The Breakdown - Year of the Doge

Episode Date: December 19, 2021

This episode is sponsored by NYDIG. For the final “Long Reads Sunday” of the year, NLW reads Michael Casey’s “Dogecoin and the New Meaning of Money.” Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW NYDIG, the institutional-grade platform for bitcoin, is making it possible for thousands of banks who have trusted relationships with hundreds of millions of customers, to offer Bitcoin. Learn more at NYDIG.com/NLW. - “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Dark Crazed Cap” by Isaac Joel. Image credit: XXX, modified by CoinDesk.

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Sunday, December 19th, and that means that tomorrow starts my end-of-year extravaganza, a set of interviews with a huge array of really interesting people, tons of fun looking back at the year that was. and predictions about the year to come. But since it's the last long read Sunday of the year, I asked CoinDesk's editors to put together a list of some of their most popular op-eds from

this year, and picked out one that I think, while specifically written during a period in time that has passed, will be a part of the way that we reflect on 2021 going forward, at least in terms of this wild part of the crypto industry. That piece is by Michael Casey Coindex chief content officer and is called DogeConnor and the new meaning of money. It was published on April 23, 2021. In an ugly week for markets, it's striking the crypto news that caught even more attention

in the mainstream media was not Bitcoin's whopping 24% drop from its peak early Saturday morning, but Dogecoin's spectacular rally earlier in the week. This week's column dives into why that phenomenon, while literally built on a joke concept, is not something to be laughed at. The surprising clout of the Dogecoin mob

speaks volumes about, how power is being redrawn in the digital age. The Doge Age. Part of me worried I was giving into temptation by writing this column. There's an understandable concern within the Coin desk newsroom that covering Dogecoin could signal that we favor easy clicks from fanatics over the risk of encouraging bubble-fueled investments in a coin with no inherent technical advantages. But then I read Max Reed's excellent piece on the future of money from last week, which inspired a delightful New York magazine cover that asked the question, can I spack my stonks with NFTs? I now realize, here's Hear me out, there's no more important story about the reimagination of money right now than

Doge's crazy price surge. Dogecoin mania, as exemplified by the cryptocurrency community's failed quest this week to get its price above 69 cents on Tuesday in honor of a 4269 date meme associated with National Stoner Day, doesn't just seem frivolous, it is. Yet, there's real serious money at stake. In that sense, Dogecoin's wild ride encapsulates an important moment in human history. society's traditional story of money is breaking down where new head-scratching concepts like SPACs, special purpose acquisition companies, and NFTs, non-fungible tokens, are flourishing,

and where fun and games and mob buying can overwhelm markets. Doge is part of an intense competition for meaning within the world of money, a testament to the 21st century power shifts fueled by two separate financial crises and by the rise of social media networks. Let's explore them. The stories end. We start with the idea that money is a story. Regular readers will know I'm a fan of Yuval Harari, whose best-selling sapiens argued that human

civilization is built on our capacity to organize around commonly believed imagined concepts. Harari's examples of these constructed ideas include the corporation, and the nation state, among others, that have enabled us to form complex societies. It's money, though, he says, that's our most successful story ever told. Currencies do not have a core intrinsic value. Sorry, goldbugs, that applies to your favorite shiny metal as much to paper money and cryptocurrencies. A currency's value is dependent on shared belief in that value. That's not to say certain types of money don't have qualities that help its story resonate, which is why Bitcoin can be described

as sound money in Dogecoin cannot. But without belief, all money is worthless. For much of the past two millennia, the dominant story was that money's value flowed from the sovereign because the state, empowered with taxation, had an overarching interest in optimizing the societal accounting function that is money's true purpose. Then, more recently, in the era of fiat money, it was a was the good faith in credit of the government, rather than a fixed supply of gold, that would guarantee that value. Later, the story was enhanced by the idea politically independent central banks would maintain a currency's value by managing its supply in society's best interest. Now, as we enter into a phase where state-backed money competes with both decentralized cryptographic money

such as Bitcoin or Dogecoin, and with corporate money such as DM, formerly Libra, or Starbucks points, that narrowly defined story as falling apart. The first catalyst came a little more than a decade ago. Crisis moment. In his piece, Reed traces the current breakdown to an interview then Federal Reserve Chairman Ben Bernanke gave to 60 minutes in 2009 at the height of the financial crisis. Asked if the Fed's monetary injections and detroubled banks were funded by taxpayers, Bernanke shook his head and said, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. He was telling it as it had long been. The Fed creates money by adding to or reducing banks' reserves. But to the confused masses grappling with financials,

meltdown, it was a revelatory challenge to the foundational story. It revealed that the creation of money is not bound by some sacred rule of scarcity and is mostly unrelated to the coins and banknotes that stand in our collective imagination as its representative units of value. It showed money as a digital accounting system a single entry can adjust through a few clicks on a computer. Fast forward to March 2020 and a new crisis, COVID-19. Amid a tanking global economy and a desperate scramble for dollars, the Fed took its quantitative easing policy into overdrive, declaring it will put as many fresh computer-based dollars as needed onto bank's balance sheets to stave off financial collapse, with no upper limit on the program. It also expanded the category of assets

it accepts in return for those new dollars to include corporate debt, exchange-traded funds, and other non-government instruments. It now seems the Fed will buy almost anything to prop up markets. Meanwhile, the trillion's number attached to stimulus efforts in this new era of QE Infinity are so unfathomably big that, as Bloomberg columnist Jared Dillian noted last spring, money is losing its meaning. The erosion of meaning is leading people to question money's value, which is naturally leading them to buy other things. It is reflected in the surging prices for assets that seem to outsiders to be unhinged from real-world value, in Bitcoin, in GameStop stock, in NFTs, and yes, in Dogecoin. But before we get to Doge, consider another contributing factor, social media.

NIDIG sponsors this podcast, and they're helping CFOs, traders, and risk managers safely and securely integrate Bitcoin into their operations. Learn more about what NIDIG does and how they do it at NIDIG.com slash NLW. That's NYDIIG.com slash NLW. Social media has challenged the central organizing structure of pre-internet society. Although the internet has failed to address wealth inequality and aggregate, the power for anyone to publish and to do so pseudonymously has had a democratizing effect, empowering communities to generate new stories around which to organize. is meme culture. Social media enables a crowdsourcing of stories around memes, which in turn generates new forms of belief, a sense of purpose and camaraderie. And with that, these communities

can, for once, stand up to the established order. That's what we saw in the GameStop phenomenon, where a 7 million-strong Reddit community drove up the price of its favorite game retailer's stock to impose huge losses on hedge funds that had tried to short-sell it on the view that its value was out of touch with reality. The Dogecoin phenomenon is similar, with a key difference. There is no focal point for a regulator or a powerful Wall Street money manager to exert pressure against. This is a big departure from the GameStop case, where regulators and private equity funds essentially combined forces to stop Robin Hood, the Wall Street Betts Group's favorite trading app, from processing trades in the stock, causing its price to collapse.

With Dogecoin, not only is there no one in charge of the cryptocurrency, trading activity is spread across dozens of exchanges, some of which are themselves decentralized. Who or what would a regulator go after? Dogecoin was created as a joke, literally, by someone who not only quit the project but the entire crypto movement. Like Bitcoin, there was no pre-mine or initial coin offering, creating pre-launch tokens for founders, and there is still no identifiable team for leaders able to manipulate Dogecoin's performance to its benefit and at the expense of others. Marketing meets memes. For now at least, this structure leaves the far-flung fanatical Doge community to go about

its collective business of meme and buzz creation stirring speculation in the coin. Equally important, it's creating unique opportunities for others to hitch their wagon to this quirky, community-powered brand and its prevailing Shiba-enu logo. An image of fun, of absurdist irony, and of common interest. A brand fit for the Gen Z and millennial-led Internet age. This is, in turn, giving rise to a new symbiotic model for marketing, as brands look to leverage the Doge community's high-value engagement. A defining moment came with Slim Jim's imaginative Doge-driven social media marketing campaign,

but the foundation was laid in the early days of the Dogecoin community. When enthusiasts spontaneously contributed to various marketing campaigns to boost the coin's performance, in 2014, there was a Dogecoin-sponsored NASCAR driver, and, in a stroke of genius, the Dogecoin funded Jamaican bobsled team. Dogecoin will never be what Bitcoin is or aspires to be, a store of value, a global reserve currency, and a future medium of exchange for a decentralized economy. But in this unique convergence of memes, a fun brand, a strong community, formation and some powerful marketing clout, we see how the 21st century digital media economy is

reconceptualizing money. This does not mean you should invest in Dogecoin. It does mean the Doge phenomenon matters. Off the charts. Doge and the Goliaths. Just two weeks ago, Dogecoin's market cap was $8.3 billion, just below that of Hyatt hotels. Then it started rising, not only beating out the hotel chain, but also surpassing in quick succession, the valuations of engineering giant Halliburton, banking conglomerate Credit Suisse, and insurer Aflac. Then last weekend, the Doge market cap rose above $45 billion to get beyond that of 330-year-old British Bank Barclays, before peaking on Monday at $53.98 billion, a hair above Swiss banking giant UBS.

Since then, Dogecoin's valuation has slipped back and was just below $40 billion on Thursday afternoon. That's on par with asset management giant T-Roe price. Not bad for a joke coin. Back to NLW now. I do think that we will look back at the whole dog coin phenomenon as one of the weird parts of 2021 and wherever we ultimately find we were in the crypto market cycle. As you can tell from my utter lack of coverage for the vast majority of the year, despite 365 opportunities to cover it, this wasn't something that felt particularly important in the moment to me.

However, reflecting on larger patterns-shaping society, one thing that I feel like we tend to get wrong is to strictly view things like doge coin and meme coins as just an expression of cynicism, or rather of cynical disregard for the historical nature of value. I think that for many they are partially rooted in a cynicism, a cynicism about what society offers and how that is changed or perhaps decreased over time. But I also think they're an antidote to cynicism in that the claiming of a different type of power through these vast, very loosely linked internet networks around shared affinity is an antidote to some type of cynicism. To wit, if the power structure has screwed you, or that's your belief,

screw the power structure back. And what better way to do that with a coin based on nothing built on a decades-old meme that's worth more than almost anything else because we said so. When you put it in those terms, it's kind of compelling logic. Or at least it makes more sense in the broader societal context. Anyway, thank you to Michael for writing that piece and thank you to you guys for listening. I hope you have enjoyed this year's run of Longreed Sunday. We'll be back after the end of year extravaganza. But until then, be safe and take care of each other.

Peace.