Elon Musk added #bitcoin to his bio. Then, he started tweeting about Bitcoin and the joke-turned-serious Dogecoin. Now, more people are looking to invest in cryptocurrency. But what are cryptocurrencies? Does everyone agree with Musk? And what does a currency named after a meme have to do with investing?
What is Bitcoin?
Cryptocurrencies are stored digitally on the cloud or a computer and are not issued or regulated by an authority, such as the federal government. Created in 2009, Bitcoin was the original decentralized cryptocurrency whose inventor uses the alias Satoshi Nakamoto. Bitcoin is mined by computers solving mathematical problems. The currency is stored in a “digital wallet,” which is not protected by the FDIC and is bought and sold on “Bitcoin exchanges,” such as Coinbase, Bitstamp or Bitfinex. Bitcoin transactions are anonymized, which has made it a currency of choice for individuals engaged in illicit activities.
Wow. Much Dogecoin. Very Crypto
To understand Dogecoin, you must understand the Doge: It’s a meme of a Shiba Inu dog. So, this cryptocurrency is a digital coin with a picture of the Doge.
The coin was at one point valued at $2 billion and is once again growing in popularity and value. Dogecoin was originally a joking tweet by Jackson Palmer, “Investing in Dogecoin, pretty sure it’s the next big thing.” Palmer bought the domain name and was then contacted by Billy Markus, who had already created “bells,” a joke cryptocurrency based on the Animal Crossing video game. Together, they created Dogecoin, largely based on Bitcoin’s code but easier to mine (or “dig”).
Dogecoin blew up on Reddit. Palmer and Markus worked with the Reddit Dogecoin community to raise money for charitable causes, including sending the Jamaican bobsled team to the 2014 Winter Olympics. Eventually, a cryptocurrency called Moolah became heavily involved in Dogecoin trading; it went bankrupt in 2014, causing Dogecoin investors to lose heavily. Its founder, Ryan Kennedy, was investigated for fraud and money laundering before being convicted for multiple counts of rape. Dogecoin has started to jump in value again due to Musk tweeting about purchasing some for his son. Still, Palmer is now a cryptocurrency skeptic, feeling that the story of Dogecoin is a cautionary tale.
Where do they fit in? Elon Musk, David Portnoy and Sebastian Siemiatkowski
Musk is a huge proponent of Bitcoin, Dogecoin and cryptocurrency. But other investors have many reservations. Portnoy, a day trader and popular figure in the GameStop movement, invested in Bitcoin and other cryptocurrencies at the urgings of the Winklevoss twins. Then, he sold them in a panic when the value of cryptocurrency dropped. He feels that cryptocurrency is weighted against ordinary investors and vows never to invest in it again. Siemiatkowski, Klarna’s CEO, thinks that the rhetoric and advertising around Bitcoin are misleading and regulations are needed to prevent investors from being taken in without considering financial risks.
Will you invest in crypto and ride the Dogecoin wave?