Lucas Jackson / Reuters
So-called meme investments like Dogecoin are a money loss trap for new, unsuspecting investors, according to longtime Bitcoin bull Mike Novogratz.
As the GameStop frenzy subsides and investors look for new speculative assets, many have turned to Dogecoin, a cryptocurrency based on the Doge meme. On Monday, Dogecoin rose 31% to a record $ 0.083745 after Elon Musk and Snoop Dogg pocketed the token on Twitter.
But Novogratz told the Bloomberg Old Lots podcast that at some point these price bubbles will burst and naive investors who don’t know when to sell are vulnerable to massive losses.
“Meme squeezes can’t last for two simple reasons,” said Novogratz. “I call it greed and gravity.”
Novogratz explained how senior people in finance, including Chamath Palihapitiya and Elon Musk, “encouraged the masses” to load up on GameStop after the stock squeezed and traded at $ 400. The result? New investors spent their “hard-earned dollars” buying the stock for $ 400 only to lose money when the stock crashed shortly thereafter.
“It was almost certain that they would lose all of their money at this point,” said Novogratz. It is frustrating to see investors buying the stock at such high prices after being encouraged to do so by prominent figures in the business world.
Though some investors see speculation on meme investing like Dogecoin in small amounts as a fun way to learn about investing, like billionaire Mark Cuban.
The Cuban tweeted on Monday that he bought a few dollars of Dogecoin for his son, and together they are discussing the exciting fluctuations in the price of the coin.
“It gives you a better chance of winning than a lottery ticket while also teaching the economics of supply and demand and introducing people to crypto assets,” Cuban said.
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