Whether or not you closely follow the world of cryptocurrency, you’ve probably heard someone mentioning Dogecoin recently. Scoffed at by Wall Street executives as a passing fad and worshipped by crypto-minded online investment forums, it’s hard to make out what exactly is going on with this meme-based cryptocurrency.
Though you may find it laughable that there’s a cryptocurrency based on a cute meme of a Shiba Inu, Dogecoin was the fourth largest cryptocurrency in the world by market cap at the height of its price spike on May 8, 2021, just behind Bitcoin, Ethereum, and Binance Coin. So, at the very least, it’s worth talking about Dogecoin as a legitimate investment vehicle in the strange economic landscape that exists in 2021.
With its unthinkable market cap and cryptocurrency supporters maintaining that this cute little coin is destined to rise above the $1 threshold, one can only wonder how Dogecoin got to the level of prominence it currently occupies. Let’s take a look at what Dogecoin is, what brought it so promptly into the spotlight, and what we can expect it to do in the future.
What Is Dogecoin?
Dogecoin emerged in 2013 as a complete and utter joke. It was created by software engineers Jackson Palmer and Billy Markus to satirize the rising popularity of cryptocurrency alternatives to large coins like Bitcoin and Ethereum by making a coin based on the “Doge” internet meme.
The “Doge” meme originally surfaced on the internet in 2013 as well, featuring a picture of a female Shiba Inu accompanied by multicolored Comic Sans text blurbs intentionally written in broken English.
After Palmer and Markus created Dogecoin.com, which is filled with clear indications that the cryptocurrency was meant to be a satire, they found that their site had been visited over a million times within the first 30 days after launch. Little did they know, that was only the beginning. Let’s look at how Dogecoin turned from a running joke between tech nerds to a serious market force.
The Rise of Dogecoin
Starting on December 19, 2013, Dogecoin experienced its first major spike, or at least it seemed major at the time. The price went from $0.00026 to $0.00095 in just 72 hours, hinting at the fact that this coin might actually gain some traction. However, only a few days later, the first major theft of Dogecoin occurred when someone hacked the cryptocurrency wallet platform Dogewallet of millions of coins. After that, the price of Dogecoin fell back down and remained relatively low for the next several years.
Things changed when the popular stock trading app Robinhood added cryptocurrency trading, including Dogecoin, in July 2018. This made it far easier for investors to buy and sell Dogecoin just like they would any other stock, without having the hassle of going to a separate exchange. This, of course, led to a major boost in Dogecoin’s popularity.
Fast forward to 2020, and the “Dogecoin Challenge” emerged on the popular social media platform TikTok. The challenge basically said that if all 800 million TikTok users invested $25 in the cryptocurrency, its price would skyrocket and each user would stand to make a profit of around $10,000. While not all 800 million users complied, the challenge did lead to a 43% price surge for Dogecoin in under 48 hours.
The next major boost in Dogecoin’s price was when Tesla CEO Elon Musk tweeted about Dogecoin, causing the price to rise about 30% in just 24 hours.
Dogecoin was just beginning to pick up steam, however. Similar to how Reddit users rallied behind GameStop stock, cryptocurrency zealots on the site started backing Dogecoin in January of 2021, causing the price to soar by about 600% and settle at around $0.045.
As the Reddit surge was just leveling out, Elon Musk put his Twitter fingers back in the pot and stirred things up once again, claiming that Dogecoin is “the people’s crypto.” This immediately caused the price to shoot up, and suddenly, Dogecoin started to appear on the radars of a lot of major celebrities and businesses.
To give you an idea of just how much of an impact Dogecoin began to make, here are a few examples:
- Smoked meat maker Slim Jim started using Dogecoin in some of its advertising content and saw a 160% uptick in user engagement in the first quarter of 2021.
- Celebrity chef Guy Fieri tweeted in support of Dogecoin and included a picture of himself and the Shiba Inu from the “Doge” meme riding in a convertible.
- The NBA’s Dallas Mavericks announced that they would accept payments of Dogecoin through the cryptocurrency transfer app BitPay in exchange for game tickets and merchandise.
- The MLB’s Oakland Athletics announced that they would allow fans to pay for game tickets with Dogecoin.
- Rapper Lil Yachty claimed to have invested a third of his bank account in Dogecoin.
- KISS frontman Gene Simmons proclaimed himself the “God of Dogecoin” on Twitter in February of 2021.
All this hype would eventually culminate on April 12, 2021. This day was deemed “Doge Day” by the internet cryptocurrency community, a day when they would try to push the price of Dogecoin above $1. The attempt failed. However, there was still an exponential increase in the cryptocurrency’s price as the media began to give it more coverage, and thus people invested in it more, and the media gave it more attention, and so on and so forth.
“Doge Day” was far from the last aggressive advance in the price of Dogecoin, though. Thus far, in early May 2021, the price has continued to surge, making it as high as $0.72 and nearing that $1 threshold. This is largely due to continued media coverage, more businesses accepting Dogecoin as payment, and anticipation of Elon Musk mentioning the cryptocurrency while hosting Saturday Night Live.
All in all, from May 8, 2020 to its height on May 8, 2021, the price of Dogecoin went up about 29,000%. Yes, 29,000%. By comparison, Bitcoin went up about 600% and Ethereum went up about 1,700% over the same time period. At its peak, the market cap of the Dogecoin network was larger than the market cap of Twitter, FedEx, Nintendo, and Ford, just to name a few. It was also larger than the market caps of Southwest Airlines and Hilton combined.
Since its height, Dogecoin’s price has taken another dip towards $0.40, leaving investors to wonder whether it’s a temporary price dip or the start of a permanent downward trend for Dogecoin. However, if you’re thinking about investing in Dogecoin yourself, there’s one piece of information you should absolutely be aware of.
The Problem With Dogecoin
Here’s the thing: since Dogecoin was originally created as a joke, its creators programmed it so that three would be 10,000 new coins created every single minute into eternity. That means that there is no cap on the supply of Dogecoins, and therefore no cap on the inflationary effects on the value of Dogecoin.
The United States Mint controls the quantity of dollars circulating in the economy. The fact that there is a definite number of dollars is what gives dollars their value. If there were infinite dollars, dollars would be worthless. Bitcoin operates on a similar principle. There is a cap on the quantity of Bitcoins at 21 million; and while not all Bitcoins have been mined yet, there is still a definite quantity from which we can derive their value.
In the case of Dogecoin, the fact that their quantity is essentially infinite means that there’s no way that the cryptocurrency could ever hold its value in the long run. The only way that could ever happen is if the hype surrounding Dogecoin right now were to continue into perpetuity and, as we all know, hype simply doesn’t work that way.
Am I saying you shouldn’t invest in Dogecoin? Not exactly. There’s certainly a chance that there could be another price surge in the near future that could make Dogecoin investors very rich, and if you get in and out at the right time, that could be you. Just don’t expect to live in a future where Dogecoin is the predominant mode of commerce. That’s never going to happen.