Named after a meme of the Japanese dog breed Shiba Inu and with supporters including Tesla’s Elon Musk, the cryptocurrency has risen over 10X in the last three months, with its market cap standing at almost $80 billion on Thursday.
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Indian cryptocurrency exchanges are now witnessing record-breaking trading volumes of Dogecoin, causing massive surge in traffic on these platforms.
On Wednesday, Binance-owned WazirX’s Doge/INR trading slowed its system as the platform saw record traffic that it did not have the capacity to support.
Soon, #WazirXScam trended on microblogging Twitter, as users complained of unexecuted Doge trades.
Me to @WazirXIndia right now #dogecoin #Crypto #WazirXScam https://t.co/S1nI3smAbb
— Aashvi vijay (@AashviVijay) 1620192914000
CoinSwitch Kuber, backed by Sequoia Capital and Tiger Global, registered 200% growth in Dogecoin volumes month on month, with a jump of 1300% for Dogecoin in the last two weeks alone.
Dogecoin’s volumes and prices are also peaking across the world on the much-anticipated appearance of Musk on an American TV show on May 8.
The Dogefather🐶May 8th — SNL https://t.co/3bQkZXo32s
— The Chairman (@WSBChairman) 1620250548000
Musk has hinted at discussing Dogecoin during his appearance on Saturday Night Live, driving retail investors to invest in the crypto asset.
May the 4th be with you and also May the 8th be with you! 😆🚀 #dogecoin #SNLDoge #SNLmay8 https://t.co/jRhjIV80nc
— Hodle₹ ₿hatt (@hodlerme) 1620128317000
Active traders on WazirX jumped by 123% in April and have been consistently growing on other platforms like CoinDCX.
Nischal Shetty, founder of WazirX, said the platform is being re-architected to deal with the expected surge on May 8 that could double or triple from Wednesday’s peak.
Shetty estimates that Dogecoins worth Rs 600 crore have been traded on the platform in the last 24 hours. On Coinswitch Kuber average daily volumes have been around Rs 100 crore in the last two weeks.
Most Indian crypto exchanges have listed the token, although some like ZebPay have steered away despite investor interest.
“We may list it, but first I’d like to be sure it isn’t just the Tulip Mania of the 21st century,” said Vikram Rangala, COO of ZebPay, referring to one of the most infamous market bubbles and crashes of all time in the 1600s.
Unlike other cryptocurrencies that are either in limited circulation – making them a storehouse of value – or have use cases like smart contracts, Doge’s use cases have been limited to tipping on Twitter and Reddit for quality content.
Its official website describes the currency as “an open-source peer-to-peer digital currency, favoured by Shiba Inus worldwide.”
There are over 129 billion Doge tokens in circulation, according to Coinmarketcap.com, and more can be mined.
Nithin Kamath, chief executive of online brokerage firm Zerodha, said a lack of regulations in crypto leaves the industry susceptible to manipulation, unlike strict regulations on capital markets that make it easier to track trading activities which artificially inflate the price of a stock.
“I can’t really make any sense of what is happening with Dogecoin,” Kamath said. “With no checks in place, the risks of some of the currencies like Dogecoin being a pump and dump scheme is quite high. I think the best way to play it is by not allocating more than 1%-5% of your liquid net worth to assets where the speculative activity is quite high,” Kamath said.
The best way to protect investors from a risky asset class like Doge is to restrict trading of the asset to high net-worth individuals and blockchain experts, said Mathew Chacko, partner at Spice Route Legal.
The majority of crypto traders in India are under 25.
Users say that if enough people ascribe value to the cryptocurrency, then the token ends up becoming valuable for that community, and use cases eventually arise.
“I don’t want to sell my Dogecoins, whatever happens,” said Siddharam Ishwarkatti, a 42-year-old engineer working for a multinational firm who started investing in cryptocurrency this year. “Even if it goes to 100, I will not sell it. These currencies might have a future. Bitcoin had zero value when it started.”
Dogecoin is an initiation token into the crypto universe for several new users like Ishwarkatti and 19-year-old Mrityunjaya Lala, who want to invest limited resources.
The fear of missing out and the thrill of owning a meme stock as well as the heavy influence of Tesla’s Musk is driving many new traders to Dogecoin, even though they may not fully understand blockchain technology.
Priyanshu Singh, a 19-year-old B Tech. student from Kanpur, is also hoping to use his profits from the Dogecoin rally to invest in more stable coins like Ethereum and Bitcoin eventually.
Long-term believers in crypto’s future and blockchain technology say that Dogecoin distracts people from the true value of crypto because it makes the industry about quick returns.
Dogecoin has peaked and slumped in its almost 8 years of existence, depending on external influences such as a community of Dogecoin Redditors supporting Sochi Olympics players in 2014 who lacked funds, to influential people adopting and promoting the token.
The most recent peak was on January 28 when Musk tweeted a faux “Dogue” magazine cover. Discussion on the cryptocurrency surged on WallStreetBets, the Reddit forum responsible for GameStop’s stock price hike.
Several industry experts have drawn parallels between the current surge in Doge’s prices and the GameStop short squeeze earlier this year.
“I think Dogecoin, like GameStop, is one of those markers of social movements that are breaking age-old concepts of what defines money,” said Tanvi Ratna, chief executive of think tank Policy 4.0. “What appears like frivolous games are drawing serious amounts of real money and challenging ideas around the legitimacy of money always coming from the state. This dynamic worries most governments.”
The now-famous GameStop short squeeze has propelled the stock of the video game retailer to nearly $160 as of Wednesday, rising by more than 30x year-to-date.
Rating agency S&P Global Ratings on Wednesday also raised the stock’s credit rating from B- to B.
“While the risks associated with investing in Dogecoin are many, the framework does not provide legally viable recourse,” said Anu Monga, Partner, AnantLaw, and an expert in technology regulations. “Owing to the volatility of Dogecoin, the financial regulator of the UK has clearly warned people investing in crypto assets such as Dogecoin to do so at their own risk.”
Currently, in India, there is no legal framework to address private cryptocurrencies.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which provides for an official digital currency to be floated by the RBI, is under consideration by the government.