The unexpected surge in GameStop’s market value powered by a group of Reddit investors has taken everyone, including Wall Street veterans, by surprise. Now, it seems they have turned their sight into the meme coin Doge ($DOGE), as it skyrocketed in performance with a +200% surge this Thursday 28.
Doge, a cryptocurrency created as a joke to Bitcoin, became the target of Reddit’s WallStreeBets community after a tweet from @WSBChairman, a Twitter account allegedly related to this group. The so-called ‘President’ of the aforementioned trading community wondered if the coin has ever hit $1 in its price per unit. Following the post, and over the course of the next 15 hours, the $DOGE would jump from $0.007 to almost $0.025 while reporting a trading volume of $10 billions, and a current market cap just shy of $3 billions, as per data from CoinGecko at press time.
The craze surrounding this coin was so big, that stock trading app Robinhood had to halt all $DOGE trades shortly after. This action was met with negative feedback from many users, especially since the $GME (GameStop’s NYSE ticker) was also banned from the same app, leaving retail traders with little to no possibilities of fighting back against Wall Street traders (who actually have access to the $GME). However, should they still want to pump Dogecoin, there’s the possibility of having the coin’s price climbing up a little bit more via crypto exchanges.
It is worth noting that this isn’t the first time the crypto community’s favorite troll coin has been shilled to the point it actually outperforms other big cryptocurrencies. A Tik Tok video challenge blasted the coin to higher-than-usual numbers back in July 2020, while porn actress Angela White sent it up to the clouds after urging its followers to use it. What’s more, the eccentric CEO and founder of Tesla and SpaceX, Elon Musk, is also known for having some sort of fond for this coin. He admitted (Doge) to be his favorite cryptocurrency in 2019 and tweets about it from time to time, which each tweet causing some movements in the meme-based coin charts.Tethering a coin to polemics
Tether controversy is back in the news
For those who have been around for awhile, the Tether drama is nothing new. The company has long been criticized for its lack of transparency, which is supposed to be essential for the centralized trust-based approach to mint its USDT stablecoin. Tether received a lot of attention back in 2017 when a user that goes by pseudonym Bitfinex’ed wrote a series of critical articles, accusing Tether and its affiliated crypto exchange Bitfinex in all sorts of wrongdoings, ranging from manipulating the market to faking the depth of their own order book, which led to massive flash crashes just a month later amid heavy DDoS attacks. Tether and Bitfinex denied all allegations and threatened critics with litigation.
Fast-forward to 2021 and Tether’s controversy is making headlines again. According to CoinGecko, the circulating supply of Tether’s stablecoin USDT increased from 4.3 billion to 25 billion in the last ten months, which sparked many-years-old debates about the risks associated with centralized custodial stablecoins. Discussions have intensified in January, with some articles going viral.
It’s worth noting that even though Tether’s market cap of $25 billion is a small portion of total crypto market capitalization, it actually represents a significant amount of cash inflow into the market. In other words, the doomsday scenario – Tether’s collapse – can potentially trigger another ‘crypto winter’.
While all USDT tokens were originally backed 1 to 1 by US dollars, the NYAG investigation has later revealed that no more than 74% were backed by real cash reserves. According to Tether General Counsel Stuart Hoegner, USDT tokens are currently backed by a basket of assets, including an undisclosed position in bitcoin and a $500 million loan to Bitfinex.
Meanwhile, the CIO of Tether’s offshore bank Deltec has recently disclosed that the bank has significant holdings of bitcoins, which were bought at about $9,300. It’s unclear, though, which client the bank holds bitcoins for.
Moderate critics argue that, even if all circulating USDT will turn out to be 100% backed by current Tether’s reserves, the company did not timely disclose to the public the risks associated with holding its tokens before the NYAG investigation’s results. There are also no mechanisms to prevent USDT tokens from becoming under-collateralized due to price volatility of assets in Tether’s reserves. For example, decentralized collateral-backed stablecoins DAI and sUSD liquidate positions when the price value of an underlying collateral significantly decreases. DeFi protocols can also mint more governance tokens in case of emergency for selling them on the market, in order to replenish reserves that back stablecoins.
Additional criticism is drawn to the fact that Tether has lent a big portion of its reserves to its affiliated company Bitfinex. That’s a major risk, because the crypto exchange can default on its debt, for example, because of another serious hack. Since then, the ratio of the loan to the total circulating supply of USDT has significantly decreased, but the decision to bail out Bitfinex at any cost without timely disclosing the possible risks to all USDT holders doesn’t add credibility to the company. As a side note, Bitfinex has previously suffered from multiple hacks that resulted in a combined loss of more than 120,000 BTC.
In other news
- Craig Wright sent legal notices to Bitcoin.org and Bitcoincore.org to delete the Bitcoin whitepaper, claiming that he owns the copyright to the paper. Following the takedown request, many crypto companies and even official government websites around the world started hosting the whitepaper. Wright got notoriety for suing people who called him a fraud, and who denied he was the inventor of Bitcoin.
- US President Joe Biden froze all federal regulatory processes, including FinCEN’s controversial self-hosted crypto wallet regulations. The proposed bill has already faced a huge backlash from crypto users over potential financial surveillance.
- Bitcoin donations to Russian opposition leader Alexey Navalny — whose bank accounts have often been reportedly frozen in the past — surged allegedly after his arrest upon arriving back home from Germany, where he was recovering from an alleged poisoning with a military-grade nerve agent. Navalny’s latest investigative fake news mixed with highly biased report about a palace that allegedly belongs to Putin gained more than 100 million views on YouTube and sparked a wave of protests across Russia.