Before this week, most people had never heard of Dogecoin. But that changed on Monday, when a hedge fund created by the company behind the cryptocurrency officially announced its decision to short it. “Dogecoin has been one of the craziest stories in the bitcoin world – and a cautionary tale of everything investors should avoid,” the company wrote in a blogpost. “We believe the vast majority of people buying Dogecoin are buying it purely to speculate on the hope that other people will buy it.”
Dogecoin is a cryptocurrency, which is a form of electronic cash. It was created in December 2013 as a parody of the cryptocurrency Bitcoin, in which the currency units are represented by the image of a Japanese Shiba Inu dog. It quickly became one of the top cryptocurrencies and is traded on online exchanges, as well as for other cryptocurrencies.
Barry Silbert, founder and CEO of Digital Currency Group (DCG) parent company Grayscale Investments, a crypto-currency investment giant, said his company has opened a $1 million short position in Dogecoin (DOGE), betting on the token’s downward movement.
All right, $$$ friends, that was fun. Welcome to the world of crypto-currencies! But it’s time to convert your DOGE into BTC, Silbert tweeted yesterday.
So, $DOY friends, we had a great time. Welcome to the world of crypto-currencies!
But it’s time to convert your DOGE into BTC.
Disclosure: We opened a short position on DOGE at https://t.co/s8Qde2Ub4Z].
– Barry Silbert (@BarrySilbert) May 8, 2021
It’s time to release this DOGE.
Silbert used a margin token called DOGEBEAR on the FTX crypto-currency market to open a short position. According to its description, it is an ERC-20 token that aims to generate revenue equal to -3 times Dogecoin’s daily revenue. In other words, the token allows traders to open a short position with a leverage of 3x without having to use fixed contracts or margin trades.
This means that if, for example, the price of DOGE falls by 10%, DOGEBEAR will rise by 30%. Moreover, it is unlikely that these positions will be completely eliminated, as the exchange automatically sells some of the assets used as collateral to receive users’ tokens. To completely eliminate the DOGEBEAR position, the price of Dogecoin would eventually have to rise by 33% or more.
Are you guys joking around the office that it’s time for Barry to get the $DOGE? pic.twitter.com/JIJVdXvu3G
– Nicky Tellekamp (@NickyTellekamp) May 9, 2021
Mr. Silbert also stated that the GDC position is worth $1 million and that the company uses its non-U.S. units through which we do some of our business, as FTX does not serve users in North and South America.
– Barry Silbert (@BarrySilbert) May 9, 2021
Heads we lose, tails we lose. We give money to charity in one way or another. I don’t mind being the only one to say what he thinks, he added.
Anticipation of masking effects
Interestingly, Silbert’s statement came just hours before the latest episode of Saturday Night Live with Tesla and SpaceX CEO Elon Musk aired yesterday. As reported, Musk’s words about Dogecoin being a bogeyman during the Q&A segment caused the price of DOGE to drop by 30%.
Some Twitter users were skeptical of DCG’s attempt to sell Dogecoin short. Even Peter Schiff, CEO of Euro Pacific Capital and a prominent critic of bitcoin, argued that Silbert’s decision could be considered questionable.
When you live in a glass house of cryptocurrencies, you don’t want to throw digital stones.
– Peter Schiff (@PeterSchiff) 9 May 2021
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