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.
Elon Musk Joins Twitter’s Board. What’s Next?
On Monday, Tesla (NASDAQ:TSLA) CEO Elon Musk revealed he had taken a 9.2% stake in Twitter.
This was no mistimed April Fool’s joke.
Instead, it was a deliberate move by one of Twitter’s most prominent users to gain greater sway over the platform. And he got precisely what he wanted.
“I’m excited to share that we’re appointing @elonmusk to our board,” Twitter CEO Parag Agrawal tweeted the following day after shares jumped 22%. “He’s both a passionate believer and intense critic of the service which is exactly what we need on @Twitter, and in the boardroom, to make us stronger in the long-term.”
Perhaps punters are right to assume Jeff Bezos will now buy a rival social media platform out of jealousy.
But I wouldn’t hold my breath. Instead, I’d sooner bet on the one thing we already know Mr. Musk enjoys:
Thumbing his nose at the SEC by promoting Dogecoin (DOGE-USD).
Source: Catalyst Labs / Shutterstock.com
The Top Doge of the Meme Coin Pack
First, let’s be clear.
Dogecoin has zero fundamental value.
Much like fine art… collectible stamps… or even the U.S. dollar… Dogecoin only has value because others believe it to be so.
That doesn’t mean these assets are worthless.
Far from it.
Dollars are used to lubricate trade and store value — essential elements for any well-functioning economy. Fine art and collectibles bring joy to the world (and the occasional pang of envy).
Of course, the moment the market collectively believes the assets are worthless, these assets can quickly go to zero. Anyone who has studied the history of the German Mark or the Zimbabwe Dollar will know these currencies were once so devalued people used them as wallpaper.
But cryptocurrency and NFTs have pushed the non-fundamental truth of these assets to its breaking point. Today, there are 2.2 million token contracts on the Binance chain alone. When it costs virtually nothing to mint a new coin or NFT, you can be sure that enterprising individuals — and unscrupulous scammers — will create as much supply as the market allows.
Emerging from the Crypto Graveyard
The virtually unlimited supply of new cryptos has created a vast graveyard of defunct could-have-beens. Only 380 of the 2.2 million tokens available on the Binance Smart Chain have any meaningful market capitalization, according to tracking site BscScan. You have better odds of winning the Daily 4 lottery than randomly picking a token of value.
And that’s why the Moonshot Investor rarely recommends any meme coins. Though you might occasionally score a 100x home run, you still end up behind if you had to buy 9,999 other coins that went to zero.
However, some bets seem to perform well, despite having little real-world use.
And Dogecoin fits that bill.
The Next Dogecoin Breakout?
When I first gave Dogecoin a 5-star review in early 2021, the 2-cent coin had already imprinted itself on investors’ minds. The coin was initially launched in 2013 when barriers to entry were still high and joke investment choices were limited.
That gave Dogecoin an almost unbeatable head start in the meme coin world. If you’re trying to drum up attention for a speculative asset, it helps to have Garlicoin (GRLC-USD) as your only competition.
Today, Dogecoin continues to benefit from its legacy, despite having no technological benefit over Litecoin (LTC-USD). Celebrities from Elon Musk to Mark Cuban have touted the coin as the “strongest” crypto in existence. And in August, Ethereum (ETH-USD) co-founder Vitalik Buterin joined the Dogecoin Foundation board, vowing to bring Proof of Stake (PoS) functionality to the legacy blockchain.
From a trading perspective, the coin is also surprisingly easy to buy. The coin is available on Robinhood, a platform that’s remained popular with millennial investors.
And now that one of Dogecoin’s biggest celebrity fans has joined Twitter’s board, any well-timed tweet by Mr. Musk could send Dogecoin rocketing out of its narrow trading range.
Investors looking for riskier bets have a wide range of other options. Small-cap cryptos… NFTs… not to mention the 2,199,692 Binance tokens with zero value.
But picking anything halfway decent is harder than it looks. Shiba Inu (SHIB-USD) was only one of many Ethereum-based tokens that gifted 50% of itself to Vitalik Buterin as a prank. The rest are now footnotes in crypto history. And social media can create such a loud echo chamber that it often becomes difficult to separate the truth from the hype.
There are some potential winners that stand out. Immutable X (IMX-USD) and Hedera Hashgraph (HBAR-USD) have strong corporate backing, while Solana’s (SOL-USD) third-generation technology puts it ahead of rivals.
Today, I’m adding a riskier wager to the list: Sologenic (SOLO-USD), a decentralized exchange and NFT marketplace on the XRP (XRP-USD) network.
The reasons to buy Sologenic are straightforward:
- Deflationary. The coin burns 0.01% of each transaction, a figure small enough to maintain well-functioning markets but large enough to make a difference in its supply.
- Useful. SOLO focuses on solving some of the real-world issues faced by XRP buyers, including asset tokenization, data storage and stablecoins.
- Low Competition. Unlike Polygon (MATIC-USD) and other coins fighting for a slice of the Ethereum pie, SOLO faces far less competition in the XRP universe.
- Momentum. SOLO jumped 70% this week on speculation around its decentralized NFT marketplace.
Sologenic is also an implicit bet on the future of XRP, a cryptocurrency currently sitting squarely in the SEC’s crosshairs. A legal win for XRP parent Ripple Labs — a not-unlikely possibility — will send SOLO soaring.
The speculative coin does bear some major investment risks. SOLO’s focus on XRP gives it outsized regulatory risk. And it’s still a relative newcomer with NFTs; cross-chain NFT transfers have security issues of their own.
But for those looking to take a flyer, it’s still a far better bet than the thousands of alternatives vying for a place on Moonshot’s “buy” list.
Dogecoin: Some Patience Required
Pity the investor who bought Dogecoin in 2014. Two years on, the coin had lost 80% of its value as the novelty wore off. A similar phenomenon happened in 2017…
…and then again in 2018 when the coin dropped a similar amount.
Each time, Dogecoin would mount a stunning comeback, rewarding investors with even-greater gains.
But that process often took years. Anyone who bought in 2018 would have needed to stay invested until 2021 to break even.
That means most Dogecoin investors never see outsized returns. Even now, the entire market cap of DOGE changes hands once every five days, 30 times faster than for stocks like Apple (NASDAQ:AAPL).
Some will find that exciting. Momentum Master offers a winning strategy for those looking to trade every several days. And Elon Musk’s Twitter announcement sets Dogecoin up for some short-term gains.
But for those looking to buy and hold, it’s a ride best enjoyed with your eyes closed. In an asset class where 80% losses are the norm, it often seems as if investors who temporarily lose their wallet passwords have the best chance of weathering the storm.
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.