The crypto asset dogecoin has been on a meteoric trajectory with retail investors from all corners of the internet ploughing into the digital currency over the last 30 days.
Dogecoin, which was founded in 2013 to poke fun at other alternative coins vying to challenge bitcoin’s dominance, is now being viewed as a legitimate investment by Redditors and crypto fiends alike. Its name is in reference to a meme about a talking Shiba Inu dog with poor grammar, with catchphrases such as “much wow”, “very concern” and “such doge”.
The coin’s individual price, which was worth around $0.40 as of 8am BST on 20 April, had surged 16% in the previous 24 hours as traders prepared for #DogeDay — a social media push to increase dogecoin’s value up to $1, coinciding with the date 4/20, a day that is celebrated in cannabis culture.
Dogecoin has risen more than 8,500% so far in 2021, with a market capitalisation of $51.4bn. This makes it the fifth most valuable cryptocurrency in the world, behind bitcoin, ether, binance coin and XRP, according to CoinMarketCap,
“In the same way that the GameStop frenzy was pitched as a battle-play of ‘Wall Street versus The Little Guy’, dogecoin is being pitched as a battle-play against the well-established crypto giants like bitcoin”
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Here’s everything you need to know about dogecoin, and where it could be headed.
Why is this happening?
Momentum first started appearing behind dogecoin earlier this month as traders, eager to find the next big hit after the excitement around GameStop and other meme stocks faltered, gathered on platforms like Reddit.
The online discussion forum recently lifted its ban on discussing cryptocurrencies, while celebrities such as Tesla boss Elon Musk and rapper Snoop Dogg also voiced their support for the meme coin.
“In the same way that the GameStop frenzy was pitched as a battle-play of ‘Wall Street versus The Little Guy’, dogecoin is being pitched as a battle-play against the well-established crypto giants like bitcoin,” said Nigel Green, chief executive of financial services firm deVere Group.
But a revolutionary effort against the dominance of bitcoin isn’t the only reasoning behind dogecoin’s rise. Many punters also see dogecoin as a way to get in on the ground level, having missed out on buying bitcoin in its infancy and becoming millionaires today.
Reddit has also shown the strength of its community before with dogecoin, raising thousands to sponsor a racecar for the Talladega Superspeedway Nascar race in 2014 and to send a Jamaican bobsled team to the Winter Olympics that same year.
READ Pro traders fear the rise of GameStop’s army of retail investors
“We can assume that many people have been buying dogecoin, not because they think it has any real value, but because they hope others will get FOMO, jack the price up, and then they can sell off and make a quick profit,” Green added.
How can we compare dogecoin?
While the crypto asset’s per-coin value is small compared to behemoths like bitcoin’s recent $64,000 high, dogecoin’s market capitalisation has been soaring.
This is because, unlike bitcoin, dogecoin has no supply limit on how many coins can be created and runs on a more efficient network, allowing coins to be minted faster. That reasoning is, in part, why dogecoin took off as a currency, as it became an easy way for crypto-heads to tip their favourite creators on social media.
“We can assume that many people have been buying dogecoin, not because they think it has any real value, but because they hope others will get FOMO, jack the price up, and then they can sell off and make a quick profit”
As of 20 April, dogecoin’s market value is now larger than the market capitalisations of Kraft Heinz ($50.1bn), Ford Motors ($48.3bn) and eBay ($43.4bn). In the world of banking, it is larger than Sumitomo Mitsui Financial Group ($48.9bn), ING ($48.9bn) and Credit Suisse ($25.5bn).
One of the coin’s founders, software engineer Billy Markus, recently said he clarified that he had left the dogecoin project in 2015 and did not own any of the cryptocurrency except for what he had been tipped with on social media.
“I’m half detached, but it’s weird that something I made in a few hours is now part of internet culture,” Markus told Bloomberg in February. “It’s amusing to see Elon Musk talk about it. It feels silly, but there’s this huge upwelling behind it.”
How much further can it go?
Dogecoin has investing experts split on its potential, with some viewing it to have major potential as a cryptocurrency while others see it as a passing fad.
“Dogecoin is the new GameStop,” said Green, who has previously appeared as a prominent cryptocurrency bull. “But this is not typically the way reasoned, savvy investors should strategise to create and build their portfolios in order to reach their financial goals.”
Meanwhile, Hargreaves Lansdown senior investment analyst Susannah Streeter added that investors should be wary of the “herd mentality because dogecoin is very much a speculative bet whose valuation has no reliable basis”.
“Demand has come from traders trying to ‘game’ the system and others hoping to benefit from future price rises rather than use the coins as a means of exchange,” Streeter said. “Predicting the point at which demand subsides and prices begin to fall is very difficult, if not impossible and people risk getting their fingers seriously burnt.’’
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However, Mati Greenspan, crypto investor and founder of Quantum Economics, noted that dogecoin failed to fall over the weekend where the prices of major cryptocurrencies slipped.
“Considering that the Dow Jones Industrial Average has risen less than 20% within this time, it is safe to say that the teens on TikTok are literally crushing it in comparison,” Greenspan wrote in his newsletter on 16 April.
“And the more economists try to laugh it off or suppress it, the more it will come back to the fore with a vengeance.”
Where else is dogecoin popping up?
Because of its status as a meme coin, dogecoin is often not even available for purchase on some of the larger cryptocurrency exchanges such as Coinbase and Bitstamp. This has led rival exchanges such as Kraken to capitalise on the movement.
However, thanks to the recent rally for bitcoin, some companies are eager not to be left on the back foot again.
Newegg, a PC and gaming technology company, said on 19 April that it was considering accepting dogecoin as a payment option in future.
READ It’s not just Tesla that takes bitcoin — these shops will take your payment in crypto too
Meanwhile, BitPay, a platform that offers gift cards for popular retailers such as Pizza Hut, Amazon and Microsoft in exchange for cryptocurrency, started accepting dogecoin in March.
Billionaire entrepreneur and owner of the Dallas Mavericks basketball team Mark Cuban also said his team will accept dogecoin alongside other cryptocurrencies as payment for tickets and merchandise.
“For those of you who would like to learn more about dogecoin we strongly encourage you to talk to your teenagers who are on TikTok and ask them about it. They will be able to explain it all to you”
“We have chosen to do so because sometimes in business you have to do things that are fun, engaging and hopefully generate a lot of PR. So we will take dogecoin, today, tomorrow and possibly forever more,” said Cuban in a statement on 4 March.
“For those of you who would like to learn more about dogecoin we strongly encourage you to talk to your teenagers who are on TikTok and ask them about it. They will be able to explain it all to you.”
To contact the author of this story with feedback or news, email Emily Nicolle
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