The cryptocurrency market slightly improved in the last seven days, but one digital token doubled its value as experts warned against the “false optimism” created by a certain billionaire’s backing for the asset.
Dogecoin (DOGE) rose nearly 100 per cent to $0.12, making it the eighth biggest cryptocurrency by market cap (m-cap). Elon Musk’s fondness for DOGE and the fact that the crypto’s price shot up after he announced taking over Twitter brought back concerns around crypto regulations.
“Given that Musk is a common thread between Twitter and Dogecoin, the excitement is reflected in the price rally,” said Vivek Iyer, partner at Grant Thornton Bharat.
“Crypto is not for the faint-hearted and even if you have a heart of steel, there is a need for regulations from a customer protection standpoint, as it becomes more and more integrated with the rest of the ecosystem,” he said.
Musk acquired Twitter for $44 million on Friday. Just after the deal was signed, DOGE rose from $0.08 to $0.14, taking its m-cap to $19.7 billion. The jump was out of place as at the same time other major tokens like Bitcoin, Ethereum, Cardano and Solana continued to show muted performance.
At around 2 pm IST on Monday, DOGE was trading at $0.116 with an m-cap of $15 billion, according to data from coinmarketcap, which tracks cryptocurrencies.
“Thousands of coins that were ‘hot coins’ are dead today, and brand pushing by individuals such as Elon Musk gives people false optimism,” said Gaurav Mehta, founder of Blockchain auditing and taxation startup Catax.
“And as a result of Elon Musk’s Dogecoin advocacy, his brand’s value pervades the cryptocurrency market and causes a price spike. He tweets, ‘Doge Barking at the Moon’ and price jumps to 20 per cent and that is a highly dangerous trend of polarizing financial markets,” he said.
“Price movements and the underlying fundamentals are not always correlated. Price moves because of many reasons including macroeconomic factors, speculations, liquidity etc,” Gaurav Arora, senior vice president at crypto exchange CoinDCX said.
Several reports have emerged stating that Musk may consider accepting payments on Twitter via Dogecoin. However, it is not clear how such payments will operate.
“If Musk plans to let users send messages and make payments on Twitter via DOGE, this can impact the DeFi ecosystem,” said Edul Patel, CEO and co-founder of crypto investment platform Mudrex.
DeFi removes centralised institutions like central banks and governments from financial transactions. The transfers can be made directly from digital wallets. The cryptocurrency was based on the concept of DeFi. However, with such price fluctuations, it is unclear if it is as “decentralised” as it is said to be.
“Evangelising for such coins and utilising them for pump-and-dump schemes on events such as the acquisition of Twitter is a ‘digital power abuse’,” Mehta said.
“Financial authorities must pick up their game and speed their fight against tech-feudalism to defend the sovereign financial system and most important technologically illiterate investors from false promises,” he said.
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