Despite being developed as a joke in 2013, Dogecoin (DOGE) has come a long way from being a random meme-coin. Prices have spiked by an astonishing 473% this past week due to retail investors pushing to make the 20th of April “Doge Day.”
Dogecoin is currently among the most traded cryptocurrencies, with a market capitalization of $52.2 billion, priced at $0.40 per coin, as of April 20, 2021. Thanks to its recent price rally, DOGE is currently the 5th largest digital asset by market cap, stealing the spotlight from some of the more popular altcoins like Cardano and Polkadot, as well as surpassing the popular stablecoin Tether.
“We saw roughly 75% of our monthly active userbase taking part in Dogecoin investment. It was very difficult to manage the scale all so sudden, the sudden spike in traffic, and we saw like 15x traffic in a matter of a few hours,” explained Neeraj Khandelwal, Co-Founder of CoinDCX on Dogecoin’s recent bull run.
But what is Dogecoin truly worth in today’s cryptocurrency market? Does this digital asset have actual value, or is this another pump and dump scheme orchestrated by retail investors using commission-free trading platforms? Let’s analyze the background and brief history of Doge to find out more.
Background and Development
Dogecoin’s protocol was based on Luckycoin, which was a popular fork of Litecoin. Contrary to Bitcoin’s SHa256, Dogecoin uses the scrypt algorithm in its proof-of-work consensus mechanism and has 1-minute block intervals – meaning that it takes an average of 1 minute between DOGE blocks found by miners.
Dogecoin was created in 2013 by IBM software engineer Billy Markus and Adobe software engineer Jackson Palmer, who developed the digital asset as a joke, taking the name and logo from the Shiba Inu dog, featured in the “doge” meme, that became popular in the same year. The founders initially created the meme-coin to satirize all the emerging digital assets promising to be the next Bitcoin:
“The original intent was a parody of all the ‘serious’ clone coins that were trying so hard to differentiate themselves, but all seemed the same,” said Markus.
On Christmas Day in 2013, at least 11 million DOGE was stolen from dogewallet.com, which was one of the most popular cryptocurrency wallets for Dogecoin holders. The cyberattack caused the currency to become the most mentioned cryptocurrency on Twitter, generating significant interest in DOGE and giving birth to numerous early investors. Also, in the video for the song “Word Crimes” (2014) by “Weird Al Yankovic“, a Doge-inspired Shiba Inu meme is referenced.
Having a circulating supply of 129.27 billion, one of the biggest concerns surrounding Dogecoin is its unlimited supply, meaning that the coin’s inflation potential is virtually endless:
“There is no limit on the number of coins that could be produced. The majority of the coins are held by very few people at the moment, so you have an additional risk that those holding a majority of the stock will have a temptation that when it hits a certain level, they’re gonna cash in, and it’ll be the last guys in, the last of the retail guys coming in that are really gonna be hurt the most,” said Andrew Sullivan, writer of Asianmarketsense.com.
Paired with Dogecoin’s historically high volatility, these risks are enough to discourage most investors from buying into this asset.
Dogecoin — The Rise to the Moon
As a meme-coin, DOGE distinguished itself as a less serious yet more approachable coin for beginner investors, skyrocketing to popularity in parallel with the original meme.
Dogecoin’s rise to the moon is also attributed to the asset gaining significant celebrity attention in February 2021, when Elon Musk tweeted a Lion King-inspired meme of him holding up the Dogecoin as if it were Simba. Musk had previously, on numerous occasions, mentioned the meme coin.
The rapper Snoop Dog tweeted a mock “Snoop Doge” album cover on the 6th of February, tagging the founder of Tesla and SpaceX in his post. Musk responded with another flurry of social posts about the meme-coin, after which DOGE prices took off.
Dogecoin supporters are rallying to mark the 20th of April “Dogeday 4/20”, making it a landmark in the phenomenon of meme-investing. Even though the Coinbase IPO last week clearly stirred the markets, it’s unclear who started the Doge movement, but Reddit groups like r/dogecoin and r/SatoshiStreetBets, the crypto equivalent of r/wallstreetbets, have played a significant role in orchestrating Dogeday.
The meme-coin enthusiasts aim to inspire a bullish frenzy and drive Dogecoin prices “to the moon” – making DOGE the cryptocurrency equivalent of GameStop (GME). Whether the meme-investors will be able to pump Dogecoin prices up to $1 is unsure. Still, one thing’s for certain – as the 5th largest digital asset, with a market cap worth more than Ford Motor Co., Dogecoin is no longer a joke in the global cryptocurrency market.