Musk’s favorite crypto doubles in value, skeptics warn
The cryptocurrency market improved slightly over the past seven days, but one digital token doubled in value as experts warned against the “false optimism” created by a certain billionaire’s support for the asset.
Dogecoin (DOGE) rose nearly 100 percent to $0.12, making it the eighth largest cryptocurrency by market capitalization (m-cap). Elon Musk’s fondness for DOGE and the fact that the cryptocurrency soared after he announced his takeover of Twitter brought back concerns about crypto regulations.
“Given that Musk is a common thread between Twitter and Dogecoin, the tension is reflected in the price increase,” said Vivek Iyer, partner at Grant Thornton Bharat.
“Crypto is not for the faint of heart, and even if you have a heart of steel, there is a need for regulation from a customer protection point of view as it becomes more and more integrated with the rest of the ecosystem,” he said.
Musk bought Twitter for $44 million on Friday. Shortly after the deal was signed, DOGE rose from $0.08 to $0.14, taking its m-cap to $19.7 billion. The jump was misplaced as other major tokens such as Bitcoin, Ethereum, Cardano and Solana continued to show muted performance.
Around 2 pm IST on Monday, DOGE was trading at $0.116 with a m cap of $15 billion, according to data from coinmarketcap, which tracks cryptocurrencies.
“Thousands of coins that were ‘hot coins’ are dead today, and brand pushing by individuals like Elon Musk is giving people false optimism,” said Gaurav Mehta, founder of Blockchain audit and tax startup Catax.
“And as a result of Elon Musk’s Dogecoin advocacy, the brand’s value permeates the cryptocurrency market and causes a price spike. He tweets, ‘Doge Barking at the Moon’ and the price jumps 20 percent, and it’s a very dangerous trend of polarizing the financial markets,” he said.
“Price movements and the underlying fundamentals are not always correlated. Price movements due to many reasons including macroeconomic factors, speculation, liquidity etc,” said Gaurav Arora, senior vice president at crypto exchange CoinDCX.
Several reports have surfaced saying that Musk may consider accepting payments on Twitter via Dogecoin. However, it is not clear how such payments will work.
“If Musk plans to allow users to send messages and make payments on Twitter via DOGE, this could impact the DeFi ecosystem,” said Edul Patel, CEO and co-founder of crypto investment platform Mudrex.
DeFi removes centralized institutions such as central banks and governments from financial transactions. The transfers can be made directly from digital wallets. The cryptocurrency was based on the concept of DeFi. But with such price fluctuations, it is unclear whether it is as “decentralised” as it is said to be.
“Evangelizing for such coins and using them for pump-and-dump schemes at events like the acquisition of Twitter is an ‘abuse of digital power,'” Mehta said.
“Financial authorities must step up their game and step up the fight against techno-feudalism to defend the sovereign financial system and the most important technological illiterates from false promises,” he said.
