato. The preeminent strategy for everyone else: Trust the — often anonymous — whales to not crash the price, so, one day, they themselves might become the whale and dump their own, instead.

But there’s an even bigger threat: Musk’s fleeting attentiveness is now its primary value proposition — proving centralization of attention is a specter already haunting the most recent wave of buyers.

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As the cryptocurrency market rose slightly above $2.5 trillion, industry giants began to levy the decentralized industry’s growth as an inevitable phenomenon. However, a senior official from the Reserve Bank of Australia (RBA) argued otherwise, claiming that crypto’s eminent gains could be reversed by changing trends along with regulatory and monetary developments.

RBA’s head of payments policy, Tony Richards delivered a speech, regarding which of the three, Cryptocurrencies, Stablecoins, or Central Bank Digital Currencies are the future of payments, noting that there are manifold techniques to crush the crypto trend. These methods include a drop in the influence of fads, increased concern about the industry’s energy usage, as well as association with financial crimes, which can easily cause a reversal effect in crypto’s popularity.

“There are plausible scenarios where a range of factors could come together to significantly challenge the current fervor for cryptocurrencies…The current speculative demand could begin to reverse, and much of the price increases of recent years could be unwound.”, Richards said.

Is RBA against CBDCs?

While commenting on the destructible nature of crypto, Richards also pointed out that he does not entirely believe in CBDCs either, given that the issue is not of, whether an asset is regulated or unregulated, rather the question of if it is even required in an economy? However, he confirmed that as Central Banks across the world have begun testing CBDCs, RBA will also start research on the subject, despite its perspective that Australia does not need a CBDC.

“The bank acknowledges the argument being made internationally that with all the innovation that is occurring in the payments area, provision of a new digital form of central bank money for general purpose use could be important for safeguarding confidence in national monies and the role of fiat currencies.”, he added.

The majority of regulators globally are gravitating towards CBDCs since they offer centralized control, further enabling customer protection. Nevertheless, China already suffered its first case of fraud using Digital Yuan, henceforth, security cannot be guaranteed on decentralized blockchains or centralized e-wallets.

About Author

Journalism & Mass Comm. ‘21 graduate, Palak is a GenZ journalist with background in Lifestyle journalism & PR. At CoinGape, Palak is a junior crypto journalist preparing for Web 3.0