I talk about this so often it feels like it’s tattooed on my eyeballs: Don’t buy garbage coins.
That can be easier said than done, though. There are a lot of smooth-talkers out there who really, really want to sell you garbage coins and will go to insane lengths to try and do it. And there are a lot of influential talking heads who bought garbage cryptos and know it and want to cash out and leave other investors holding the bag.
They own – and, importantly, hype – cryptos with no meaningful use case, like Ripple (XRP). There are tokens with lousy, continually-crashing technical architecture like Solana (SOL). And there are even cryptos with zero technological improvements like Dogecoin (DOGE).
And there is also an endless stream of attempted “stablecoins” based on algorithms rather than actual collateral, which will inevitably collapse and lose all their value. We saw this with Luna (LUNA), and a lot of people trusted Mike Novogratz (who got a tattoo to show just how much he loves LUNA), and then lost a lot of money.
But, if you’ve been following along with us, you know better. And, like me, you’re constantly wondering why these things are so prevalent. Why don’t trash cryptos ever seem to go away? Bad companies like Celsius and FTX do, but it seems like every other day a new, terrible token hits the blockchain.
I’ll tell you what’s really going on here, because these things are more dangerous than they seem, even to savvy investors…
You Can Blame the “Bagholders”
Look at DOGE. It’s a terrible coin with zilch to offer anyone. It’s currently worth about half of what it traded for (I almost said “value”) in 2021.
But then again, Bitcoin (BTC), one of the best, most fundamental investments in crypto, is doing no better. Why is Dogecoin still around? Why hasn’t it become a smoking hole in the ground yet?
Two words: “Elon” and “Musk.” A lot of these coins are kept going by “bagholders,” traders and investors who can’t admit they’re wrong and who become, essentially, obsessed with supporting “their” favorite crypto no matter what. So long as there’s one person committed to a crapcoin, it won’t go away. And if that one person happens to have legions of slavishly devoted fanboys convinced he’s the second coming of John D. Rockefeller and Nikola Tesla all in one, well… So long as Musk owns DOGE and keeps rabbiting on about it, there will be DOGE.
That doesn’t make it a good investment, but it does mean it’s probably not going to $0, and it might even gain once in a while.
In fact, I need to make something clear. I do not support Dogecoin. I do not recommend investing in Dogecoin.
That doesn’t mean nobody ever makes money off it – and at least a handful of people have probably gotten rich off of it.
So, why don’t I recommend it? Because it’s totally unpredictable and it brings absolutely nothing of value to the table. Dogecoin doesn’t come close to meeting a single one of my 5 Ts criteria.
Dreams, Memes, and Schemes
I use the 5 Ts test to give ourselves the best possible shot at making money on sound digital asset investments. I choose coins with breakthrough technological prospects, good management teams, and solid tokenomics. When a coin meets all the criteria it’ll do better on average than the tokens which don’t.
How well Dogecoin does is not determined by what Dogecoin is, technologically. How well Dogecoin does is determined by fleeting ideas passing through the meme-space in which dupes congregate.
I can make pretty confident hypotheses as to whether a crypto’s technology is useful or not. I can objectively evaluate whether their development team knows what they’re doing and what that team’s accomplishments might be. All those are a known quantity.
When or why idiots will decide to buy Dogecoin is determined by totally unpredictable factors and the whim of a certain multibillionaire gadfly. It’s complete chaos.
What am I saying? There is no “investing” in Dogecoin because it’s not building towards anything like greater adoption or technological improvements. Dogecoin is essentially just gambling.
I’m not saying you’ll always lose, but I’m sure as hell not saying you’ll win. If you absolutely need to trade Dogecoin, and I don’t recommend it, only put in money that you are prepared to lose. It’s like a trip to Vegas.
And Dogecoin is a special exception here. Solana, on the other hand, is doing way worse. It’s lost more than 90% of its value in the past year alone. It’s inextricably linked to the FTX disaster. You can’t even gamble on SOL. It technically still exists, but it’s done.
So, my advice is, be careful, stick to strong fundamentals. Go by the 5 Ts. Don’t expect any investments to pay off overnight. We’re focusing on the two-, five, and even 10-year timeframes. If you absolutely must gamble, don’t have any delusions. Know that gambling is what you are doing, and don’t risk what you can’t afford to lose.