The price of Dogecoin (CCC:DOGE-USD) jumped 12% on Jan. 14 after Tesla (NASDAQ:TSLA) CEO Elon Musk tweeted that customers could now buy select Tesla merchandise using the cryptocurrency as payment.
“In a series of tweets, Elon Musk announced that Tesla is now accepting Dogecoin for payment for select Tesla products. For example, a whistle shaped like Tesla’s Cybertruck costs 300 Dogecoin. At current prices, that comes out to about $59,” stated InvestorPlace’s Joel Baglole. “A commemorative belt buckle to celebrate Tesla’s Gigafactory in Texas can be bought for 835 DOGE, or about $164.”
Either I’m getting old and forgetful, or crypto investors are getting desperate for Dogecoin catalysts, but isn’t this old news?
Either way, it hardly screams gamechanger.
Who Cares If Tesla Accepts Dogecoin?
When Musk first tweeted in mid-December that Tesla would accept DODE-USD as payment for some of its merchandise, the cryptocurrency’s price jumped more than 20%. “Tesla will make some merch buyable with Doge & see how it goes,” CNBC reported about the billionaire’s tweet.
So, Dogecoin gained 32% from two tweets a month apart, despite the fact the acceptance of the meme coin has been widely accepted for months now. The Dallas Mavericks began accepting Dogecoin for payment in March 2021. Mark Cuban’s team was the first to take the cryptocurrency as payment in the NBA. In August 2019, the Mavs started accepting Bitcoin (CCC:BTC-USD).
While Cuban’s team is ahead of the curve, other large businesses have gotten on board. The two leading meme stocks of 2021 — AMC Entertainment (NYSE:AMC) and GameStop (NYSE:GME) — both accept Dogecoin. Even The Kessler Collection — its luxury hotels include the Beaver Creek Lodge in Colorado — accepts the crypto for a night’s stay.
However, as with any cryptocurrency, I always like to perform a utility “sniff test” before considering whether it’s worth your while.
TheStreet.com recently discussed the meme coin with Alex Lemberg, the CEO of Nimbus Platform. Here’s what he had to say:
“It’s very hard to identify what that utility is with dogecoin and what it could be in 2022, primarily because dogecoin is meant to be a payment coin, unfortunately … though it is a highly inflationary coin just based on tokenomics and how much of it is produced and released into the market and how often it’s released into the market … [I]f I cannot find the utility value and it looks like the world can’t either, then dogecoin becomes a tradable asset instead of investible.”
Lemberg suggests that if its value can’t be pegged, its utility goes right out the window. I couldn’t agree more.
Desperate for News
My InvestorPlace colleague argues that the Tesla news legitimizes Dogecoin. I respectfully disagree. Musk would gladly accept buttons for payment if he thought enough people would follow through on buying one of his company’s electric vehicles.
The fact is, business is just business. Tesla’s acceptance of Dogecoin hardly qualifies as a rubber stamp of the cryptocurrency’s utility. If enough people tell Adam Aron, CEO of AMC, that they want to pay with Russian rubles, you can be sure that it will soon be accepting rubles as a form of payment.
It’s Capitalism 101.
As I’ve said before, and this relates to Lemberg’s comments in the previous section, you would have to be an idiot to pay for movie tickets with an appreciating asset. Now, if you’re one of the lucky ones who’ve made 2,000% on Dogecoin over the past 12 months, then yes, in this scenario, it makes sense.
If Dogecoin could be pegged at a specific rate to the greenback, then it becomes a no-brainer.
For investors to boost the price of DOGE-USD by one-third on what is ostensibly the press release version of the “Visa Accepted Here” sticker is pure poppycock.
Don’t be swayed by such nonsense. Soon enough, you’ll be able to buy a newspaper at your local convenience store using all kinds of cryptos, Dogecoin included.
None of them ought to be used to pay for payment of goods without some peg. So the greenback remains the gold standard.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
