As of today, Dogecoin has a total market capitalization of $50 billion—putting it on par with Ford Motors or Volvo.
But here’s the thing: Ford and Volvo produce automobiles and employ tens of thousands of people whereas Dogecoin started as a joke, has been popularized by memes, amplified by tweets from billionaires and is today being spurred on by day traders celebrating April 20—the unofficial holiday of smoking pot.
“It was really just a game,” says Eloisa Marchesoni, a tokenomics expert, when describing the origins of Dogecoin. “The cryptocurrency was not meant to be used as a form of payment.”
In a sense, Dogecoin is the perfect representation of this silly era of investing. At least GameStop actually had the potential to provide cash flow to its shareholders and employed Americans at its physical stores—even if speculative investments in its stock weren’t a great idea.DOGEUSD Chart by TradingView
While Dogecoin started as folly, it has evolved into a real asset—at least as real as a cryptocurrency can be—with actual people betting actual dollars on it. A few will profit, most of the rest will take a loss and the absurdity of Dogecoin will linger on.
What Is Dogecoin, Really?
Dogecoin’s origin story reads as a parody of Bitcoin.
The latter was created by the mysterious Satoshi Nakamoto and pioneered blockchain technology. It was conceived as technology that would remove rent-seeking middlemen from the world of finance, and while that hasn’t exactly come to pass—it’s more of a speculative store of value today—at least Bitcoin offers a compelling story.
Dogecoin, meanwhile, was created by software engineers Billy Marcus and Jackson Palmer back in 2013 quite literally to poke fun at the hagiography surrounding Bitcoin. They used a popular meme at the time—a Shiba Inu dog with a purposely misspelled “doge” in the title.
Dogecoin garnered some attention over the years through publicity stunts, like sending the Jamaican bobsled team to the 2014 Olympics, sponsoring a NASCAR driver and financing more than $30,000 for clean water in Kenya.
But mostly it was a nearly invisible so-called alt currency without much takeup, a spec of water in a sea of thousands of crypto alternatives.
Why Is Dogecoin Going Up?
Only two cryptocurrencies have been blessed by Tesla CEO Elon Musk’s Midas touch: Bitcoin and Dogecoin. But he’s probably kidding about the latter.
Musk has tweeted about Dogecoin throughout its existence, including a fake magazine cover and a Lion King meme. Others, including beef jerky brand Slim Jim, have gotten in on the fun. Online community groups, including those on Reddit, have trumpeted the digital coin as well. Enthusiasts are proclaiming that they want Dogecoin to go to the moon. Musk has taken this literally, saying he wants to put an actual Dogecoin token on the actual moon (okay, it was an April Fool’s joke).
SpaceX is going to put a literal Dogecoin on the literal moon
— Elon Musk (@elonmusk) April 1, 2021
All of this publicity makes a difference. Nearly 40% of investors, according to research firm Piplsay, have at least considered making a trade based on a Musk tweet. Even if you take that finding with a grain of salt, you cannot deny Musk’s microphone—he has almost 52 million followers on Twitter.
Even more eyeballs were peeled when a growing chorus of day traders wanted to raise Dogecoin’s value to $0.420 to commemorate marajuana. When such motivations are in play, you kinda got to throw conventional analysis out the window.
What You Should Do?
After Bitcoin, GameStop and non-fungible tokens (NFTs), it’s clear that Americans who are stuck at home during the Covid-19 pandemic, with money to spend and time to burn, have decided to make bets based on Internet jokes for fun. That’s just how some people blow off steam these days.
Let’s not confuse this with investing. While inflation may or may not be coming down the pike, it appears that today’s low-interest rate environment, coupled with unprecedented direct payments from the government and social distancing restrictions, has driven up demand for nonsense.
Don’t give in. While it’s fun to speculate in theory, it’s more stressful in practice. The reason financial planners tell you to avoid these fads is because there’s no way to accurately predict what a Dogecoin will be worth in 30 years when you retire, much less 30 days or even 30 minutes.
There’s nothing wrong with betting a few bucks on the volatility and enjoying the ride. Just like playing a $5 hand of blackjack in Vegas. Just be ready to lose everything you wagered, without a care in the world.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.