Is Dogecoin really money or just an illusion?

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by Shaun Richards

Saturday night brought something really rather extraordinary as the worlds of finance and entertainment came together at least for a while. Here is The Hill on Saturday Night Live which was on NBC in the US.

Musk appeared on the show’s “Weekend Update” segment as fictitious financial expert Lloyd Ostertag. When asked about Dogecoin by co-host Colin Jost, Musk explained it is “the future of currency.”

“It’s an unstoppable financial vehicle that’s going to take over the world,” he said.

“I get that, but what is it, man?” co-host Michael Che asked.

“It’s a cryptocurrency you can trade for conventional money,” Musk responded.

“Oh, so it’s a hustle?” Che asked.

“Yeah, it’s a hustle,” Musk replied, letting out a laugh.

This begs quite a few questions of which the first is should NBC be showing this sort of thing which leads into the behaviour of Elon Musk to whom financial regulation foes not seem to apply. If we start with the claim that it is going to take over the world that is not a little bizarre but does feed into this sort of hype.

Speaking of hype there was also this.

CALGARY, ABMay 9, 2021 /PRNewswire/ – Geometric Energy Corporation (GEC) announced today the DOGE-1 Mission to the Moon—the first-ever commercial lunar payload in history paid entirely with DOGE—will launch aboard a SpaceX Falcon 9 rocket.

Geometric Energy Corporation’s DOGE-1 Mission to the Moon will involve Geometric Space Corporation (GSC) mission management collaborating with SpaceX to launch a 40kg cubesat as a rideshare on a Falcon 9 lunar payload mission in Q1 2022. The payload will obtain lunar-spatial intelligence from sensors and cameras on-board with integrated communications and computational systems.

Of course this involves Elon Musk again and we are running on the future of currency vibe again although maybe the view of space needs refining as last time I checked the Moon is not a planet.

“This mission will demonstrate the application of cryptocurrency beyond Earth orbit and set the foundation for interplanetary commerce,” said SpaceX Vice President of Commercial Sales Tom Ochinero. “We’re excited to launch DOGE-1 to the Moon!”

What is Money?

There is then a switch to implying this means that Doge is money.

Indeed, through this very transaction, DOGE has proven to be a fast, reliable, and cryptographically secure digital currency that operates when traditional banks cannot and is sophisticated enough to finance a commercial Moon mission in full.

We have seen a lot of claims for security for the various coins that have then hit issues. The statement about traditional banks seems to be in fact them saying no as they could finance this.Also “sophisticated enough” merely means you have enough money to do so and with the rise in the Doge price which Investing.com tells me has been 21,666% over the past year you could buy quite a few things. There is no sophistication here.

But the bit that stands out is “reliable” because over the weekend we also saw this.

Dogecoin DOGEUSD, -6.22% slumped Sunday after Musk’s “SNL” appearance failed to rally prices toward $1. Instead, the price of dogecoin, which was around 70 cents before the show started Saturday night, plunged as low as 47 cents. By Sunday evening, it had rebounded to about 57 cents, according to Coinbase. ( MarketWatch)

As you can see hopes that Doge would cruise to US $1 were replaced by quite a drop. On this there are two perspectives because if you have held Doge for only a month or so you were only losing some of your profits. But those who bought the SNL hype were making pretty quick losses and at the time of typing the price is 53.6 cents.

Next we get a mention of another of the functions of money which is as a type of measuring stick.

 It has been chosen as the unit of account for all lunar business between SpaceX and Geometric Energy Corporation and sets precedent for future missions to the Moon and Mars.

That’s going to be fun! Quite how you account with such swings I am not entirely sure. Ordinary or fiat currencies do have swings at times. Some consistently fall but that tends to be over quite long periods and moves like Doge has seen this weekend are vary rare. Even something like the Turkish Lira has only fallen by 16% over the past year versus the US Dollar. So in general they work as a unit of account although not always which is why the US Dollar is so popular in places like Argentina and Venezuela.

Doge

According to Dogecoin it is this.

1 Dogecoin = 1 Dogecoin

Also this

Dogecoin is an open source peer-to-peer digital currency, favored by Shiba Inus worldwide.

Shiba Inus is the dog in the pictures.

In case you think that there is more to it than this here is an interview with Max Keller who is a Core Developer for Dogecoin.

I was not involved in its creation specifically, but I think Billy and Jackson, the original creators, explained that quite well. DOGE was meant to be a joke and was built that way…….. it has become much more serious. Now, we are dealing with a lot of funds. Every time I look at the market cap, I get goosebumps. Thus, Dogecoin has developed into something more serious while managing to keep its fun side.

The market capitalisation referred to rose as high as 92 billion US Dollars on Friday and is 67 billion now.

Interestingly we move onto another of the functions of money but not the one mentioned.

As for the Dogecoin being a store of value, I believe it is more of an actual currency. I mean, there are lots of things in my apartment that have been paid for in DOGE…….. By the way, I used a service selling gift cards for DOGE, so I paid half the bill for my sofa with it. And just yesterday, I bought a keyboard for DOGE directly from someone.

Thus it is beginning to fulfil some of the medium of exchange function of money. In a sense the moonshot example we looked at earlier did that too although these seem to be quite specific examples because he only bought half off his sofa with it.

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Comment

We can look at this from the context of the very last part of the Bank of England press conference on Thursday when Bank of England Governor Andrew Bailey said this.

You mentioned cryptocurrency. I don’t like using that phrase and I’m afraid currency and crypto are two words that don’t go together for me so I’m trying to use the more neutral crypto-assets. I would only emphasise what I’ve said quite a few times in recent years. I’m afraid they have no intrinsic value. That doesn’t mean to say people don’t put value on them because they can have extrinsic value but they have no intrinsic value so I’m sorry, I’m going to say this very bluntly again, you know, buy them only if you’re prepared to lose all your money.

The first undercut is that the Bank of England can hardly be seen as a beacon of technology when the press conference is virtual but with no video. It was at least better than the previous “lack of bandwidth” issue but combining both makes you look archaic. Next is the issue of the Pound notes issued by the Bank of England which promise to pay the bearer the sum on the note but that is not really an intrinsic value either. The use of the word “fiat” in fiat currencies means that in another way. There are a couple of nuances to this as the Bank of England has some gold reserves but they would not go far especially if we note the expansion of the money supply over the past year. Also with commodity prices high some coins will have a far bit of intrinsic value, but that is not what he meant.

So as you can see Doge may have begun as a joke but in the famous words of Bob Monkhouse.

nobody’s laughing now….

It may be used more as a medium of exchange but for that to last it needs a more stable price. That is a problem because many or only in it to make money which leads to instability. But the central bankers are mostly upset because it disturbs their game of controlling both the amount and price of money. Indeed the expansion of the various coins looks to me to be a direct response to the expansion of the fiat money supplies.

So if it works The Waterboys were on the case.

You saw the whole of the moon
I was grounded
While you filled the skies
I was dumbfounded by truth
You cut through lies

If it doesn’t it seems they were also ready.

You stretched for the stars and you know how it feels to reach too high
Too far
Too soon
You saw the whole of the moon

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