Dogecoin rallies ahead of Elon Musk’s SNL stint. Why is the cryptocurrency so popular?

Meme-based virtual currency Dogecoin soared to an all-time high this week, and with it, stole the spotlight from other popular cryptocurrencies such as Bitcoin and Ethereum.

The Dogecoin rally comes ahead of this weekend’s Saturday Night Live (SNL) show, which will be hosted by Elon Musk, the CEO of Tesla and founder of SpaceX.

And some experts believe the appearance may send the cryptocurrency even higher.

“I predict it could reach $1.00,” said Carol Alexander, a finance professor at the University of Sussex Business School. “There’ll be quite a few people on the Reddit coordinated group that will be happy to take their profits, albeit maybe only 30 per cent or 40 per cent, because it’s been stable around 60 cents for a while.” (All prices U.S. dollars and cents.)

But she added that like most cryptocurrencies, it will likely fall back down in price by Sunday — potentially to 50 cents.

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What is Dogecoin?

Dogecoin launched in 2013 as a satirical critique of the cryptocurrency frenzy. But what started off as a joke, has turned into an online craze.

The coin climbed 41 per cent in 24 hours this week, to a record 69 cents on Wednesday.

It now ranks as one of the top four digital coins by market value, according to CoinMarketCap. It’s also worth more than FedEx, General Motors and Nintendo.

A $1,000 Dogecoin purchase on Jan. 1, 2021, would be worth $121,052 as of Wednesday’s high of 69 cents — a gain of more than 12,000 per cent, according to CNBC.

This is significantly higher than other cryptocurrencies, said Moon Jerin, founder and CEO of Doctrina and an industry analyst at the University College London’s Centre for Blockchain Technologies.

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“If you had invested a thousand dollars at the beginning of this year in Bitcoin, you would have around $2,000,” Moon said. “Whereas if you had invested a thousand dollars at the beginning of this year in Dogecoin, this would have become $120,000 by now.”

But Dogecoin remains rarely used in commerce or payments. Like other digital coins, it is highly volatile and its price is heavily influenced by social media users.


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Some cryptocurrency market players said its volatility was its main draw, with a mixture of retail investors and market makers fueling its trading volumes.

“The ugly truth is that a lot of crypto valuations are divorced from reality anyway,” Joseph Edwards, head of research at crypto brokerage Enigma Securities, told Reuters.

“Right now, (Dogecoin) is being seen as it’s always been seen — an asset with surprising staying power that provides opportunities to take advantage of volatility every year or so.”

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History of Dogecoin

Dogecoin, which is pronounced dohj-coin, has a picture of a Shiba Inu dog as its logo. The term “doge” came from an internet meme that gained popularity in 2013, which had a Shiba Inu dog with phrases written in rainbow-coloured comic sans type.

Jackson Palmer and Billy Markus, a pair of software engineers, created Dogecoin in 2013 as a way to poke fun at the hype surrounding cryptocurrencies, such as Bitcoin, according to Business Insider.

But Dogecoin is very similar to Bitcoin, explained Brian Mosoff, CEO of Ether Capital. It’s an open-source, software-based protocol that has its own currency to it called “doge” and is a clone of Bitcoin.

“Bitcoin is open-sourced. Anyone can go on the internet and can copy that code. They can tweak around the recipe and redeploy it,” he said.

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And in this case, Palmer and Markus changed the Bitcoin recipe and called it Dogecoin. The currency was derived from the open-source software project, Litecoin. Unlike Bitcoin, it does not have a limit to the number of coins that can be produced in the system.

“It was meant to be fun, it was meant to be a joke. They put this cute dog on the logo and put it into the world, not thinking it would be anything. And here we are years later where there is enough buy-in from different investors where you have an over $70-billion market cap,” Mosoff said.

Alexander echoed Mosoff’s statement, saying it started off as “anti-establishment” currency — not a way for people to make money, but for people to rebel against banks.

For example, when Dogecoin exploded on Reddit, it became a way of “tipping” on the internet (repaying people on the web for performing a good deed).

Investors even used Dogecoin to send the Jamaican bobsleigh team to the Winter Olympics in Sochi in 2014, Alexander said.


Why is Dogecoin so popular?

Dogecoin’s popularity can be tied to Musk, Alexander said.

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Musk mentioned the digital coin in July when he tweeted, “It’s inevitable” with an image of Dogecoin engulfing the global financial system.

Then in December, Musk mentioned the coin in a tweet saying, “One Word: Doge.”

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“There’s a growing amount of branding with cryptocurrency. Companies pick up crypto as a way of being cool,” Alexander said. “Elon didn’t choose to tweet about Ether or Bitcoin, because that’s not his image. Dogecoin appeals to his image.”

And with Musk’s stamp of approval, Dogecoin started gaining traction.

For example, earlier this year the Tesla CEO posted a picture of a fictional “Dogue” magazine (playing on the magazine “Vogue”), which led to an 800 per cent surge in the coin’s price, according to CNBC.

Other celebrities, like Snoop Dogg and Kiss singer Gene Simmons, have also posted tweets backing Dogecoin.

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Although celebrity endorsement has helped boost the coin’s popularity, there is another reason for its likability, experts say.

“You have a group of investors who are feeling like they’ve been priced out of Bitcoin, they’ve been priced out of ether … and they’re looking to what else is out there,” Mosoff said. “And Dogecoin has a unique value proposition — it has a very large circulating supply and has a very low cost to enter.”

People want to participate in something that is not trying to take itself too seriously, he added.

Moon called Dogecoin the “people’s coin,” explaining that it only took a group of people, largely on Reddit, to try and send the price of the coin “to the moon,” without Wall Street’s involvement.

“It started off as a joke, a rebel to Bitcoin, everything about it is done in a very unconventional way,” she explained. “It represents decentralization and rebellion.”


Should you invest in Dogecoin?

Currently, Dogecoin does not have much use to it, Alexander explained.

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“There’s no use for it at all unless it were for a grassroots movement of philanthropists that like the idea of trying to make money at the same time as funding benevolent projects like water in Nigeria.”

Critics say Dogecoin’s soaring price is another example of the fever to buy the next big thing that’s been pushing prices up across investments, and that people buying in now may be setting themselves up for pain.


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Even cryptocurrencies that are more widely accepted and seen as serious are notoriously volatile, with huge swings in price, up and down.

“We can expect many novice retail investors — who may not have the financial resilience needed — to get burned in the Dogecoin frenzy, in the same way they did with the GameStop one,” Nigel Green, chief executive of deVere Group, told the Associated Press on April 20.

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Like other cryptocurrencies, it’s also extremely volatile.

There is no cap to the supply of Dogecoin, meaning the coin can inflate infinitely. There are only 21 million bitcoins that can be mined in total. However, Dogecoin does not have a cap on its quantity.

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Moon said this may contribute to Dogecoin’s turbulence in the digital market.

“Right now there’s around 130 billion of them and they’re going to continue to make more as people mine more Dogecoin,” Moon said. “And that’s where the volatility question comes in.”

But she added that in the cryptocurrency world there is always a risk.

“Whether is Dogecoin or it’s Bitcoin, you always invest in what you are willing to lose,” Moon said.

— with files from the Associated Press and Reuters

© 2021 Global News, a division of Corus Entertainment Inc.

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