Remember how studying the fundamentals for investment is considered a good thing?Â
âCheck what tune the financial statement of an entity is singing. Study the industry thoroughly. Do some math, and make an investment decision. Donât be impulsive. Think long term.â
These are the nuggets that have been fed to us, since forever. These were the secrets to become a good investor. But, the theory seems to be cracking in recent times.Â
Itâs the internet revolution all over again. And, the storm is getting fiercer with every passing day. Every now and then, there is a new investment (or betting) tool on the block that leaves the dopamine-junkie investors wide-eyed. Sometimes, there is a Gamestop saga, sale of virtual art (Non-Fungible Tokens) or a new cryptocurrency. What fundamentals drive such episodes?
None. At least not in the short run. Thatâs what the trend with Dogecoin points at. Hereâs how much Dogecoin has fluctuated over the last month, especially in the last few days:
And, we could give lots of credit to Elon Musk for this. His breakthrough success at SpaceX and Tesla has made him so credible, so influential that even his jokes are considered with utmost sincerity.
So, this is what he tweeted about hosting Saturday Night Live:
Now, people started betting on the currency like crazy. Shooting up Dogecoinâs value to $1 was the aim.
But, Elon Musk ended up calling Dogecoin a âhustleâ during Saturday Night Live that made the value of the currency tumble down by 35% in just 24 hours!
(Rushing to look up "hustle" in the dictionary? Itâs modern-day slang that means unethical. Yeah, weird lingo).
Well, this was not the end. This is what he tweeted the very next day:
And this:
With each tweet, each statement, the value of Dogecoin is fluctuating. Thatâs how much power we have accorded to people of influence.Â
The mass-influencers are amassing the new currency for cheap, driving its popularity and making it acceptable. And, when we, the common masses give in, the prices rise. This makes them more powerful, more influential.
This is what happened with Bitcoins a few days ago...Â
Tesla started accepting Bitcoins and made a cool $122 mn in profits. Now, Elon Musk is accepting Dogecoin as a currency to send a satellite to the moon. Not just this. Heâs also dropping hints of Tesla accepting Doge as a currency. Come on fellas, spot the pattern! (Tweet this)
Blockchain-based currency is a concept we know very little about. Especially when new crypto-currencies are mushrooming in the market every other day. Itâs difficult to choose which one is better than the other. We werenât taught about it. And so, we look up to influential people to understand its scope. But, influence does not always mean wisdom (remember Hitler? At his peak, the guy had 6M âfollowersâ).Â
But we understand why this happens - it is just so easy. Our basic ape-instinct to copy kicks in!
As for Dogecoin, some people who have done their research are sceptical about the âstore of valueâ of the currency because it is programmed to create 10,000 dogecoins (max) every minute till eternity. The currency was just created as a meme. Even the creator wanted to dissuade people from holding it, hence the free supply. And, as the supply will rise, the price will fall (economics 101). So, will Dogecoin hold any value? (donât take our word for it, though - do your own research).
While we might feel this is the first time something like this is happening, it's not. History repeats itself. Humans fall into the same pit over and over again.Â
But, the thing with falling into a pit is that you don't see it. Why would you deliberately fall into one, otherwise? Yep, Tulip Mania all over again.
So next time, when you rush into a new trend, just stop for a second - and ask yourself - do I understand this well enough, or is FOMO driving me?
Itâs your hard-earned money, after all. Take care of it! đ¤
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