Cardano (ADA) founder Charles Hoskinson is not a fan of Dogecoin (DOGE).
In a new update on the state of Cardano and the crypto markets, Hoskinson says DOGE isn’t sustainable and is likely to result in a systemic, catastrophic failure that will disenfranchise millions of investors.
He believes such an event could “destroy the reputation” of the crypto industry and even lead to more stringent regulations.
The Input Output Hong Kong (IOHK) chief executive says the root of the problem is that people aren’t buying Dogecoin for its utility.
“When someone buys DOGE, if you look at the commentary of the community, 99% is, ‘We’re going to get rich.’
The only way you get rich with DOGE is if you take your Dogecoin and sell it to someone else. So that other person, you have to ask – why are they buying it?
Are they purchasing that because they intend on using it for something? Or are they purchasing that because they want to get a 10x?
If that mentality persists, there are only so many doublings you can have before it doesn’t happen anymore and then a panic sale happens.”
Hoskinson points to a high concentration of wealth as another potential issue for investors.
“And if you look at the distribution of the coin, over 90% of the holdings are held by less than 1% of the participants, so at any time, a cascading failure can happen, and the people who are selling are always in the money, so whether they sell DOGE at $0.60 or $0.01, they make a huge profit, and that’s a very bad situation to be in.
So catastrophic failure is the most likely outcome here, as people with wildly unrealistic expectations and very limited experience investing acquire these assets, and then once the failure occurs, their opinion of the entire industry will be the same as Bill Maher’s, the same as a lot of people in the mainstream, like Charlie Munger.”
Dogecoin is trading at $0.5307 at time of writing and is up a whopping 73% in the past week, but down nearly 18% in the past 24 hours, according to CoinGecko.