Elon Musk, the Tesla
billionaire who’s helped the “joke” bitcoin rival dogecoin become a major cryptocurrency this year, has outlined exactly why he supports the memecoin over the likes of bitcoin, ethereum and other cryptocurrencies.
The bitcoin price has fallen sharply over the last month, losing around 25% of its value and hitting the price of ethereum and most other major cryptocurrencies—including the meme-based dogecoin.
Musk, speaking to Time magazine after it named him Time’s 2021 Person of the Year, said he thinks dogecoin is better suited for transactions than bitcoin and has a “much higher potential.”
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“Bitcoin is an interesting example and the prime mover on this,” Musk said in a video shared to Twitter by Time.
“The transaction volume of bitcoin is low and cost per transaction is high. Bitcoin is maybe suitable as a store of value but fundamentally bitcoin isn’t a good substitute for transactional currency. Even though it was created as a silly joke, dogecoin is better suited for transactions,” Musk said, explaining, “the total transaction flow that you can do with dogecoin, transactions per day, is substantially higher [than bitcoin] and it has much higher potential.”
Musk, who also told the magazine he doesn’t think dogecoin, bitcoin, ethereum or any other cryptocurrency will fully replace fiat currency, has now said via Twitter that “Tesla will make some merch buyable with doge and see how it goes,” following in the footsteps of fellow dogecoin supporter and technology investor Mark Cuban who added dogecoin support for NBA team Dallas Mavericks merchandise in March.
The bitcoin price has soared over the last 12 months as traders and investors bet it will act as a hedge against the inflation created by huge government Covid-19 stimulus measures. In May 2020, famed macro investor Paul Tudor Jones made headlines when he revealed he thought bitcoin was the “fastest horse to beat inflation.”
However, Musk has said he thinks dogecoin’s inflationary nature could help it dominate the crypto payments space.
“Dogecoin is slightly inflationary but that inflationary number is a fixed number as opposed to a percentage,” Musk told Time this week. “So that means over time its percentage of inflation actually decreases. That’s actually good because it encourages people to spend rather than hoard it as a store of value.”
Musk also said his experience in the payments industry means he understands how the money system works better than most.
“I could really wax on about the nature of money for hours because I played a significant role in creating PayPal,” he said. “My understanding of the money system at a fundamental level of how it actually works, the detailed mechanics of it, there are very few people that understand it better than me.”
The massive bitcoin price rally, taking bitcoin from under $20,000 per bitcoin this time last year to highs of almost $70,000 last month, has helped the broader crypto market surge to a combined value of around $3 trillion.
However, Musk denied his tweets are a factor in bitcoin and crypto price swings even after his tweets have repeatedly boosted the dogecoin price over recent years and his post that Tesla would stop stop accepting bitcoin payments because of concerns over its environmental impact tanked the bitcoin price by 15%.
“Markets move themselves all the time based on nothing as far as I can tell,” Musk said. “So the statements that I make, are they materially different from random movements of the stock that might happen anyway? I don’t think so.”
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Ethereum, the second-largest cryptocurrency after bitcoin, has rocketed 500% over the last 12 months, far outpacing bitcoin’s rally amid a surge of interest in ethereum-based non-fungible tokens (NFTs) and decentralized finance (DeFi). Many ethereum rivals have also soared as investors bet they could win market share from ethereum.
Dogecoin, helped on by support from the likes of Musk and other high-profile investors and influencers, has climbed a blistering 5,000% over the last year—even though the dogecoin price is now down almost 80% from its all-time high set in May ahead of Musk’s much-hyped appearance on comedy sketch show Saturday Night Live.
Since then Musk has called on dogecoin developers to upgrade the meme-based cryptocurrency with faster transaction times and lower fees in order to “beat bitcoin hands down.”
The wider bitcoin and crypto market also remains highly volatile and has fallen sharply in recent weeks, wiping almost $1 trillion worth of value from the combined market.