Dogecoin Started as a Joke. Now It’s Too Important to Laugh Off.

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Dogecoin soared above 69 cents on Wednesday, continuing its astronomical ascent after starting the year at less than a penny. It’s now the fourth most valuable cryptocurrency, worth more than $80 billion.

Dogecoin was started as a joke in 2013, a way to poke fun at some of the wild speculation in cryptocurrencies. Unlike Bitcoin, its supply isn’t capped, so it doesn’t really make sense as an inflation hedge. And while online retailer Newegg and a few other businesses now let people pay with dogecoin, it isn’t gaining the kind of mainstream acceptance that Bitcoin has enjoyed this year.

But what dogecoin does have is a substantial community—probably well into the millions now. Trading has been so hot that it has caused outages on platforms like Robinhood. With current trends in investing, that alone is meaningful. It makes little difference that the community rallies together around ridiculous observances like Doge Day, which occurs on April 20, or 4/20, also a holiday for fans of marijuana.

“The social aspect of crypto is meaningful,” wrote Matt Hougan, the chief investment officer of Bitwise Asset Management, in an email to Barron’s. “Despite the silliness of Dogecoin, it does demonstrate the social nature of cryptocurrencies. Cryptocurrencies are the first money that is native to the internet, and it is not surprising that some of the common features of the internet are part of its story, including online communities, viral growth, etc.”

Large online communities are valuable because they can form the basis of new markets—and may even provide the customers for those markets. Dogecoin has been used to tip people who make fun internet memes, for instance. While that use case might seem essentially meaningless in the offline world, it’s a social activity that a large group of people now enjoy. Investors who came of age before the rise of internet communities may consider online “assets” to be worthless. People who grew up spending real money to buy a videogame sword are more comfortable with the concept.

Non-fungible tokens, or NFTs, can also seem befuddling. NFTs are online collectibles that have software built into them that can verify ownership. It’s surprising to many people that these collectibles now comprise a multibillion-dollar industry. And it’s likely that some of them plunge in value as the frenzy fades. But they’re likely here to stay, and will continue to gain new fans.

Dogecoin is the latest manifestation of the

GameStop

(GME) phenomenon. It’s different in that GameStop fans often said they had a fundamental investment case. But it plays on many of the same group dynamics.

It’s still not clear how the average investor who has no interest in the meme can get involved in this kind of investment. It’s like an inside joke shared with a large group. The person who tries to join in late is likely to miss the nuance — the group may simply hope dogecoin hits a number with some comedic significance. For those who haven’t been clued in, the joke may be on them.

Write to Avi Salzman at avi.salzman@barrons.com