So-called meme investments like Dogecoin are a money-losing trap for new, unsuspecting investors, according to long-standing bitcoin bull Mike Novogratz.
As the frenzy around GameStop dies down and investors look for new speculative assets, many have turned to Dogecoin, a cryptocurrency based on the Doge meme. On Monday, Dogecoin jumped 31% to a record $0.083745 after Elon Musk and Snoop Dogg plugged the token on twitter.
But Novogratz told the Bloomberg Old Lots podcast that those price bubbles will eventually pop, and they leave naive investors who don’t know when to sell vulnerable to massive losses.
“Meme squeezes can’t sustain themselves for two simple reasons,” Novogratz said, “I call it greed and gravity.”
Novogratz down how “senior people in finance” including Chamath Palihapitiya and Elon Musk were “encouraging the masses” to load up on GameStop after the stock was squeezed and traded at $400. The result? New investors spent their “hard-earned dollars” to buy the stock at $400, only to lose money when the stock crashed shortly after.
“It was almost a certainty they’d lose all their money at that point,” said Novogratz, who added it was frustrating to watch investors buy the stock at such high prices after being encouraged to do so by prominent figures in the business world.
Though some investors view speculating in meme investments like Dogecoin in small amounts as an entertaining way to learn about investing, like billionaire Mark Cuban.
Cuban tweeted on Monday that he bought a few dollars of Dogecoin for his son, and together they discuss the coin’s exciting price swings.
“It gives you a better chance of winning than a lottery ticket, all while teaching the economics of supply and demand and introducing people to crypto assets,” Cuban said.