Markets Are Musk’s ‘Toy’ As Mania Hits ‘Whippet In A Turtleneck’ Phase

“If Bitcoin continues to fall, it would be just one more warning shot that P/Es may be peaking,” Morgan Stanley’s Mike Wilson said earlier this week. “If Bitcoin is able to make new highs, it likely means the speculative frenzy isn’t over.”

That was on Monday.

Suffice to say the “speculative frenzy” wasn’t over. Four sessions of abject insanity later, the crypto crowd (which is, in some respects, indistinguishable from the crowd that drove shares of GameStop, AMC, and other vagrants into the stratosphere this week), took the baton, spurred on by Elon Musk.

I don’t know what you call the stage of a mania when an “asset” originally created as a joke surges ~600% in 24 hours because the richest person on the planet tweeted a picture of a dog wearing a turtleneck, but that’s the stage we’re in.

The chart below shows Dogecoin. The data is from Coindesk which, I assume, is just as reliable as anything else when it comes to Dogecoin. In the interest of veracity (and I have no idea why I bother), a more granular chart shows the coin peaking above $0.072, if that matters to you.

Attempting to “explain” that is clearly impossible. Or at least if you define “explain” as an attempt to offer a rational account.

Bloomberg dutifully tried its best. “Musk posted an image on Twitter featuring a whippet in a red outfit,” somebody called Gregor Stuart Hunter wrote, at 1:10 in the morning. “No further explanation was given, but a Musk tweet in December — ‘One word: Doge’ — was taken by some to refer to the coin, sparking a climb in the price.”

So, that’s where we are, folks. We’re at the “whippet in a red outfit” stage of the rally. And, again, I’d remind you that Dogecoin started as a joke, which is where it will doubtlessly finish at some indeterminate future date. But perhaps not before some lucky souls on Reddit make a few bucks.

Bloomberg went on to say that Reddit threads “have been touting the coin and linking its return potential to GameStop [with] some posters seem[ing] to dangl[e] $1 as a price target for Dogecoin.”

As for Bitcoin, Musk appended an emoji (and a hashtag) to his Twitter account, leading directly to a surge in the world’s dominant digital asset (figure below).

“Musk has suddenly become the most influential person on Twitter, taking the mantle from Donald Trump,” Oanda’s Craig Erlam remarked Friday.

“Given everything we’ve seen this week, this is increasingly looking like normal behavior,” Erlam added, noting that “whether Musk is an investor or just having a little fun doesn’t even matter at this point — markets are turning into his newest toy.”

Back in August, in “Gods,” I wrote that “when one combines the exponential nature of wealth creation in a capitalist system (especially during times of subdued economic growth) with modern market structure, the read-through is that a few fortunes will become so large, so fast, that the people associated with them will become gods,” beholden to no one — not regulators, not presidents, not nations.

Fast forward six months and we’re witnessing just that.


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12 thoughts on “Markets Are Musk’s ‘Toy’ As Mania Hits ‘Whippet In A Turtleneck’ Phase

  1. Maybe Jack Ma thought the same? And then Xi Jinping reminded him that, no, after all, he was just a successful shopkeeper.

    If the US authorities want to clip Elon Musk’s wings, they got nothing but choice…

    1. I don’t think that’s comparable. “Behave yourself” means something totally different coming from Beijing than it does from Washington, or at least when it comes to individual citizens with a high profile. That’s not to say the US government isn’t capable of conveying the message. It’s just to say that it would be much more difficult to convey that kind of implicit threat in the US to someone like Musk than it is for Xi to convey it in China to Ma.

    1. I mean it was literally invented for random people to hand out as cheap as free likes on forums. It literally is supposed to be essentially worthless. Whatever you want to say about Crypto in generally, Doge was supposed to be a joke and basically free. Since it happens to offer entertainment value it’s always been worth slightly more than 0.

      1. Finally. Someone gives me a compelling case for why a cryptocurrency has a value greater than 0. I’d pay 5 cents for humor and entertainment. Maybe I’ll buy some Dogecoin. 🙂

  2. Crypto exists outside of the traditional financial system and can govern itself. I’d venture to say that makes it worth more than zero.

  3. H., I don’t practically disagree with your views on crypto, or the implication of your question, namely that [most] crypto users don’t want ‘crypto’ as such but are merely engaging in arbitrage for gain measured in ‘dollars’ or other nation-state currency. However, the facts are that crypto trades in anything. One doge is worth 1 sat, currently, for example. That statement may be ‘meaningless’ to most people now and forever. But it doesn’t have to be. Not any more than ‘one USD is X EUR’ was meaningless before 1999.

    People seem to prefer/need ‘real’ currencies now, and they always may. If you don’t completely discount a future where a growing number of people prefer bitcoin (at whatever personal ‘cost’ to their portfolios, etc.), then you are missing part of the potential of btc, or other cryptocurrency. People have and continue to live completely off of crypto. Is this a growing, static, or ephemeral phenomenon? I don’t see how anyone can say with such certainty. That’s the investment case. Moreover, other cryptos have different value propositions. The developments on etherium (like layer-2 of btc) have wild use-case potential. Does that make ether at all valuable in the future? That will be dependent on the price of etherium network time/power and ether supply. Fortunately, that will be something which is easy to put a ‘price’ on, to etherium’s merit or detriment.

    Finally, you often make the cogent and urgent point that BTC will face regulation. And certainly BTC can become too onerous to hold for all but hodler-stalwarts if China or USA/dependents make it so. This will be a fun space to watch, however, because the regulatory power of any government shouldn’t be overstated. Bill Clinton was at the whim of bond traders, and Soros bullied the Brits. Capital flows are the blood of the world and Crypto is neovascularization. Any effort to stifle it will be inherently dangerous. Finally, forex is the largest market in the world. The sandbox should be big enough for innovative forms of exchange.

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