Despite a 41% crash in DOGE price that absurdly was initiated by a bit on an American comedic skit television show, a perusal of online comments from DOGE hodlers shows no lack of optimism for future price behavior, a symptom of the times created by the Bubble of Everything and a belief that every thing that crashes will be resurrected in price again if one “just holds on.” Let’s explore how irrational DOGE hodler beliefs created irrational DOGE coin prices. In fact, most cryptocurrency owners are irrational and a bit reckless when formulating their beliefs about future price behavior,completely dismissing all risk analysis. The important principle to keep in mind is that during stages of price mania, irrational behavior actually helps, not hurts, the investor. Consequently, profitability is not a good metric to measure levels of extreme irrationality of DOGE hodlers. Only when blow-off tops established in asset prices quickly reverse and crash is irrationality finally revealed.
When Tesla billionaire Elon Musk appeared on a US comedic skit television show, Saturday Night Live, and made some disparaging comments about a cryptocurrency he had just hyped a few weeks ago to send the price soaring, Doge coin, its price promptly plummeted by 41% and promptly wiped out about $20 billion in market cap.
In reaction, many irrational DOGE coin HODLers took to the internet to express support for a long-term hold of DOGE coin and vomited a slew of irrational beliefs. To paraphrase some of these irrational beliefs, here are some:
(1) DOGE is still going to $1.00 no doubt, and the price crash is just an opportunity to buy even more before it soars to $1.00.
(2) DOGE is exactly the same as BTC, DOGE is for real and I’m in for the long term.
(3) People think DOGE is a joke coin but it was never started as a joke but as a serious cryptocurrency. People just forwarded the narrative of DOGE as a joke coin to hide the fact that it is a serious cryptocurrency and to prevent other people from getting in on the action. Buy all dips!
There were plenty more irrational beliefs spouted on the internet in addition to the above, but I don’t have unlimited time to recount them all. Let’s start with the first statement that DOGE is still going to recover and rise to an irrational DOGE coin price of $1.00. In the Bubble of Everything, too many people are now on board that every single asset price can only move higher, that no extended downward price movements are possible and that every single price dip, especially massive price dips, are merely opportunities to average down in price in buying the asset. While indeed, in a global financial market in which Central Bankers have created daily irrational asset price movements across thousands of assets as the norm, DOGE coin could perhaps rebound to a $1.00 or higher price.
I never have a problem with higher price predictions because honestly, I have no idea where the price of DOGE heads from here, though if I had to guess, it would not be higher than its previous high. However, the thing that irks me to no end are the posers that present themselves as experts, incessantly push higher prices for whatever cryptocurrency is the flavor of the month, and almost NEVER speak about any risk of buying into them simply because they want to drive prices higher to recoup losses they suffered from not treating the asset as a speculation as should have been done. To express unbridled optimism with no reservations that a 41% price crash is a can’t lose opportunity to average down is not just absurd, but extremely dangerous to highly impressionable people that may end up dumping their entire life savings into an investment without a basic understanding of the risks involved. The massive risk embedded in even the current day $0.47 DOGE coin price, despite its recent price crash, could yield yet much lower prices and higher prices are never guaranteed.
The unbridled optimism still surrounding DOGE coin among many reminds me of the massive pushback that met my comments of massive risk embedded in Gamestop shares when they rose to $380 and my statement that any smart person would sell the shares at that price due to the massive risk of continuing to hold. In response, some stated they were holding on until GME shares reached four figures and not selling before a four figure price was achieved. Though GME shares indeed spiked higher to more than $500 a share, this price lasted only a New York minute and happened after market hours during illiquid markets and low trading volumes, meaning that it was highly unlikely that any buyer looking to offload tons of shares at this price had any success in doing so A few days later, GME shares plummeted below $100, and a few days after that plummeted below $40 a share.
When GME shares rose back above $260, I stated anyone reckless enough to buy GME shares on the price spike higher at a price above $200 a share but lucky enough to hold on through the price crash below $50 should now definitely unload at $260. I spoke to a stranger personally that told me he had purchased GME at $190 a share and held on to $260 and asked me what I though he should do. I told him to thank his lucky stars for the luck he had and to sell, after which he told me that he was taking personal advice from an “expert” that told him to wait until GME shares reached $500 again before even considering a sale, because redditors were holding GME for the long term and their commitment to holding GME stock would definitely drive it back up to $500 a share at a minimum. What is GME stock trading at now? $143 a share.
Thus, that person, whom I’m 99.9% sure is still holding his position in GME, not only lost all his paper profits, but is now sitting on substantial losses, and will likely keep riding the share price down as he waits for it to rebound to $500 a share, which I highly doubt will ever happen. Why am I certain that person is still holding on to his GME position? Because I’ve literally met hundreds of people like him in the past. People that ask others that possess a true understanding of market risk what they would do if they were holding the same assets and then completely disregard all education about real market risk they just received simply because of a blind belief in much higher asset prices.
Let’s deconstruct number two now, the belief that there are no fundamental differences between DOGE and BTC and therefore that makes DOGE a long-term hold. First of all, every educated investor knows that no speculative asset is ever a multi-year long-term hold. Because BTC is a speculative asset and not a long-term hold and the BTC investors that have done the best are those that have repeatedly sold their positions before massive price crashes and repurchased multiple times more BTC with the proceeds of their pre-crash sale, DOGE coin is definitely not a long-term hold. Secondly, BTC’s market cap is more than 50 times the market cap of DOGE coin so to say they are the same asset is like stating Tesla is the same company as Nikola, thought it’s market cap is 130 times greater than Nikola’s. Even though TSLA doesn’t deserve to have a market cap 130Xs greater than Nikola’s and is still way overbloated in share price, this is still irrelevant to the argument that they are the same asset because perception drives market cap and obviously massive gaps in perception exist if one asset has a market cap 50 or a 100Xs greater than another asset in the same industry. Lastly, BTC supply is limited while DOGE coins supply is unlimited, so again, definitely not the same asset (even though BTCs supply will soon no longer be limited and perhaps wildly expansive, as I discussed the reasons for this shift, misunderstood by most, in The Most Important Bitcoin Podcast Ever, available to skwealthacademy patrons).
Finally, for those that say DOGE coin was never started as a joke is yet another example of owners of asset that completely disregard what the inventors of an asset state about it, much as there literally are hundreds of millions of people that support economic lockdowns based upon infection rates of corona through use of the PCR test completely disregard the fact that the inventor of the PCR test stated that the PCR test should never be used to diagnose infections. In years past, I literally have read comments from Ethereum owners that incredulously stated that comments about ETH issued by the inventor of Ethereum, Vitalik Buterum, should be completely disregarded because he had no idea what he was talking about!
It matters not one bit to irrational DOGE HODLers that the creator of DOGE, Jackson Palmer, has stated, on the record, in previous interviews: “When I jokingly tweeted about investing in Dogecoin in late 2013, I never imagined that the tongue-in-cheek cryptocurrency I had just brought into the world would still be around in the year 2018, let alone hit a $2 billion market cap like it just did over the weekend.” Again, DOGE HODLers will point to this statement and scream, “Look, I don’t care that he created DOGE. He obviously was wrong about not understanding where it could go, because he stated he was astounded at its $2B market cap and it has a $48.6B market cap now.” Again, this error in logic conflates insane prices with asset soundness, which leads to the conclusion that even though Mr. Palmer has stated that he created DOGE as a joke to illustrate the absurd valuations of thousands of other alt-coins, he “really didn’t mean what he said in the past” and that “clearly, he made such statements to conceal the fact that he launched DOGE coin as a serious cryptocurrency from day one.” To make it crystal clear that he founded DOGE coin as a satirical commentary on the absurdity of altcoin prices, Jackson initially set a supply limit on DOGE coins at one hundred billion coins, a satirical “cap” that he eventually removed in February 2014 in a second act of satire.
Are there DOGE coin investors out there that bought DOGE coin at a price of a few pennies a share and are still sitting on huge profits? Sure, but this doesn’t mean that irrational beliefs of DOGE coin did not heavily factor into the still favorable position they currently hold and that understanding of risk should not compel them to take profits now versus trying to regain lost paper profits at the risk of further potential steep losses. As I’ve stated dozens of times in the past, asset price movements do not prove an investment decision as right or wrong as no one has a crystal ball and can predict price movements of an asset that exists in a highly irrational market. Even if someone were to cash out of DOGE right now and take enormous profits and DOGE ratchets back up to $0.70, in my opinion, such a decision would still, even in hindsight, have been an intelligent investment decision.
People always think that intelligent investment decisions are defined by how close one’s asset sale was to the maximum possible return on that asset. This is wrong. Intelligent investment decisions can be marked by profits well below maximum possible returns because they prevented the loss of the majority of paper profits once held, or even real losses from materializing. Will this article wake investors up to the massive risk embedded in the market through my logical deconstruction of investor irrationality? Sadly, I doubt it.