Dogecoin, the “joke” cryptocurrency, has suddenly gotten dead serious, as investors pile in funds, raising its market capitalisation to $9 billion.
‘It took about 3 hours to make’, said Billy Markus in a Reddit post on Wednesday of his Cryptocurrency invention.
He created Dogecoin ‘for the sillies’ back in 2013, with the face of the Shibu Inu dog from the ‘Doge’ meme as its logo and namesake.
Dogecoin supports good causes
It’s not all a joke, however. Dogecoin has incited the kind of comradery that is rarely seen in the world of finance. A community of the cryptocurrency’s early supporters have, over the years, donated millions of coins to various causes, including building water wells in Africa, helping connect service dogs and kids and even some ‘fun’ causes, like helping to send the Jamaican Bobsled team to the Olympics.
Meanwhile, as of Friday morning, Dogecoin’s market capitalisation stood at around $9 billion, following a dizzying 1,400 per cent year-to-date Reddit-fuelled rally.
Sadly, Markus is no longer involved with Dogecoin, having sold all the crypto he had back in 2015, for ‘about enough in total to buy a used Honda Civic’.
Dogecoin lacks technology value
This is all the more surprising when you learn that Dogecoin isn’t nearly as sophisticated as some of the other cryptocurrencies. The serious arguments for Bitcoin revolve around its algorithmically enforced scarcity, its technological sophistication and transactional security. These are among the reasons why it is currently testing $50,000, and major companies like Tesla and Mastercard have revealed intentions to opt it into it
Dogecoin benefits from none of these advantages, and therefore its intrinsic value depends entirely on whatever someone else is willing to pay for it.
The prospect of widespread institutional adoption is virtually non-existent. And yet, its market capitalisation is larger than that of Dropbox or Under Armour.
Elon Musk touts dogecoin
How has this happened? The explanation, like many financial stories of the last month, involves Reddit and Elon Musk.
Bloomberg’s Matt Levine described Dogecoin as ‘GameStop stripped of all the distracting reality’. Essentially, the cryptocurrency is benefitting from the same sort of ‘honest pump’ that fuelled the GameStop saga.
People on the internet, that is, on Reddit, understanding the fundamentals of supply and demand have come together and decided that if they all buy Dogecoin, it will go up.
Sure enough, it has.
At the start of the year, a single Dogecoin was worth half a penny. Now, it’s worth about 7 cents, having been as high as 8 earlier this week thanks to tweets from Elon Musk and Snoop Dog among others. That’s how finance seems to work of late – things are valuable not based on any tangible, real-world metrics, but rather their proximity to Elon Musk.
The billionaire founder of Tesla and Space X has tweeted numerous times about Dogecoin, posting memes, polls and even revealing that he has bought some Dogecoin for his youngest son, who is named ‘X Æ A-12’.
Even so, investors should be cautious. Referencing Dogecoin’s main differentiating factor from Bitcoin – the lack of an algorithmically enforced scarcity, the ‘meme’ cryptocurrency’s creator told Bloomberg on Thursday that purchasers of Dogecoin should be careful, because he cannot limit the coin’s supply to help make them rich.
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