Elon Musk and Twitter set up a Meme room for success
This article is excerpted from Tom Yeung’s Moonshot Investor newsletter. To be sure not to miss anything of Tom’s 100x potential picks, subscribe to his mailing list here.
Elon Musk joins Twitter’s board of directors. And after?
Monday, You’re here (NASDAQ:TSLA) CEO Elon Musk has revealed he has taken a 9.2% stake in Twitter.
It wasn’t a bad April Fool’s joke.
Instead, it was a deliberate move by one of Twitter’s most prominent users to get a bigger grip on the platform. And he got exactly what he wanted.
“Excited to share that we are appointing @elonmusk to our Board of Directors,” Twitter CEO Parag Agrawal tweeted the following day after shares jumped 22%. “He is both a passionate believer and intense critic of service, which is exactly what we need on @Twitter and in the boardroom, to make us stronger in the long run.”
Meanwhile, shares of other social media companies would also rise. Metaplatforms (NASDAQ:Facebook) added 5% to its share price, while Break (NYSE:BREAK) would increase by 6%.
Bettors may be right to assume that Jeff Bezos will now buy a rival social media platform out of jealousy.
But I wouldn’t hold my breath. Instead, I’d rather bet on the one thing we already know Mr. Musk likes:
Thumbing the nose at the SEC by promoting Dogecoin (DOGE-USD).
The Top Doge of the Meme Coin Pack
First, let’s be clear.
Dogecoin has zero fundamental value.
Just like fine art… collectible stamps… or even the US dollar… Dogecoin only has value because others believe it.
This does not mean that these assets are worthless.
Far from there.
Dollars are used to lubricate commerce and store value – essentials for any well-functioning economy. Fine art and collectibles bring joy to the world (and sometimes a hint of jealousy).
Of course, the moment the market collectively believes assets are worthless, those assets can quickly drop to zero. Anyone who has studied the history of the German mark or the Zimbabwean dollar knows that these currencies were once so devalued that people used them as wallpaper.
But cryptocurrency and NFTs have pushed the non-fundamental truth of these assets to breaking point. Today, there are 2.2 million token contracts on the Binance Chain alone. When it costs next to nothing to mint a new coin or NFT, you can be sure that enterprising individuals – and unscrupulous scam artists – will create as much supply as the market allows.
Getting out of the crypto graveyard
The virtually limitless supply of new cryptos has created a vast graveyard of dead who might have been. Only 380 of the 2.2 million tokens available on the Binance Smart Chain have a significant market cap, according to tracking site BscScan. You have a better chance of winning the Daily 4 lottery than randomly picking a valuable token.
And that’s why the Moonshot Investor rarely recommend meme coins. While you can sometimes score a home run 100x, you’ll still find yourself behind if you were to buy another 9,999 coins that fell to zero.
However, some bets seem to work well, despite their low real-world usage.
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 released in 2013 when barriers to entry were still high and joke investing choices were limited.
This gave Dogecoin an almost unbeatable edge in the world of meme coins. If you are trying to draw attention to a speculative asset, it is useful to have Ailcoin (GRLC-USD) as the only competition.
Today, Dogecoin continues to benefit from its legacy, despite having no technological advantage over Litecoin (LTC-USD). Celebrities from Elon Musk to Mark Cuban have touted the coin as the “strongest” crypto out there. And in August, Ethereum (ETH-USD) co-founder Vitalik Buterin has joined the Dogecoin Foundation board, pledging to bring Proof of Stake (PoS) functionality to the legacy blockchain.
From a business perspective, the coin is also surprisingly easy to buy. The coin is available on Robinhood, a platform that has remained popular with millennial investors.
And now that one of Dogecoin’s biggest celebrity fans has joined Twitter’s board, any timely tweet from Mr. Musk could send Dogecoin out of its tight 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 zero-value Binance tokens.
But choosing something half-decent is harder than it looks. shiba inus (SHIB-USD) was just one of many Ethereum-based tokens that offered 50% of itself to Vitalik Buterin as a prank. The rest are now footnotes in crypto history. And social media can create such a noisy echo chamber that it often becomes difficult to separate the truth from the hype.
There are some potential winners who stand out. X immutable (IMX-USD) and Hedera Hashgraph (HBAR-USD) enjoy strong business support, while At Solana’s (SOL-USD) third-generation technology puts it ahead of its rivals.
Today I add a riskier bet to the list: sologen (SOLO-USD), a decentralized exchange and NFT marketplace on the XRP (XRP-USD) network.
The reasons to buy Sologenic are simple:
- Deflationary. The coin burns 0.01% of each transaction, a figure small enough to keep the markets functioning but large enough to make a difference in its supply.
- Useful. SOLO is focused on solving some of the real-world problems faced by XRP buyers, including asset tokenization, data storage, and stablecoins.
- Low competition. Unlike Polygon (MATIC-USD) and other coins battling 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 that is currently in the crosshairs of the SEC. A legal victory for XRP parent Ripple Labs – an unlikely possibility – will send SOLO skyrocketing.
The speculative coin carries major investment risks. SOLO’s focus on XRP gives it outsized regulatory risk. And he’s still a relative newcomer to NFTs; cross-chain NFT transfers have their own security issues.
But for those looking to pick up a flyer, it’s still a much better bet than the thousands of alternatives vying for a spot on Moonshot’s “buy” list.
Dogecoin: a little patience required
Too bad for the investor who bought Dogecoin in 2014. Two years later, the coin had lost 80% of its value as the novelty faded. A similar phenomenon occurred in 2017…
…and then again in 2018 when the coin dropped a similar amount.
Each time, Dogecoin made a stunning comeback, rewarding investors with even bigger gains.
But this process often took years. Anyone who bought in 2018 would have had to stay invested until 2021 to break even.
This means that most Dogecoin investors never see outsized returns. Even now, DOGE’s entire market capitalization changes hands once every five days, 30 times faster than stocks like Apple (NASDAQ:AAPL).
Some will find this exciting. Moose Master offers a winning strategy for those looking to trade every day. And Elon Musk’s Twitter announcement sets Dogecoin up for near-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 that investors who temporarily lose their portfolio passwords have the best chance of weathering the storm.
PS Do you want to know more about cryptocurrencies? Penny stocks? Choice ? Drop me a note at [email protected] 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 rapid growth opportunities on Reddit. He recommended Dogecoin before it skyrocketed over 8000%, Ripple before it skyrocketed over 480%, and Cardano before it skyrocketed over 460%. Now, in a new report, he names 17 of his favorite Reddit penny stocks. Claim your FREE COPY here!
As of the date of publication, Tom Yeung had (neither directly nor indirectly) any position in the securities mentioned in this article.
Tom Yeung, CFA, is a Registered Investment Advisor on a mission to simplify the world of investing.