Though it started out as a joke, Dogecoin currently ranks as one of the top cryptocurrencies by market capitalization. According to Coinmarketcap, it is the fifth highest digital asset with a market cap of close to $65 billion as of May 18, 2021. Its rise to fame has been marred with controversy but that has not stopped the meme coin from registering stratospheric gains.
As of May 12, 2021, the crypto asset was up by an astounding 12,000% YTD. According to YCharts, its value as of May 17, 2021 was 19,490% higher than it was a year ago. To place its market value in perspective, DOGE is worth more than established companies such as Ford Motors, eBay and Kraft Heinz. It is, in fact, more valuable than 75% of the companies on the S&P 500. In the past few months, its returns have surpassed the gains that the S&P 500 has posted in at least three decades.
While it seems easy to dismiss the asset as the product of frenzied speculation, there is more to it than meets the eye.
From Joke Coin to Money Maker
Founded in 2013, the cryptocurrency is based on the doge meme and has a Shiba Inu as its logo. At the onset, it was simply a joke coin meant to satirize the digital currency ecosystem and the craze associated with the crypto space. It first posted a significant rise in price in 2018 alongside the rest of the crypto market but has been off the radar since then.
But in early 2021, it embarked on a wild uptrend thanks to the support of a Reddit group known as SatoshiStreetBets. After starting out the year at a price of less than one cent, DOGE shot up as high as $0.72 at some point. It is trading at $0.49 at the time of going to press.
SatoshiStreetBets is a group focused on pumping crypto prices. It is eerily similar to the subreddit WallStreetBets, which was behind the GameStop share rally around the start of the year. Meme traders on these platforms often set arbitrary price targets for a specific asset. They then generate hype around it in a bid to reach their target price. As price surges, more traders often join the hype, creating a feedback loop that sends the price even higher.
Catching on with Celebrities
The frenzy around the coin has also been attributed to a number of additional factors. One of these is the listing of Coinbase, the most popular crypto exchange in the US. When it went public in mid-April 2021, the digital asset market as a whole reacted with sharp rallies in top coins. Bitcoin briefly rose to $64,000 at the time while Ether crossed the $2,500 threshold for the first time. Dogecoin was also a beneficiary of the market’s uptrend.
Support from Tesla CEO Elon Musk has undoubtedly also contributed to the coin’s performance. His praiseful tweets about it fed the enthusiasm and speculation around the asset and push prices up. The billionaire once referred to it as “the people’s crypto” and his “fav” cryptocurrency.
Other noteworthy personalities supporting the asset include Mark Cuban, the owner of Dalls Mavericks and rapper Snoop Dogg. According to Cuban, it is the one coin that people actually use for transactions. He believes that since people actually spend it, more businesses will embrace it with time.
Speculative Bubble or the Future of Crypto?
Investing experts are split on the future of the meme coin. While some view it as a highly promising digital asset, others feel it is simply a passing fad. Others have gone as far as to call it a bubble.
Though the rapid rise of its price has been driven by the media frenzy around it, the viability of Dogecoin in payments is yet to be tested. Founders of traditional digital assets like BTC and ETH aimed to create alternative payment options. The founders of DOGE meant for it to be a parody against mainstream crypto.
With the current speculation and frenzy surrounding it, both of these objectives have been challenged. By defying the intentions of its creators, it has gained the status of a serious investment drawing fiat money in the billions. However, what the future holds for DOGE and other DOGE-related meme coins remains to be seen.