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Opinion: The Dogecoin TikTok Rally is a Bad Idea
TikTok is steam rolling over existing social media platforms. The new(ish) social media platform just hit 800 million monthly active users. One of the latest memes to go viral on TikTok is focused around one particular cryptocurrency; Dogecoin. The TikTok Dogecoin meme went viral early last week with the phrase “Let’s All Get Rich”. In the past week, Dogecoin has almost doubled in value. The rationale behind “everyone getting rich is this”. If every TikTok user bought $25 worth of dogecoin, then when Dogecoin hits $1, you’ll have 10k. Unfortunately, investing in cryptocurrency doesn’t exactly work like that. There is lots left out of the picture, and the Dogecoin TikTok rally is simply a bad idea.
An Infinite amount of Dogecoin
Dogecoin is different from other cryptocurrencies in that everyone knows it’s a joke, yet it’s achieved popularity anyway. Almost every aspect of Dogecoin was designed to be memeable, and joke worthy. One of the best examples of why Dogecoin is worthless is how many Dogecoins there are in existence. There currently exists 125 billion Dogecoins, and the cryptocurrency has no plans on slowing down production. Unlike bitcoin, which has a deflationary supply, the Dogecoin blockchain will continue producing Dogecoins forever.
The Dogecoin Rally is Irresponsible
The Dogecoin rally is not going to make the average TikTok user rich. It is an irresponsible “pump” perpetrated by individuals who know how to take advantage of a price rise. Almost half of TikTok users are between the ages of 16 and 24. If the users who’ve bought Dogecoin are new to cryptocurrency, then it is unlikely that they would know how to sell their Dogecoin, even if they wanted to. At the end of the day, the Dogecoin rally will profit the few at the expense of the many. The perpetrators of the meme are using clever tactics in order to entice people to purchase Dogecoin.
A common misunderstanding in cryptocurrency is if you have a lot of it, then there is a higher potential for gains. This is really not the case. With respect to Dogecoin, the units are worth so little, because there are so many Dogecoins in existence. In the case of bitcoin, there will only ever be 21 million, so scarcity is maintained. It’s much easier to understand why bitcoin is worth $10000 each, when there is a finite supply of 21 million. The fuelers of the Dogecoin meme are capitalizing on this misunderstanding by declaring that there is plenty of potential for growth.
Dogecoin Twitter Response
The makers of Dogecoin have published a response on twitter that is very reasonable.
“Be mindful of the intentions people have when they direct you to buy things. None of them are in the spot to be financially advising.
Make choices right for you, do not ride other people’s FOMO or manipulation.”
This tweet perfectly summarizes the situation. There are people on TikTok, advising you to buy an investment who have no business in doing so. Before taking the investment advice of someone on a social media channel, it is important to consider the intentions of the other person. What do they stand to gain?
The answer is quite a lot. By making a Dogecoin investment meme go viral, they are able to sell Dogecoin at higher and higher prices. This in turn gives them a high rate of return, but leaves the uninformed individual holding the bag.
What if Dogecoin went to $1.00?
If Dogecoin actually became worth $1.00 each, then this would mean several things.
- All Dogecoin would be worth $125 billion dollars
- Dogecoin would be the second largest cryptocurrency in the world (beating Ethereum)
If Dogecoin actually made it to $1.00 per coin, it wouldn’t stay at that price for very long. Long term holders of Dogecoin would be happy to cash in their investment. Dogecoin is relatively early to the cryptocurrency scene having been started in 2013. There are lots of people that have bought, and sold Dogecoin. The people that bought above the current price would love to get rid of their investment and not take a loss. It’s possible that it is these very people that are responsible for the TikTok meme in the first place.
The Need for Financial Literacy
People are going to lose money from the Dogecoin TikTok challenge. Furthermore, this is not the last time we will see social media leveraged to pump a cryptocurrency. Social media was partially responsible for the cryptocurrency bubble of 2017. This prompted Facebook, and Google to ban cryptocurrency advertisements. Banning the advertisements and crypto related content may be a good short term solution. However, a better long term solution is needed. People need to understand a good investment from a bad investment. Furthermore, people need the ability to make mistakes, and learn from them. Facebook banning cryptocurrency content is not going to protect people against making mistakes in the real world. The only thing that does, is protect Facebook against being held accountable for users losses. That makes sense, Facebook is a business that wants to protect their interests.
The need for financial literacy has never been greater. The worst part about the Dogecoin TikTok rally is that it actually worked. Investors who got in early nearly doubled their money in a week at the expense of others. This is quite unfortunate because they doubled their money on the serendipity of others. Ultimately, this means that this is not the last time TikTok will be used to pump a particular cryptocurrency. The main takeaway here is that people need to be informed. Dogecoin is a cryptocurrency that was designed to be a joke, not to bring riches to the masses. The world of cryptocurrency is rich with fantastically designed tokens and coins. Dogecoin is not one of them. The Dogecoin TikTok rally is a very bad idea.
