A bitcoin-inspired subsection of cryptocurrencies known as memecoins have exploded this year with the tongue-in-cheek dogecoin leading the pack.
Dogecoin, a cryptocurrency based on the Shiba Inu doge meme that’s recently rocketed into the crypto top five by value has soared thanks to support from Tesla
Now, Dave Portnoy, the founder of the Barstool Sports blog who made a name for himself live-streaming his stock market and bitcoin escapades last year, said he’s investing in safemoon, a new cryptocurrency that’s been branded a Ponzi scheme by critics.
“The events of the last couple of days and weeks have made me think I have to get involved in something other than bitcoin,” Portnoy, who described himself “as the baron of bitcoin,” told his 2.5 million Twitter followers, adding he will continue to hold bitcoin and doesn’t “care what Elon Musk says.”
Over the last week, Musk has rocked the bitcoin and cryptocurrency market by first pulling the plug on Tesla bitcoin payments, citing environmental concerns; proposing dogecoin upgrades to make it “the currency of Earth;” then appearing to suggest Tesla had sold the bitcoin it bought earlier this year. Musk later clarified Tesla hasn’t sold any more bitcoin since it offloaded some to test market liquidity but the wider crypto market remains around $500 billion off its all-time high of $2.5 trillion.
“I see what Elon does, he’s pulling levers so one day doge is good, next it’s bad, bitcoin good, bitcoin bad,” Portnoy said in a Twitter video that’s been viewed more than 2 million times since it was posted last night and captioned: “Invest at your own risk. I have no idea how this works.”
“It’s time for me to choose a side, and I’ve done that,” Portnoy said, adding he wants to become safemoon’s “leader” and has already bought $40,000 worth of safemoon tokens.
“It could be a Ponzi scheme,” Portnoy said. “Everyone’s Ponzi, Ponzi, Ponzi—it’s early, if it is a Ponzi, get in on the ground floor. I like the word ‘moon’ because that’s where I want to go,” referring to the crypto community meme of tokens “going to the moon” when their price spikes.
The safemoon price has struggled along with the wider bitcoin and cryptocurrency market over the last week but it has so far mostly held onto the eye-popping gains it’s racked up over the last few months, helped by social media influencers such as YouTuber Ben Phillips that have given safemoon their backing.
Safemoon, developed by the company Safemoon and its chief executive John Karony, has been branded a Ponzi scheme—an investment that generates returns for early investors with money put in by later investors—due to its apparent lack of utility, highly centralized liquidity, and fees for selling. Safemoon charges a 10% fee to anyone who sells their tokens, with 5% of that redistributed to all other safemoon token holders.
“Remember just because you make money off of a Ponzi does not change the fact that it is a Ponzi,” bitcoin and cryptocurrency investor Lark Davis said via Twitter in April, adding “#safemoon.”
Davis went on to compare safemoon to bitcoin investment lending platform BitConnect and its associated cryptocurrency, known as one of the biggest scams in cryptocurrency history, that abruptly shut down in 2018 after U.S. regulators warned investors of its similarities to a Ponzi scheme.
Others in the cryptocurrency community have warned new investors to be wary of memecoins such as safemoon and dogecoin, comparing them to meme stocks like GameStop.
“Safemoon is community-driven by people trying to get rich quick and history shows these never work out,” Adam Morris, co-founder of bitcoin and cryptocurrency education website Crypto Head, said in emailed comments, adding safemoon “has a lot of similarities with dogecoin, but it’s even more risky because it doesn’t have the history that dogecoin does.”
“Safemoon itself as a project doesn’t offer much and the coin is designed to be as hard to sell as possible. At this point it seems that safemoon, dogecoin and other altcoins that have appeared out of nowhere are likely a phase similar to GameStop. We might not see a huge correction though until the next major market correction.”