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What is Dogecoin? All You Need to Know About the Meme Cryptocurrency

Editor, TRANSFIN.
Apr 17, 2021 12:46 PM 4 min read
Editorial

Dogecoin is having a sensational April!

In the last 24 hours, the price of the “meme cryptocurrency” has more than doubled, with its valuation skyrocketing to above $40bn.

That's remarkable news for a cryptocurrency that began the year priced at less than one cent. Even more remarkable for a cryptocurrency that was created as a joke!

What is Dogecoin?

A satirical response to Bitcoin and the crypto craze, Dogecoin was invented by software engineers Billy Markus and Jackson Palmer in 2013.

Their intention, ironically, was “to show the absurdity of wagering huge sums of money on unstable ventures”.

The digital token takes its name and logo from the viral Shiba Inu meme which features a dog that speaks in broken English (ergo, it’s a “doge” and not a “dog”).

There are already more than 100 billion Dogecoins in existence; unlike Bitcoin, which has a maximum number of 21 million, Dogecoin has no upper limit.

Until the end of 2020, the Dogecoin community largely backed it in jest or to support causes, such as sponsoring Jamaica’s bobsled team at the 2014 Winter Olympics in Sochi. Or collecting donations to build a well in Kenya. Or giving $55,000 worth of Dogecoin to a Nascar driver in the US.

In 2021, though, just like virtually everything else in the world, Dogecoin has turned upside-down. 

 

Why is Dogecoin Price Rising?

The Coinbase Effect

The joke cryptocurrency’s surge in the last couple of days is reflective of the surge in value in most digital currencies. This is due to Coinbase’s listing: The largest crypto exchange platform in the US briefly hit $100bn in market cap after it went public on Wednesday.

Given that it was the first crypto startup to go public (and at a valuation similar to Airbnb and Facebook’s when they went public), Coinbase’s IPO was a watershed moment for the industry as a whole. It signalled the mainstreaming of crypto investments and the normalisation of trades once seen as reckless, speculative or even criminal.

Accordingly, the values of Bitcoin and Ethereum soared, crossing $64,000 and $2,500 respectively. Dogecoin benefited similarly.

 

The Musk Effect

That’s this week. But Dogecoin has been on the rise for most of 2021.

If you look at the chart above, you’ll notice a sharp uptick at the end of January. This is when Elon Musk began tweeting about the digital token. The Tesla CEO has routinely tweeted jokes about the meme crypto, sharing a Vogue magazine cover renamed as Dogue, a Lion King meme with the Shiba Inu dog superimposed on Simba’s face, and tweeting things like “Who let the Doge out” and “No highs, no lows, only Doge”. He also once changed his Twitter bio to “Former CEO of Dogecoin”.

During his talk on Clubhouse (another phenomenon he helped mainstream), Musk said, “Dogecoin was made as a joke to make fun of cryptocurrencies, but fate loves irony… The most ironic outcome would be that Dogecoin becomes the currency of Earth in the future.”

Other public personalities like Mark Cuban, Snoop Dogg and Gene Simmons have also come out in apparent endorsement of Dogecoin. This celebrity frenzy popularised the meme token and sent its price to the sky.

 

The Reddit Effect

Then there’s Reddit. Remember the r/wallstreetbets subreddit that sent GameStop shares to the exosphere earlier this year? There’s a similar community of crypto enthusiasts called r/SatoshiStreetBets, which has been building similar hype around Dogecoin.

In this way, Dogecoin’s rise can be viewed as another product of the changing power dynamics in the investing world. Individual newbie Robinhood traders are increasingly calling the shots over Wall Street heavyweights. Online forums and platforms such as Reddit, Discord, Facebook and Twitter are becoming more and more influential in influencing trader behaviour. And shifting trends (like China’s national digital currency, Tesla accepting Bitcoin payments or the likes of PayPal allowing users to buy and sell crypto) have normalised erstwhile “unconventional” investments.

Call it decentralisation. Call it populism. But it is what it is.

 

Doge-ing Bullets

Dogecoin’s rise may be ironic, amusing or even hilarious. But many fear it may lead to a bubble. After all, it doesn't have any "intrinsic" value and most investors are trading it solely to push its price up and thus make a killing.

That hasn’t demoralised Doge’s loyal cult-like community though. Many traders believe the token’s value will cross $1 soon, up from the $0.30-$0.35 range it is trading at now. They brush off concerns about the hype being hubris, saying such paranoia was pushed forward about even Bitcoin years ago - and still is.

For many in the Dogecoin community, investing in the meme currency boils down to their faith in crypto being the future of money.

For others, it’s just for kicks and laughs.

FIN.
 

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