Dogecoin, the cryptocurrency named after a popular dog meme from a few years ago, reached a new high on Friday afternoon. Following a six-month gain of more than 26,000 percent, it now has a market valuation of almost $92 billion.
According to CoinMarketCap, the S&P 500 gained 19 percent within the same time span, while crypto competitors bitcoin and ether gained 286 percent and 698 percent, respectively. And what about Tesla, the stock market darling? It has increased by 56% since November.
Mati Greenspan, portfolio manager and founder of Quantum Economics, said, “This time the joke is on Wall Street.” “You have a situation where even the smartest suits are outperforming teens on TikTok by thousands of percentage points.”
The satirical cryptocurrency was created in 2013 by software programmers Billy Markus and Jackson Palmer as a parody of bitcoin and the many other cryptocurrencies boasting great aspirations to take over the world.
After the once-popular “doge” CoinMarketCap, they named it dogecoin (pronounced “doje coin” with a soft “g” sound). What is the point of it? To be a “fun” alternative to bitcoin that is speedier.
In a note to clients on May 4, Galaxy’s researchers Alex Thorn and Karim Helmy highlighted that “the attractiveness of dogecoin has always been its honesty.” “Unlike many other cryptocurrency projects, there is no great vision, no declarations about how dogecoin will transform the world,” says the author.
Furthermore, unlike bitcoin, which has a limited amount of 21 million coins, the number of dogecoins that can be minted is now unlimited.
HOW ELON MUSK HAD AN EFFECT ON DOGECOIN
It’s unclear when or why Elon Musk became interested in dogecoin.
Tesla and SpaceX CEO Elon Musk, a Billionaire, has spent years promoting the token. Musk’s tweets, which occasionally include oblique references to dogecoin, frequently propel it to new highs. These articles have also piqued the curiosity of individual investors.
Asheesh Birla, a general manager of Ripple, which maintains an alternative cryptocurrency used for payments, said, “You have this one individual who is sort of like the cult leader.”
Musk, on the other hand, isn’t the first celebrity to support the animal-themed token. Mark Cuban, the owner of the Dallas Mavericks, Snoop Dogg, and Gene Simmons, the bassist for Kiss, have all openly backed dogecoin. Slim Jim, a beef jerky company, has joined in the fun.
Its recent price increase, which one analyst ascribed to Elon Musk’s imminent “Saturday Night Live” appearance on May 8, even caused Robinhood’s trading app to crash temporarily.
But dogecoin’s historic price rise is much more than celebrity endorsements.
The market has also been favorable. People now have more money to spend thanks to multiple rounds of stimulus payments. Day-trading has become a widespread sport thanks to apps like Robinhood, which have made it easier than ever for the casual investor to make a stock wager.
There’s also the old adage of “sticking it” to the establishment.
Experts compare the current situation to the GameStop trading frenzy earlier this year.
“Elon is basically preaching, ‘Why can’t dogecoin have value?'” Felman explained. “It’s all part of the GameStop phenomenon.” These stories are well-liked by the public. These tales appeal to them. These jokes are popular with them. And every single retail investor’s mind and imagination has been captured by dogecoin.”
The rise of commission-free trading via online brokerage apps such as Robinhood has also made it easier than ever to invest in cryptocurrency.
“You have a fanatic online group,” Birla remarked of doge evangelists’ following. “You’ve got Twitter and Reddit, where they’re all congregating and pondering how to pump dogecoin.”
THE VALUE OF DOGECOIN
It’s questionable whether dogecoin is worth anything. There are currently just a handful use cases for the token. Though more merchants are beginning to accept dogecoin as a form of payment, it is still far from achieving the degree of adoption required to be utilized as a true currency substitute.
“It’s just one huge marketing trick these days,” said Mike Bucella, general partner at BlockTower Capital.
There isn’t much anyone can do with dogecoin, unlike competing cryptocurrencies like ethereum, which allows programmers to build applications on their platform to do things like lend and borrow money. Dogecoin isn’t exactly a dependable store of value, as this normally necessitates a level of long-term trust in the coin and the blockchain on which it’s based.
“Whether you look at the dogecoin protocol itself, I don’t know if anyone has introduced new functionality or code to it in the last many years,” Birla remarked. “Dogecoin isn’t truly supported by a development team.”
Given these constraints, dogecoin’s rise appears to be solely speculative. Dogecoin is valuable because other people think it is valuable. They also feel that someone else will pay a higher price to buy it from them.
“We envision dogecoin’s price growing as a result of low liquidity and rapid network growth,” Greenspan added. “I don’t think that type of growth is sustainable once the network reaches critical mass. “However, dogecoin’s future is not doomed.
“The actual value is in today’s meme-driven culture, and doge represents the memetics network value, which could be immense,” Bucella explained. “If the doge community decides to introduce a burn or new supply mechanism via a protocol hard fork at some point in the future, this value will be more likely to be kept long-term.”