Can Dogecoin replicate the story of GameStop squeezing Wall Street?

This article is from Jiemian News, original title: "【Comment】Can Dogecoin replicate the story of GameStop's revenge against Wall Street?"
Author: Si Linwei.

The early 2021 battle on Wall Street left a deep impression, as a large number of retail investors clashed with well-known short-selling institutions like Citron Research over stocks like GameStop. Ultimately, Citron Research lost billions of dollars and announced it would never short-sell again, while GameStop's stock price soared. Now, the retail investors, having tasted success, have turned their attention to Dogecoin.

Why did Dogecoin surge? Have Bitcoin and Ethereum become the playgrounds of big capital? Can Dogecoin repeat the story of GameStop?

On May 8, Barry Silbert, the CEO of Grayscale, the world's largest Bitcoin institutional holder, announced on social media that he had shorted Dogecoin, hoping to redirect attention back to Bitcoin.

According to public data, Grayscale holds 653,000 Bitcoins, valued at $38.014 billion. Barry Silbert is the founder and CEO of Grayscale's parent company, Digital Currency Group, and is a wealthy figure on Wall Street.

On May 9, Tesla CEO Elon Musk stated during his appearance on the American show "Saturday Night Live" that Dogecoin is the future of currency, an unstoppable financial tool that will take over the world. The emergence of Dogecoin is "hustle" (the original text is "It is hustle," but it cannot be directly understood as "scam"; "hustle" in Western culture also carries a sense of rogue spirit, as seen in the British series "Hustle").

Why did Barry Silbert announce he would short the retail investors' favorite asset, just like Citron Research? The background is that in early 2021, under the powerful influence of the self-proclaimed "Dogecoin CEO" Musk, Dogecoin's price skyrocketed more than 140 times in less than six months. Most investors are retail investors from the U.S., rather than large institutional funds, which is why Musk referred to it as "the people's currency."

Dogecoin represents a public celebration led by Musk and a rebellion against traditional American elites. It embodies a completely different investment philosophy, driven by the most direct dreams of wealth and down-to-earth slogans, and its investment returns have far outpaced traditional institutions heavily invested in Bitcoin and Ethereum.

This comically inflated cryptocurrency has no actual value or innovation, yet its market cap peaked over $100 billion. In contrast, Grayscale's Bitcoin trust products have recently shown prolonged negative premiums, reflecting a decreasing willingness among investors to buy. This naturally makes Wall Street elites like Barry Silbert unable to accept the surge of Dogecoin.

Why did Dogecoin experience such a crazy surge? Beyond Musk's endorsement, we can focus on two perspectives:

First, multiple trends indicate that Bitcoin and Ethereum have become increasingly distant from ordinary investors. As of May 10, Bitcoin's price remained around $60,000, while Ethereum was about to break the $4,000 mark. From a pricing perspective, many Americans can no longer afford to buy a single Bitcoin.

From on-chain data, according to research from the data analysis site Glassnode, as of January 2021, exchanges held 2.36 million Bitcoins, accounting for 12.7%, while funds, custodial institutions, OTC desks, and other entities held 31.7% of Bitcoins. Given that the total supply of Bitcoin is only 21 million, and recent large purchases of Bitcoin have been made by traditional large funds, it is foreseeable that the concentration of large Bitcoin addresses will further increase.

In other words, the recent price increases of Ethereum and Bitcoin have been driven by the influx of incremental funds from traditional institutions, and most of the circulating coins in the market are gradually being absorbed by large institutions, which in turn has made the high prices unattainable for retail investors. The wealth gap represented by Wall Street will reappear in the cryptocurrency space.

Thus, Dogecoin is also a manifestation of the American people's resistance to Wall Street elite culture. Since the 2008 subprime mortgage crisis, the structural problems exposed in the U.S. economy have remained unresolved. Even during the pandemic, the wealth of Wall Street elites has continued to grow, while the American people still rely on government-issued checks to make ends meet.

The retail investors who initially drove up GameStop's stock price had a very simple intention: to protect childhood memories and make Wall Street lose money. In terms of the final outcome, Citron Research's surrender indeed achieved the direct goal of retail investors, but the deeper demands behind it have not been articulated and have not been acknowledged by the elites represented by Wall Street.

Even the U.S. Securities and Exchange Commission (SEC), which acted as an arbitrator, announced it would investigate whether there was market manipulation in the "WallStreetBets" section of the American forum, while the recent "Bill Hwang" incident showed that institutional investors can also abuse tools, but the treatment of institutional investors and retail investors is vastly different.

The American people's dream of wealth and the narrative against Wall Street need a new investment target, and the geek culture of cryptocurrency itself, along with the satirical spirit of Dogecoin, perfectly aligns with this. Thus, Musk calls it "hustle." For the elites, it is a scam, but for the American people, it is a celebration of the common folk.

Dogecoin and GameStop are fundamentally no different as investment targets, but note that its surge is not simply about retail investors targeting Wall Street; rather, it is a massive bubble born from the wealth dreams of the public combined with the anti-authoritarian spirit in American culture during a bull market. Barry Silbert's statements effectively aim to burst this bubble, positioning himself against retail investors, which leads to a clash between these two forces in the cryptocurrency space. This time, who will win and who will lose? Which side are you on?

Since Barry Silbert announced his short position, on May 9, according to CoinMarketCap data, Dogecoin's price fell by as much as 40% within 24 hours, currently narrowing to around 25%. However, on May 10, the Dogecoin-inspired altcoin "SHIB" (Shiba Inu) saw its price triple in a single day, trending on Weibo, with discussion topics even surpassing those of Dogecoin.