The value of Dogecoin jumped again this week. What’s all the fuss about?
Dogecoin — launched as a joke back in 2013 — has its share of lovers and haters. Some believe it epitomizes everything that’s worrying about cryptocurrency. Others see it as their ticket to the big time.
Featuring a Japanese Shiba Inu dog taken from a popular meme, Dogecoin aimed to poke fun at the way people bought into cryptocurrencies they didn’t fully understand. The two founders aren’t laughing anymore. Dogecoin caught people’s attention and has gone from strength to strength.
In fact, in the past week, Dogecoin increased in value over 400% on the back of another tweet from billionaire Dogecoin fan and Tesla CEO Elon Musk.
Why are people so skeptical about Dogecoin’s value? Well, unlike most coins, it has no declared purpose. For example, Ethereum lets you send crypto to another person for a small fee. Bitcoin is a decentralized payment method. Any currency you might invest in has a white paper, so you can see who’s involved and what problem they want their currency to solve. Dogecoin doesn’t. It’s also worth noting that one anonymous investor owns nearly a third of Dogecoin, and it’s not clear what would happen if that investor sells.
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Both Dogecoin creators stepped away from the coin in 2015, concerned that scammers and shady characters had targeted the fun-loving community. Since then, there’s been little technical development of the coin, and the effort is mostly being run by volunteers.
But that hasn’t stopped Dogecoin’s growth. And because of its continued popularity, more people are buying into it. So has it become more than just a meme?
Here are three reasons why there’s more to it:
1. It has people’s attention
There are 1.3 million members of the Dogecoin Reddit group and several high-profile Dogecoin supporters, such as Elon Musk and Snoop Dogg. Every time a celebrity tweets about Dogecoin, it pushes the price up further, though the jump we’ve seen in recent weeks is on a whole new level.
One of the interesting aspects of the digital world is that attention has value. Your attention is a commodity to everyone from Facebook, Netflix, and news organizations to Angry Birds. Advertisers spend a fortune trying to get you to notice their products and services. Dogecoin has people’s attention. What’s not so clear is whether — and how — it can capitalize on it.
2. It’s a stepping stone into crypto
Let’s face it — cryptocurrency can be intimidating. If you’re tangled up in understanding blockchain or befuddled by the meaning of decentralization, Dogecoin is, in comparison, fun and accessible. That’s part of the reason Elon Musk called it the “people’s crypto.”
It’s built a dedicated community of fans, many of whom have never invested in crypto or stocks before. With its low barrier to entry, people are attracted to a coin that doesn’t take itself seriously. The memes can make you laugh, and some of them help you understand crypto better.
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3. It’s like a lottery ticket
Billionaire investor Mark Cuban said earlier this year that he’d bought Dogecoin for his son. His reason? It’s better than a lottery ticket. “If I had to choose between buying a lottery ticket and Dogecoin, I would buy Dogecoin,” he tweeted. “But please don’t ask me to choose between it and anything else.” He also commented it was educational for his son, saying they watch the price movements together and discuss why they occur.
Is Dogecoin more than a meme?
Dogecoin is more than a meme. It’s hundreds of memes — every day. And those memes underpin an active community. But that doesn’t make it a good investment.
If you’re considering buying Dogecoin, be aware that it’s even more volatile than other cryptocurrencies — and that’s saying something. Plus, if you’re looking to speculate, there are plenty of other coins that have business plans and aren’t run by volunteers. Start by looking at the coins listed on top cryptocurrency exchanges, and research what they do and who runs them.
When a coin shoots up in value because someone famous tweets about it, you have to wonder what will happen if that person loses interest and stops tweeting. And the actions of the one investor with almost a third of the currency could also have outsized consequences.
The danger with cryptocurrencies is that they’re so new and so much is unknown. They have enormous potential. And we know that early Bitcoin adopters have seen their assets skyrocket. But there are also over 1,000 failed digital currencies. If you’d put your money into one of them instead, you’d have lost it all — which is why it’s not a great idea to buy crypto with money you can’t afford to lose.
Dogecoin is a lot of fun, but when you’re looking for somewhere to invest your hard-earned cash, it’s worth doing some research before you jump on the bandwagon.