This article is excerpted from Tom Yeung’s Moonshot Investor newsletter. To make sure you don’t miss any of Tom’s potential 100x picks, subscribe to his mailing list here.
Quiet Announcements Are Shaking Up Meme Coins
On Jan. 20, crypto site UpOnly published a 100-minute interview with Ethereum (CCC:ETH-USD) co-founder Vitalik Buterin.
Buried in the stream of consciousness was news that few picked up on:
Mr. Buterin confirmed he’s helping Dogecoin migrate to a Proof of Stake (PoS) protocol.
That’s game-changing for the “original” meme coin. Dogecoin (CCC:DOGE-USD) currently looks a lot like Litecoin (CCC:LTC-USD) — energy-intensive and reliant on an inefficient Proof of Work (PoW) system. A transition to PoS would vault Dogecoin beyond Bitcoin’s (CCC:BTC-USD) ecosystem from both a technological and practical standpoint.
Meanwhile, a 169-word press release by GameStop (NYSE:GME) has made waves in another coin: Immutable X (CCC:IMX1).
“The partnership establishes an up to $100 million fund in Immutable X’s IMX tokens,” announced the firm. “Immutable X will also become a layer-2 partner and platform for GameStop and the Company’s NFT marketplace.”
Though Dogecoin and Immutable X’s futures are far from certain, these Moonshots remain far better bets than the tokens and NFTs that are bilking investors out of millions.
The $500 Investment You Won’t Regret
In April 2021, I recommended that readers put $500 in Dogecoin:
“Dogecoin may rise to $10 or go to zero. Either way, if you have $500 invested, you’ll win all the same. Because in the end, DOGE is a day at the racetrack. Profits are welcome, but most people are there to cheer their favorite horse on — whether they win or lose.”
Since then, Dogecoin has delivered on that promise, rising from my initial 17 cents to 74 cents before sliding back down again. Those who sold out following Momentum Master’s recommendation would have locked in a 4x gain. And those who ignored the “sell” signal would be no worse off for it financially.
And everyone had some fun in the process.
“Serious money is flowing to the joke cryptocurrency Dogecoin,” noted the New York Times the following month. As institutional investors started piling in, retail investors would revel in how the tail was finally wagging the Wall Street dog.
Barking up the Wrong Tree
But if you didn’t put $500 into Dogecoin, that’s fine too.
And I get it. Trust me, I do.
Buying Dogecoin is moronic from a “traditional” investment perspective. The coin offers no profits… no interest payments… no fundamental value. Even buying a case of port wine will leave you with a drinkable stash 20 years down the road. Cryptocurrencies offer no such Dionysian benefit.
Dogecoin also has a usability problem. Its 1-minute block time can only handle 33 transactions per second making it impractical as a means of exchange. By comparison, Visa (NYSE:V) can handle 65,000 transactions per second.
A large portion of Dogecoin also remains locked on Robinhood (NASDAQ:HOOD), a platform that annoyingly isolates your assets. Want to pay for your AMC Entertainment (NYSE:AMC) tickets in Dogecoin? Having a million DOGE on Robinhood is about as useful as having a safety deposit box hidden away in Switzerland. Even though your money’s secure, it’s impossible to access at a moment’s notice.
Why a CFA Charterholder Recommends Dogecoin
So why would I, as a CFA charterholder, ever recommend Dogecoin?
That’s because I’m acutely aware that we’re also human. We get tired, scared, greedy and afraid of missing out. Especially when we see our friends (or YouTube celebrities) making a lot of money with virtually zero effort.
The fear of missing out has driven investors to make increasingly risky bets. Crypto token Safemoon (CCC:SAFEMOON-USD) would briefly become the most popular cryptocurrency on Twitter in 2021, despite clear signs that its anonymous founders were skimming off the top. And NFT scammers have little trouble convincing believers into buying rug-pulls.
Consider Doodled Dragons, an NFT project that would supposedly donate proceeds to the World Wildlife Fund.
“actually. f*ck that. our charity will instead now be… my bank account. cya nerds,” wrote the Twitter account behind Doodled Dragons before disappearing with at least $30,000 of donations.
And that makes Dogecoin different.
The “joke” cryptocurrency is actually an improvement of Litecoin, which is itself an upgrade over Bitcoin. DOGE has a 1-minute block time and (despite its limitations) can still process 5 times more transactions than does BTC. Its $0.20 average gas fees are also less than a tenth of its bigger brother’s.
But what makes Dogecoin stand out is its independence. The meme coin runs on its own protocol and wallet, making it the equivalent of the Pennsylvania Railroad of the cryptocurrency world. Not only does Dogecoin control the railcars (token), it also creates the rail (protocol) and stations (exchanges) that everything else uses (Meanwhile, tokens like Shiba Inu (CCC:SHIB-USD) are built on other cryptocurrencies like Ethereum; these coins look more like Amtrak running on borrowed freight rails).
There are rare occasions, however, where I’ll accept tokens that run on other cryptocurrency “rails.” And Immutable X is one of those instances.
Immutable X is a Layer 2 protocol built on Ethereum for the purpose of transferring NFTs. It works with a “ZK Rollup” technique, batching thousands of trades off-chain before putting them onto the chain in a single transaction.
The technique itself is nothing new. Crypto exchanges use similar techniques all the time to lower trading costs. And in the world of equities, stockbrokers have used order batching for decades.
But Immutable X is different for two reasons:
- Financial backers. IMX counts Naspers Ventures as a key investor. The venture capital firm has previously bought into stars like DappRadar and insurance firm Collective.
- Business development. IMX’s team has already courted TikTok as a customer. Its partnership with GameStop shows it’s not finished yet.
It’s essentially the same reason I’ve recommended coins like Hedera Hashgraph (CCC:HBAR-USD) and Crypto.com Token (CCC: CRO-USD). Like e-commerce sites of the late 1990s, many cryptocurrencies today are indistinguishable by their strategy or technology. Winners like Amazon (AMZN) are players with the best 1) management and 2) funding.
FOMO? Meet JOMO
That’s why $500 in Dogecoin (or Immutable X) makes so much sense. It’s hard to completely ignore the NFT/crypto noise. So if you’re going to be tempted to buy a Moonshot crypto or NFT, you might as well buy the most promising of the bunch.
Researchers at Google also found evidence that this strategy works. In a study, they found that FOMO (the fear of missing out) can be replaced by JOMO (the joy of missing out) by disconnecting from the fixation. And as for those who can’t completely tune out? Researchers found that creating strategies to reduce engagement also works.
That’s where DOGE and IMX come in.
As lower-value cryptocurrencies, these two Moonshots retain the potential of many smaller coins. Dogecoin could rise 10x and still be worth just half of Ethereum’s market cap. Meanwhile IMX barely breaks the top 100 cryptos by size.
At the same time, these two players are far higher quality than many of today’s tokens and NFTs. A strong community goes a long way when it comes to meme investments.
The Scam Coins of the Internet
On the other end of the DOGE/IMX spectrum live the pump-and-dump coins of the internet.
Consider CxCoin (CCC:CX-USD), an alleged fraud run by YouTube star Paul “Ice Poseidon” Denino.
On Monday, fellow YouTuber Coffeezilla posted a 23-minute video outlining how the former Twitch star may have bilked investors out of hundreds of thousands of dollars.
“I thought something was off, but every time I’d go to Ice… he always gave me something that sounded reasonable,” the investigator reported. “What he didn’t tell me was he took out $200,000 at the very beginning… and another quarter million dollars from the marketing wallet… and $300,000 from the liquidity pool.”
This isn’t the first time “Ice Poseidon” has run into trouble. In 2017, the popular streamer received a one-month suspension from Twitch for publishing a viewer’s phone number before getting permanently banned from the platform in another incident.
Nor is it the first time questionable actors have fooled investors. Last week, prices of Avalanche-based Wonderland (CCC:TIME-USD) saw prices drop another 60% after reports emerged that one founder was a long-time serial scammer. Prices are now down 98% from its peak.
But as cryptos and NFTs find increasingly inventive ways to hide scams, it’s going to be more important than ever to tread carefully in this brave new world.
How Important is Proof of Stake?
On Monday, CoinShares published a study suggesting Bitcoin miners emit less than 0.08% of all carbon emissions.
“In the grand scheme of things, the carbon emissions emitted by electricity providers supplying the Bitcoin mining network are inconsequential,” the report concluded. “Within that context, we believe the small addition to global emissions is absolutely worth the cost.”
The internet predictably responded with a mix of cynicism and doubt.
“Does coinshares [sic] have a relationship/know any entrepreneurs mining bitcoin with flared gas?” one Twitter commentator wrote before having the tweet deleted.
Bitcoin’s critics have a point. Proof of Work is a needlessly inefficient protocol. No matter how much computing power the network has, first-generation cryptos throw almost all of it out. It’s the equivalent of running 1,000,000 high-wattage light bulbs to read a single book.
Dogecoin’s migration to a Proof of Stake protocol looks to change that. Rather than have computers solve pointlessly difficult problems, the protocol would elect trusted nodes to run the “light bulbs” as needed. Meanwhile, tokens like Immutable X create workarounds to reduce waste and lower fees.
Researchers have known of Proof of Work’s shortcomings for years. And next-gen Moonshots are finally doing something about it.
P.S. Do you want to hear more about cryptocurrencies? Penny stocks? Options? Leave me a note at firstname.lastname@example.org or connect with me on LinkedIn and let me know what you’d like to see.
FREE REPORT: 17 Reddit Penny Stocks to Buy Now
Thomas Yeung is an expert when it comes to finding fast-paced growth opportunities on Reddit. He recommended Dogecoin before it skyrocketed over 8,000%, Ripple before it flew up more than 480% and Cardano before it soared 460%. Now, in a new report, he’s naming 17 of his favorite Reddit penny stocks. Claim your FREE COPY here!
On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing.