The cryptocurrency market is perhaps one of the most volatile and unusual investment opportunities in existence today. From the original Bitcoin came hundreds of other cryptocurrencies of all types and for all different purposes. Of these, the most well-known are probably still Bitcoin, Litecoin, and Ethereum.
However, there is another cryptocurrency that has spent a great deal of time in the news lately, which you might be wondering about: Dogecoin. Originally created in 2013 as a joke based on a popular internet meme, Dogecoin is the latest cryptocurrency in the news. Here is a look at what has fueled the strong interest in Dogecoin and what’s driving the latest surge.
What Is Dogecoin?
Dogecoin came onto the cryptocurrency scene as a joke—literally. It was meant as a sort of satirical homage to Bitcoin, the original cryptocurrency that surged onto the market in 2008. Dogecoin began as a joke tweet from Jackson Palmer, then an employee of software company Adobe. He purchased the domain dogecoin.com and created a website with the meme image. IBM software engineer Billy Markus saw the site and reached out to Palmer, and together they co-created the cryptocurrency.
In many ways, Dogecoin is similar to Bitcoin. Like Bitcoin, Dogecoin is a form of cryptocurrency—a digital asset that functions as a unit of exchange and allows people to conduct peer-to-peer transactions without a central banking authority.
Cryptocurrencies are facilitated by blockchain technology. Blockchain is essentially a digital record of transactions linked together using cryptography. Each “block” of records contains a cryptographic code from the previous block, making it virtually impossible to alter records after the fact. In this way, blockchain facilitates peer-to-peer transactions without oversight of a central authority.
Dogecoin differs most drastically from Bitcoin in that it does not have a hard limit on the total supply of Dogecoin available. Bitcoin is limited to about 21 million coins, though not all of these have been mined yet. By comparison, Dogecoin currently has more than 100 billion coins outstanding, and even more hit the supply each year.
The Dogecoin mascot, the shiba inu, originally became popular as a 2013 internet meme that included a picture of the Japanese dog with a quizzical look on its face, accompanied by colorful text intended to display the dog’s internal monologue in broken English. Originally, the meme borrowed its “doge” name from an Internet cartoon series popular in the early 2000s; in one episode, the misspelling “doge” was used to refer to a dog.
When it debuted in December 2013, one Dogecoin was valued at around USD $0.00026; it rallied on December 19th of that year to increase more than 300% to $0.00095 within 24 hours. Dogecoin’s trading volume briefly exceeded that of Bitcoin and all other cryptocurrencies combined in January 2014. During the early 2018 cryptocurrency bubble, Dogecoin reached a value of $0.017/coin and a market capitalization of $2 billion.
The Influence of Elon Musk
Speculators have flocked to Dogecoin recently. In late January 2021, Dogecoin’s value increased by more than 600% in one day. It ultimately reached $0.085/coin on February 9, 2021. By the 12th, it had fallen slightly to $0.071/coin. These figures mean that Dogecoin’s year-to-date rally is nearly 1,500%.
But why now? What happened?
The answer lies with well-known entrepreneur Elon Musk. He has been credited with sparking this latest round of speculation through a series of tweets about Dogecoin. Several of his past tweets have caused spikes in Dogecoin and Bitcoin, though he has often been quoted as saying the tweets are just jokes.
Rocker Gene Simmons and rapper Snoop Dogg also helped fuel Dogecoin’s recent surge, with Snoop Dogg tweeting a mock album image captioned “Snoop Doge” and Simmons calling himself the “God of Doge.”
Dogecoin’s surge is also likely due to activity on TikTok and Reddit, and further demand for cryptocurrency fueled by Bitcoin’s recent surge. Investors on Reddit and elsewhere have openly said they are trying to push Dogecoin’s value to $1 and have called on others to hold their coins until it reaches this peak—just for kicks, it seems.
All this activity has pushed the market valuation of Dogecoin above $10 billion, making it the tenth most valuable cryptocurrency currently in circulation.
However, Dogecoin remains a risky and extremely volatile investment—it’s more a news headline. The value is almost guaranteed to collapse. Experts say that the speculation resembles a “frothy market” where investors ignore market principles and inflate the value of an asset beyond its real worth. Apparently, enough traders have cash to burn and want a laugh, so this fact doesn’t matter much to them! However, serious investors would do well to avoid the speculation.
Featured Image courtesy Ivan Radic | Flickr