Reported by Zhao Yi, Hu Jinhua, a reporter from China Times (www.chinatimes
Reported by Zhao Yi, Hu Jinhua, a reporter from China Times (www.chinatimes. net. cn) in Shanghai
Since Musk, the world's richest man, announced his acquisition of Twitter, the price of Dogcoin has been skyrocketing. As of press release, CoinGecko data shows that the latest trading price of Dogcoin is approximately $0.14, with a price increase of over 120% within a week. As of now, with a market value of over 18 billion yuan, Dogcoin has jumped to become the eighth largest cryptocurrency in the world by market value. Driven by this, the prices of other meme currencies such as ShibaInu and Tamadoge are also rising.
In fact, Musk has never mentioned how the acquisition of Twitter will empower Dogcoin, but rather through the use of images with elements of 'dog' and 'Twitter logo' to subtly hype it. Since 2020, Musk has repeatedly promoted Dogcoin, and for a large number of young people who follow Musk, Dogcoin is one of their most familiar digital assets Yu Jianing, co chairman of the Blockchain Special Committee of the China Communications Industry Association, told reporters from the China Times in an interview.
In Jianing's view, if Musk wants to transform Twitter into a Web3.0 product, compliant stable currency or other mainstream assets are its better choice. Dog coins, on the other hand, are just a tool for Musk to use his social media celebrity status to drive retail investors who follow him to invest, and even chase gains.
How long can dog coins fly?
What is the direct connection between Musk's acquisition of Twitter and cryptocurrency? A significant portion of the funding for Musk's acquisition of Twitter comes from the coin circle, and many coin circle operating institutions, including Coin An, have provided public financing for Musk's acquisition of Twitter, "independent international strategy researcher Chen Jia told China Times.
In addition to funding, Musk seems to be planning to use more encryption technology to "arm" Twitter. According to foreign media reports, on October 28th, a spokesperson for Coin Security stated that Coin Security is forming a new team dedicated to researching how to use blockchain and encryption technology to help Twitter. Coin's new team will explore how to build on chain solutions to address Twitter's existing issues, including Musk's repeated complaints about the proliferation of robot accounts.
The reporter learned that Twitter launched a reward function in 2021, allowing users to send Bitcoin to creators through the platform. In February of this year, Twitter added Ethereum to its tip feature.
Twitter's new CEO, Musk, can be described as a "loyal fan" of Dogcoin. As early as May this year, with the help of multiple tweets from Musk, Dogcoin soared to a historic high of $0.73. In June, when Gougou Coin plummeted by 10%, he sent a push to support Gougou Coin, narrowing its decline to 1.2%.
In this regard, Yu Jianing stated that Gougou Coin had previously increased by nearly 300 times within five months at the end of 2020, from $0.002 to $0.74. However, when speculation and FOMO sentiment reach the peak, a huge amount of asset foam will emerge, and the foam will inevitably burst, and the market risk will become higher and higher. After reaching its peak, Gougou Coin fell from $0.74 to $0.05, and some investors not only lost all their returns but also lost their principal.
We need to take history as a lesson. Investment involves risks, and digital asset prices can rise or fall sharply, and even some digital assets may have zero value in extreme cases, "said Yu Jianing.
Worthless meme coins
A reporter from the China Times noticed that meme coins, represented by dog coins, often experience sharp rises and falls, but there are still investors who are not tired of it. In fact, the "ancestor" of meme coin - dog coin, which was born in 2013, was originally just for a joke, and its founder cleared all positions of dog coin long ago, and firmly said that he would never regret it, because he created dog coin purely to make friends happy, and in addition, it has no market value.
But a large number of meme coins have already arrived one after another. According to CoinMarketCap data, as of February 2022, there were over 5000 meme tokens, and this number may increase as more people create their own versions.
Yu Jianing introduced that meme coins are digital assets based on meme culture. In the environment of the internet community, meme cultures such as emoji, emoji, and facial expressions have become very powerful and have strong self diffusion ability. Therefore, the hype nature of meme coins is extremely strong.
The reporter learned that extreme price fluctuations are a major characteristic of meme coins. Dog coins have fallen by 50% within a year, while Chaigou coins have fallen by 80%, and many smaller meme coins have even returned to zero. Previously, when Netflix's Squid Game went viral, the price of Squid's meme coin, which had the same name as it, soared by over 86000% within a week. However, as the development team ran away overnight, its price also plummeted by 99%.
Digital currency researcher Yang Jun told a reporter from China Times that Meme coins, due to their large supply, low unit price, and being initiated by the community, have community topics and consensus. By investing a small amount, a large number of tokens can be obtained. Through community communication and FOMO sentiment, buying can drive up prices, achieving short-term, low investment, and high returns. Based on the above factors, Meme coins are very easily driven and hyped by community KOLs, and have been tested and tested repeatedly.
Another characteristic of meme coins is their low valuation. Unlike other mainstream cryptocurrencies, most meme currencies have no quantitative restrictions, and scarcity is difficult to control their prices. Over time, the inflationary nature will weaken the value of meme coins. In addition, anyone can easily create memes without the need for complex technologies or ecosystems.
Yang Jun stated that meme basically has no ecology or application, only due to the rise of community consensus culture, which is the biggest risk of meme currency itself. Investing in meme coins is essentially more like speculation, "taking a shot, turning a bike into a motorcycle", and the financial risks it presents are enormous, even leading to crashes due to community management issues or development team issues.
Yu Jianing also stated: The deceptive nature of low-priced digital assets comes from the low price itself. Currently, the cost of creating and issuing a simple digital asset is less than a few tens of dollars, and its price can be set to countless zeros after the decimal point. The circulation can be extremely small. It seems that there is no difference from 0.0000001 to 0.000001, but the book assets have actually increased by 10 times. With the help of FOMO sentiment, the zeros after the decimal point can disappear one by one. However, we are all aware that the book assets have increased by 10 times Assets are just a surface
Regarding the risks associated with investing in meme coins, Yu Jianing believes that compared to traditional financial markets, the digital asset market is relatively small, especially meme coins, which are inherently very cheap assets. The addition of a large amount of funds will inevitably lead to a significant increase in the currency price, which will further affect the investment sentiment in the market, leading to the price soaring as quickly as possible. However, it is obvious that this irrational speculative sentiment is extremely unhealthy, and the risk of assets such as dog coins is already very high.
In terms of current regulation, China's attitude towards virtual currency has not changed since 2013. Departments such as the People's Bank of China and the China Banking and Insurance Regulatory Commission have successively issued a series of documents, including the "Notice on Preventing Bitcoin Risks", the "Notice on Preventing Token Issuance Financing Risks", and the "Notice on Further Preventing and Dealing with Virtual Currency Trading Speculation Risks", and continuously strengthened risk warnings Continuously strengthen cleaning and rectification.
On the one hand, it is emphasized that virtual currency does not have the same legal status as fiat currency, does not have legal compensation, and should not and cannot be used as currency in the market. On the other hand, virtual currency related business activities are illegal financial activities, and carrying out virtual currency related business activities such as exchanging fiat currency and virtual currency, issuing and financing tokens, and trading virtual currency derivatives is suspected of illegal issuance of token coupons, unauthorized public disclosure, etc Illegal financial activities such as issuing securities, illegally operating futures business, and illegally raising funds. There are legal risks involved in participating in virtual currency investment transactions Yu Jianing said.
Yu Jianing emphasized that China's attitude towards issuing coins is always strict. Once it involves issuing coins or conducting exchange business, it is illegal financial activities, and relevant personnel will be severely punished in accordance with the law.
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