This is why Elon Musk prefers Dogecoin

For Elon Musk, Dogecoin is a better form of payment than Bitcoin.

For Elon Musk, Dogecoin is a better form of payment than Bitcoin. For once, the Tesla boss's words had little impact on the price of the popular memecoin.

Aliens, Mars colonies, human clones: on the Full Send Podcast, tech guru Elon Musk talks politics, the supernatural, the underground, and his favorite cryptocurrency Dogecoin. The memecoin with the Shiba Inu face isn’t just good for payments. It’s, according to Musk, a better alternative to Bitcoin.

Dogecoin vs. Bitcoin: an uneven showdown

Dogecoin processes 33 transactions per second, versus seven for Bitcoin. Musk is right when he says that "the actual transaction throughput of Doge is much higher than that of Bitcoin". The Tesla boss also points to the fact that the Dogecoin blockchain produces new blocks every 60 seconds, not every ten minutes like Bitcoin, as evidence of a more suitable payments method.

Moreover, there’s the difference in supply. With Bitcoin, the supply of new coins gradually declines due to the halving that happens every 210,000 blocks. Since the circulating supply is capped at 21 million units, the cryptocurrency is therefore a deflationary asset. Whether Bitcoin is suitable as a payments asset or more as a store of value is also a much-debated question.

Dogecoin, on the other hand, is highly inflationary. For every new block, the supply increases by 10,000 coins. 132 billion Dogecoin are already in circulation. A condition Musk says is well-suited to be used as a transactional currency.

The "Musk Effect"

He provides the evidence himself: since January, Tesla merchandise has been sold in exchange for Dogecoin. SpaceX followed suit later. Musk has also announced Dogecoin will be accepted for the Boring Company's underground tunnel system.

With Bitcoin, however, he keeps a buy-sell relationship. In January 2021, Tesla bought Bitcoin for $1.5 billion, but soon sold a portion of it for a profit. According to the latest quarterly results, Tesla has also distanced itself from 75 percent of the remaining Bitcoin. The criticism of Bitcoin's environmental footprint seemed to give him a ready excuse.

With a string of tweets, Musk has repeatedly sparked rallies in the crypto markets, especially for Dogecoin. A study examined the effect of Elon Musk’s crypto-related tweets on Dogecoin’s price. The result: "For all 47 events there is a price jump of about three percent after the information is released".

According to the study, Dogecoin shows "an immediate and very large price spike, followed by another price spike about 45 minutes later". Then returns fall back to the level of the first spike. The study thus shows a "positive price effect that lasts at least two hours".

Podcasts and YouTube videos, however, don’t seem to have as big a viral reach. The Dogecoin price hardly moved in response to Musk’s recent remarks.