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Dogecoin ‘is a mockery’ to crypto's success: expert

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Dogecoin tumbles after touching a $50 billion valuation. Perianne Boring, Chamber of Digital Commerce Founder and President, joins Yahoo Finance Live to discuss Dogecoin’s price crash and break down the outlook for cryptocurrency.

Video Transcript

AKIKO FUJITA: Well, let's turn now our attention to cryptocurrencies, and a specific one-- the price of Dogecoin plunging today, one day after fans claimed 420 is Doge Day, pushing the cryptocurrency to an all-time high. The currency now down about 17%. Supporters tried to push the price to $1 yesterday.

Let's bring in Perianne Boring Chamber of Digital Commerce Founder and President. It's good to talk to you today. We have seen huge swings in this currency at a time when we don't even really know how to value of the currency itself. How much of the swings, do you think, have been justified?

PERIANNE BORING: Yeah, I love that you use the term, how do you value Dogecoin? We are watching this development with great concern. Dogecoin lacks many fundamental attributes. It originally was created as a joke. It has not been through any of the analysis through the industry's rating councils. There's a number of reputable exchanges like Coinbase that do not list it or allow its trading on its platform.

It has no dedicated developer community. There's no original code behind. It is largely just a copy of Bitcoin and Litecoin. And there's also no hard tack on the number of Dogecoins that can be produced-- so very different than Bitcoin that has a cap of 21 million. The first rule of investing-- do not invest in things you do not understand. And when it comes to Dogecoin, there's a lot of things that are very concerning here to us.

ZACK GUZMAN: I wonder too, I mean, when we look at the landscape and what kind of that enthusiasm meant-- and I know there are a lot of reasons as to why we saw Bitcoin and other major cryptos sell off over the weekend-- but I wonder how much of Dogecoin's spike really caused some jitters when it comes to valuations in the crypto space, considering you think about what happened with GameStop, and that frenzy, and how the market took a dip too and we saw some of these meme stocks catching a boost. Does it kind of maybe delegitimize some of the more advanced projects out there that have been working to build institutional favor for the last few years?

PERIANNE BORING: It definitely is a mockery to the serious developers, engineers, and organizations that are working to institutionalize this new asset class. Again, Dogecoin was created as a joke. It lacks developer resources. That is essential to any cryptocurrency's success. What the Dogecoin community does have is a lot of marketing activity.

There's a lot of celebrities and big name brands like Slim Jim and Snickers that are talking about Doge in their marketing campaigns, and are using Dogecoin in marketing campaigns-- and it's getting a lot of attention across the internet. Again, if you're making an investment, it's absolutely essential that you do your research on the fundamentals.

And when you do that on Dogecoin, you will find that it lacks many things that more reputable cryptocurrencies do not have. If you don't understand how it works, do not buy it. Don't buy Dogecoin because celebrities are talking about it. That's not a reason why you should make an investment decision. And more importantly, if you are an investor in Doge and you cannot afford to lose the money that you put into it, you need to think very long and hard about that and consider getting out.

Again, this is a very concerning situation. It should not be compared to Bitcoin, which is a store of value. Dogecoin lacks many fundamental attributes of a serious cryptocurrency.

AKIKO FUJITA: Yeah, you could certainly argue that a lot of people are just now dipping their toes into the space, seeing it as much more accessible, given where it trades at in terms of the price. I want to just get your thoughts on the moves we've seen, particularly in Bitcoin, though. We're seeing it above that 56,000 level, but certainly off of the highs that we saw in the lead-up to the Coinbase listing. You know, how healthy is this valuation, if we're talking about that, and how much more upside do you see?

PERIANNE BORING: Great questions. So Bitcoin today, according to multiple models, is undervalued. If you look at Bitcoin on a very myopic and short-term view, it is volatile. It goes up, it goes down. Remember, Bitcoin is very different. It trades very different than a stock or an equity.

These exchanges and trading platforms for cryptocurrencies, they're open 24 hours a day, seven days a week, 365 days out of the year. They're always open. And so a lot of times, it's very hard to understand why the price is what it is today. What you really should be looking at is how do you value Bitcoin? And the models that professional investors are using to make investment decisions around Bitcoin include Metcalfe's law and the stock to flow model.

According to Metcalfe's law, Bitcoin should be priced at $72,000 today. And according to stock to flow, Bitcoin should be valued at $100 to 288,000 this year. So again, Bitcoin is undervalued, according to multiple financial models.

ZACK GUZMAN: And, Perianne, too, it was interesting to see JP Morgan's take too that if it doesn't break out past $60,000 soon, that the momentum's going to slow. But when you think about non-technical, I guess, analysis here-- just the idea that the SEC and Gary Gensler getting his footing there, the idea of ETFs coming down the pike-- whether or not they approve those-- does seem like there's some real factors to point to as to why the momentum that's on the technical side could continue if more institutional investors continue to pour in. So what's your take there maybe those catalysts that could drive it in the back half of 2021?

PERIANNE BORING: So Gary Gensler was just confirmed to the SEC last week. There are many companies who have applied for a Bitcoin ETF or an exchange traded product. I do believe you would see significant upside to the price of Bitcoin if one of those gets approved. Another thing that is really driving demand for Bitcoin is the institutional and corporate buying of Bitcoin.

Lots of retail investors, accredited investors, institutional investors, and corporate investors are looking at Bitcoin as a store of value. They're using it as a replacement to gold, or gold 2.0, or a digital gold as a way to hedge against inflation. So what's going to be incredibly interesting to watch over the next couple of weeks and months are public companies who have added Bitcoin to their balance sheet.

Last quarter, we saw Tesla and MicroStrategy add billions of dollars worth of Bitcoin to their balance sheet. If you have more corporate institutional investors buying Bitcoin at that level, that is going to continue to drive the price up significantly throughout the end of the year and beyond.

ZACK GUZMAN: All right, Chamber of Digital Commerce Founder and President Perianne Boring, appreciate you taking the time to stop by and chat with us today.