Dogecoin nosedives on Musk’s remarks; what does it mean for the cyptocurrency?

Summary

  • Dogecoin crashed by almost 32%.
  • The crash happened after Musk called it a ‘hustle’
  • The crash exposes the vulnerability of the digital asset

The meme-turned-frenzy cryptocurrency, Dogecoin, plummeted after billionaire Elon Musk of Tesla Inc (NASDAQ:TSLA) called it a ‘hustle’ in a live show.

At one point in time in the last 24 hours, the digital asset was down 31.7% from its one-day peak. It however, tried to recoup the losses later. As of now, Dogecoin is still trading lower by 14.5% from the Sunday’s peak, and down 11.47% in 24 hours.

"It's the future of currency. It's an unstoppable financial vehicle that's going to take over the world," he said – explaining the Dogecoin.

Now imagine a scenario: Mr Musk tweets about the buying the cryptocurrency in February, and it shoots through the roof. Three months later, the same person calls it a ‘hustle’ and it crashes. This shows, if anything, that the cryptocurrency, as on date is still volatile and bereft of any rally based on strong fundamentals.

This is akin to a rally in the shares of a company with no product. Some experts suggest that global liquidity surge, coupled with the calibrated curbs on non-discretionary spending has put various asset classes on steroids. First it was real estate, then it was stock markets, and now it’s the digital assets.

But the problem with any such rally is that such rallies often turn out to be bubbles – both in case of stocks as well as any other asset class, including cryptocurrencies. A classic example of this is the Indian stock markets, where equities are overheated despite the COVID-19 pandemic ripping the country apart – the price-earning multiple of benchmarks stands at an astounding 32, almost double that of China – the only country that didn’t see a recession last year.

So, it comes as no surprise that Mr Musk, on Thursday, advised caution on the digital assets. He, a huge proponent of digital assets, tweeted: "Cryptocurrency is promising, but please invest with caution!". There was also a video clip attached to the tweet in which he said, "it should be considered speculation at this point. And so, you know, don't go too far in the crypto speculation ..."

Meanwhile, SpaceX, owned by Mr Musk, will be launchinh the “DOGE-1 Mission to the Moon” by March 2022, in which the company will accepting the meme-inspired digital asset as payment.


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