Dogecoin started out as a joke but has now become the 7th largest cryptocurrency by market capitalization, reaching nearly $40 billion.
The Doge meme, a Shiba Inu dog with a bewildered face overlaid with meaningless words written in a colorful Comic Sans font, inspires the digital currency.
Dogecoine was created in 2013 based on Litecoin, by computer engineer Billy Markus and marketing expert at Adobe Jackson Palmer. This digital currency has a faster mining speed than other cryptocurrencies, is unlimited, and the bet is an interesting alternative to Bitcoin.
To date, despite being born as a joke, Dogecoin has a market capitalization of nearly 40 billion USD, ranking 7th in the entire market in terms of value, according to CoinmarketCap. The digital currency has tripled in the past week.
The latest week is not the first time Dogecoin has surged in price. Like many other cryptocurrencies, this coin is also volatile. In 2018, Dogecoin price increased along with other popular digital currencies. But since then, volatility has been rather lackluster. By the beginning of this year, Dogecoin had skyrocketed thanks to enthusiastic support from a group on Reddit called SatoshiStreetBets.
Similar to WallStreetBets – the community that pushed GameStop’s stock price in early 2021, SatoshiStreetBets set its sights on cryptocurrencies.
On April 16, a Reddit user posted an image of the value of their Dogecoin on the investment app Robinhood. “Hey guys, I just became a Dogecoin millionaire,” this person said with a balance of over 1 million USD when converting Dogecoin into their account.
Why has a recent “joke” attracted so much attention? First, it’s Coinbase. The most popular cryptocurrency exchange in the US has IPO, quickly reaching a market capitalization of $100 billion, making the attraction to cryptocurrencies increase sharply.
Investor excitement caused Bitcoin and Ether prices to skyrocket. Bitcoin hit a record high of over $64,000 on April 15, while Ether also hit $2,500 for the first time. Dogecoin is no exception to investors’ frenzied interest in digital assets.
The coin created in 2013 also attracted many users of Robinhood. The online brokerage said there was a “major breakdown” in its crypto trading feature on April 15 in the face of “unprecedented demand”.
In addition, Tesla CEO Elon Musk also supported the upward momentum of Dogecoin.
“Doge barking at the moon”, the US billionaire posted a status line with a painting of the same name by artist Joan Miro on Twitter on April 16. The tweet caused the price of Dogecoin to increase by over 100% in just one day, reaching an all-time high, one Dogecoin for approximately 0.3 USD.
The new record was set just two days after Dogecoin first crossed the $0.1 mark when Coinbase made its IPO on Nasdaq.
The US billionaire also once called Dogecoin his “favorite cryptocurrency” and “everyone’s cryptocurrency”. Musk, earlier this year, also appeared as a supporter of Bitcoin, with electric car company Tesla buying $1.5 billion worth of crypto.
But the skyrocketing Dogecoin price has led to worries about a potential bubble in the crypto market. Some investors have called Bitcoin a speculative bubble as the world’s most popular digital currency has more than doubled since early 2021. Nic Carter, the co-founder of Castle Island Ventures, warns investors Private investors “will lose money” if they invest in Dogecoin, calling the digital currency a “speculative vehicle”.
“The rise of Dogecoin is a classic example of the More Fool Theory,” said David Kimberley, an analyst at UK Freetrade.
This theory (Greater Fool Theory) holds that it is possible to make money buying assets if they are overvalued, by selling them to more idiots.
“People are buying crypto, not because they think it has any meaningful value, but because they hope other people will buy it, push the price up, and then they can sell it off and make money,” Kimberley said. “When people do this, the bubble eventually bursts and you’re left behind if you don’t get out in time.”
This expert also warned that the case of Dogecoin is common with digital currencies held mainly by a small group of players. “That means it only takes one person to sell off their holdings and the whole market will go up in smoke,” Kimberley commented.