On November 13, 2024, the newly elected US President Trump appointed Elon Musk to lead a newly established government department, the Department of Government Efficiency (DOGE). The main goals of this department are:
1. Streamlining government red tape
2. Reduce over-regulation
3. Cut unnecessary expenses
4. Reorganize federal agencies
Interestingly, netizens jokingly called this new department the American version of the "National Development and Reform Commission."
Musk will be one of the two main heads of this "National Development and Reform Commission". In fact, Musk originally proposed the establishment of this government efficiency department (DOGE) as a joke. He also humorously said that the mascot of Dogecoin (DOGE), the Shiba Inu, may become the logo of the department.
To further the joke, Musk even used artificial intelligence to create a photo of himself as the head of the department and posted it online, which attracted widespread attention.
As the new division shares its name with Dogecoin (DOGE), the price of Dogecoin has risen by more than 100% in recent days and more than 400% in the past month.
So, what is the relationship between Dogecoin and Musk?
The birth of Dogecoin: From a "joke" to a cryptocurrency phenomenon
Dogecoin was born in 2013. Its founders, Billy Markus and Jackson Palmer, are actually ordinary programmers.
At that time, the atmosphere in the cryptocurrency market was a bit tense, and they were dissatisfied with this overly serious atmosphere, so they decided to make a "joke" coin to make fun of this overly serious market.
To make it more interesting, they also specially selected a Shiba Inu emoticon that was very popular at the time as the mascot and logo of Dogecoin.
The design of Dogecoin is actually very similar to Bitcoin, and most of the code comes from Bitcoin. It can be said that Dogecoin is, to some extent, a "shelled version" of Bitcoin - it changes the shell, adjusts some parameters, and then claims to be a brand new currency (in fact, this is similar to the practice of Litecoin and Bitcoin Cash).
In essence, the birth of Dogecoin is an example of "lightweight" cryptocurrency. It did not have any grand goals at the beginning, but with its low threshold and friendly image, it attracted a large number of newcomers and further lowered the entry threshold of the cryptocurrency market.
In the early days, the main use of Dogecoin was small rewards, especially on social platforms such as Reddit and Twitter, where users used Dogecoin to express their gratitude or support for creators. This micro-payment scenario brought it a large number of active users.
In the first few years, Dogecoin's development was relatively stable, with a market value of only a few million US dollars. But by mid-2017, the situation changed. During that bull market, Bitcoin soared from $1,000 to nearly $20,000, and Dogecoin also rose with Bitcoin, with its market value soaring tenfold to over $20 million.
2021: Celebrity Effect and the "Zoo Market"
In 2021, Bitcoin ushered in a new round of bull market, with its price soaring from US$8,000 to US$70,000, an astonishing increase.
The popularity of Bitcoin not only made the overall cryptocurrency market active, but also made Dogecoin rise with it. The market value of Dogecoin quickly soared from US$20 million to around US$100 million.
However, the real explosion point of Dogecoin appeared on Musk's Twitter. That year, Musk frequently talked about Dogecoin on Twitter, even calling it "the people's cryptocurrency." Each of his tweets attracted great attention from the market, and the price of Dogecoin rose rapidly.
From January 1, 2021 to its peak on May 8, Dogecoin's market value soared from US$100 million to nearly US$100 billion, an almost astronomical increase.
For traditional value investors, this is almost a cognitive revolution.
Think about it from another perspective: How big is a market value of $100 billion?
If this market value is placed in the A-share market, it would be difficult to find a few companies in the entire A-share market with a market value close to 700 billion yuan.
In China, the market capitalization of leading companies in many industries has not yet reached this scale.
For example, the market value of Gree Electric Appliances is only more than 200 billion yuan, Hengrui Medicine is only more than 300 billion yuan, and Yili shares are only more than 180 billion yuan.
However, a currency with no practical application, no cash flow, and unclear functions can actually reach a market value of 700 billion yuan, which completely breaks the mindset of value investors.
Dogecoin has grown from a programmer's joke to a market value of nearly $100 billion, which may be one of the most amazing stories in investment history.
At that time, the stories of getting rich quickly were more attractive. Many people invested in Dogecoin early on, and their assets increased a thousand times in just a few months.
However, what is a common mistake we make when investing?
That is to infer the process based on the results.
After hearing stories about getting rich quickly, many people start to think: "If I had invested $10,000 a year ago, I might have $10 million now."
Looking back, many things seem simple, but in fact, there is no point in calculating them in this way.
Take a look at Dogecoin’s price fluctuations.
If you invested in Dogecoin in the early stage, you might have sold it when it increased by 5 or 10 times. Moreover, everyone can feel the pain of the ups and downs along the way, and few people can bear it.
The Dogecoin market in 2021 has indeed been talked about a lot, and it has also exposed some "truths" in the financial market.
A major principle of investing is to look for assets that have real value and can generate cash flow.
However, the Dogecoin craze has completely overturned this traditional concept.
Many people find this situation "absurd" because according to traditional investment logic, the value of an asset should be based on its profitability and intrinsic value, rather than simply relying on market sentiment.
But market reactions always reveal some reality.
"The market is always right."
When we fail to understand market fluctuations, it is often because we lack sufficient understanding of market rules, sentiments and trends.
The surge in Dogecoin is not accidental; it is the result of multiple factors working together.
