Information Cascade to the Moon
The beginning of the year phenomenon of space travel perhaps best sums up the hype around cryptocurrency. A truly pop cultural event fueled by a billionaire playboy philanthropist, quarantine boredom, and pipe dreams of becoming filthy rich without barely having to lift a finger; it seemed like everyone was going to the moon with doge. Not that information cascades aren’t common in financial markets, to a certain degree information cascades form the basis of most financial markets. If the majority of people think something is valuable, it probably is. Popularity in itself has inherit value, not also accounting for the network effects that propagate from a community of like-minded individuals acting some what in unison.
What really set doge apart was the power that an information cascade has to assign value to something designed with no intrinsic utilitarian value. Ironically, ‘the token was created in 2013 as satire about the proliferation of dubious crypto coins at the time’ (NY Times). A meme coin which literally derives itself from the perpetually surprised face of the Japanese Shiba Inu dog breed of the “Doge” meme as its logo and namesake. Yet in “January 2021, Dogecoin went up over 800% in 24 hours, attaining a price of $0.07, as a result of attention from Reddit users, partially encouraged by Elon Musk and the GameStop short squeeze. In February 2021, Dogecoin hit a new high price of $0.08 following Twitter encouragement from Musk, Snoop Dogg and Gene Simmons. In March 2021, Dallas Mavericks owner Mark Cuban announced his NBA team would allow purchasing tickets and products with Dogecoin; within two days, Cuban had declared his franchise had become the top Dogecoin merchant, having carried out 20,000 transactions”.
Citations:
https://www.investopedia.com/articles/investing/052715/guide-understanding-information-cascades.asp
https://en.wikipedia.org/wiki/Dogecoin