Dogecoin: A Journey From Meme To The Moon
Dogecoin recently achieved buzzword status in the crypto lexicon as one of the most well-known cryptocurrencies, alongside more established coins like Bitcoin and Ethereum. The cryptocurrency was created in 2013 and is named after a Shiba Inu dog touted as the subject of an internet meme that was popular at the time. Over the years, Dogecoin has gained notoriety among the internet crowd as a “joke piece,” a perceived attempt to satirize the seemingly bizarre culture of the crypto craze now underway.
The past few months have proven that despite its wacky namesake and reputation, many crypto traders take Dogecoin seriously, raising its market cap to the current $ 30 billion (at the time of writing). While this may seem shabby compared to the $ 930 billion worth of bitcoin in circulation, Dogecoin’s price volatility over the past few months has made it stand out from its crypto peers. The cryptocurrency started the current year at around half a cent per coin, hitting a high of 42 cents on April 19.e (an increase of over 8000%).
While mainstream cryptocurrencies have gained more and more attention from institutional investors over the past year or so, Dogecoin is often associated with the sophomore crowd that populates various Discord subreddits and discussions. The Doge’s frenzy appears to be driven by the rallying and enthusiasm of his self-proclaimed evangelists, using memes and hashtags to encourage increased business activity. Over the past week, in an attempt to rally the prize, some Doge devotees have taken to their online communities to share variations of the coin’s namesake meme. Others posted 4/20 thematic supplications to honor the unofficial holiday celebrated by cannabis enthusiasts around the world by pushing the coin’s price past the $ 0.420 mark.
Big credit for the Dogecoin price rally goes to none other than Elon Musk, the spiritual leader of the amateur investor crowd who brought us the Gamestop short squeeze earlier this year. Musk and other Silicon Valley opinion influencers shared their praise tweets, fueling the excitement around Dogecoin with other cryptocurrencies, often leaving observers to guess the gravity of their intentions.
The big question for the payments space is whether Dogecoin and similar cryptocurrencies are just volatile securities or next-gen payments technology. While Dogecoin’s rapid rise in price is obviously driven by social (and traditional) media frenzy and speculative market forces, its viability in the payments space remains to be tested.
The founders of traditional cryptocurrencies like Bitcoin and Ethereum wanted them to be a more reliable and efficient way to make payments: a cost-free alternative to traditional P2P transfer methods. The founders of Dogecoin wanted this to be a joke. The current speculative frenzy around crypto-assets has challenged both of these visions. The advent of cryptocurrency exchanges has made the cryptocurrency market accessible to virtually anyone with access to the internet, creating the perfect conditions for bubble-like speculation. This makes the price of cryptocurrencies (except stablecoins) too volatile to serve as a reliable store of value, thus negating their usefulness as a medium of exchange. It also creates space for Dogecoin to be treated as a serious investment, attracting very real fiat money from those hoping to make a profit on its extraordinary price swings, defying the ironic intentions of its founders.
For any of the commonly traded cryptocurrencies to be widely adopted for payments, it would have to achieve price stability, which seems the least likely for Dogecoin of all major coins. Unlike Bitcoin, which is capped at 21 million coins, the Dogecoin protocol has no upper limit on the number of tokens that can be mined. This is of little use when it comes to inspiring hope for price stability. This has led some to speculate that it is more reasonable to compare cryptocurrencies to traditional commodities such as gold and silver, rather than regular fiat currencies. This comparison makes sense when you consider the similarities: both types of assets tend to have volatile prices, are used as a store of value instead of money, and are subject to increased demand in times of economic instability. This may help explain the rapid growth in cryptocurrency market capitalization over the past year, a strong rebound from the cryptocurrency’s first bull run in 2017.
If unstable cryptocurrencies are to be accepted as new commodities, there is less reason to dismiss them as a fleeting fad or a bubble with a looming expiration date. And in that case, if there is room for Bitcoin and Ethereum as the gold and silver of the future, then why not have Dogecoin as the new copper?