Dogecoin, the cryptocurrency that’s all the rage these days, was started as a joke. This “joke” cryptocurrency is now worth around $50 billion, worth more than some large well-known hotel chains and car manufacturers.
As of this publication, the parody coin that rose to popularity through social media and memes can’t be exchanged for much, and there’s no constraint as to how many Dogecoins can be in circulation.
Recap: a cryptocurrency that started as a joke and has almost no use cases and an unlimited supply is worth $50 billion.
Let that sink in.
At M1, we enjoy a good joke.
And we’re not here to tell you where you should invest your money or what you should do with it.
But we stand for a few fundamental principles:
- We don’t believe you can improve your financial well-being with a joke.
- You can’t build long-term, sustainable wealth by being cavalier about it.
There are three particularly disappointing elements to the Dogecoin mania:
1. Not all brokerages that talk about financial well-being act on it.
Some institutions in the brokerage space claim to focus on building individuals’ financial health. At the same time, they’re encouraging and enabling behaviors and activities that do the exact opposite. We see this in their product design, their messaging, their partnerships, and their features.
We don’t have anything against buying, selling, or trading Dogecoin and making money when enabling it. But we believe it’s disingenuous to wrap that with a message of improving financial health.
2. Misinformation and hyperbole are running wild and stoking emotions.
There’s a ton of exaggerated misinformation and hyperbole in general on the internet, and Dogecoin is subject to this as well. Tweets, posts, memes, and influencers feature and reference Dogecoin frequently.
In the pre-internet days, unscrupulous boiler room brokerages called unsuspecting, naive clients and convinced them to buy a stock that was “just about to break out” (think “Wolf of Wall Street”). Excited investors bought on this information, driving the price up. Then, brokers profited by selling into the rising market until investors were left holding the bag when the price tanked.
Today, anyone with an online following can promote anything they want. While some people choose to promote good things or are just having a good laugh others may be driving outcomes that directly benefit themselves, as intent and disclosures are typically not easy to discern.
Now, we’re not accusing anyone of illegal activity or purposely stoking irrational behavior. But, if you’re going to put your money into something, calm your emotions and ask yourself if an investment is right for you.
Caveat emptor to the max here.
3. It might be a bubble, and bubbles tend to burst.
We’ve seen this movie before, each time with different titles but virtually the same result. Still, many people believe, “This time is different.”
Dogecoin’s fast-rising price has led to concerns of a potential bubble in the cryptocurrency market. But bubbles don’t last.
Some recent and not-so-recent notable re-runs of this story include the housing crash from 12 years ago, the dot com bubble 20 years ago, the South Sea bubble 400 years ago, and the Dutch tulip mania 450 years ago.
Here’s a plot refresher: an initial buying rush in a market builds up; more people hear about the “riches” others are presumably making and they pile in, many with no knowledge of what they’re buying; the market price goes to astronomically insane levels relative to value; the price eventually peaks and then quickly and violently returns to its rational value; a few lucky people who got in early and rode the market on the way up to make a lot of money, and the vast majority lose money, or worse, lose all their money and are saddled with debt they used to leverage their position. End of story.
Our perspective: Stick to long-term investing fundamentals.
If your goal is financial well-being and long-term wealth accumulation, approach it with intentionality and stick to the proven, sustainable basics. Don’t be swayed by “pundits” predictions on where markets will go or the next investing fad. Don’t carry expensive debt. Regularly contribute to a diversified portfolio of assets that suits your risk tolerance. If you’re lucky to see outsized returns, treat them as anomalies—be thankful when they occur but don’t expect you can make them predictably.
Even historically successful investors can’t predict the market.
The Dogecoin phenomenon has certainly been interesting to watch. But we won’t be offering it on M1 anytime soon. There are plenty of other places to trade it if you’d like.
At M1, we’ll stay focused on helping people build durable wealth by providing helpful tools and advocating for a long-term mindset.
No laugh track required.