The sharp fall was an anticlimax to a weeks-long build-up by Dogecoin enthusiasts in the run-up to Musk’s appearance as a guest host on the popular show. Dogecoin’s price climbed to a record high before the airing of the show as fans organised watch parties in anticipation of a major boost for the meme cryptocurrency from the show featuring Musk, the most prominent Dogecoin supporter.
“Musk is probably happy to jump on the joke of what is a meme (coin), but investors are probably feeling real pain now,” said Justin d’Anethan, Hong Kong-based head of Exchange Sales at Diginex, a digital asset exchange. “The supply is essentially unlimited [for Dogecoin], and so unsustainable long-term. It’s a question of who will sell first and who will be left holding the bags.”
Interest in cryptocurrencies has surged over the past year pushing the value of all digital coins past $2.3 trillion, propped up by trillions of dollars in stimulus by governments and central banks and endorsement from some institutional investors.
While Bitcoin, the most valued cryptocurrency by some distance, has hogged much of the limelight witnessing record rallies, it’s the so-called altcoins such as Ether and Dogecoin that have taken charge in recent days. There is no easy explanation behind the rising prices of Dogecoin, which was created as a parody on 2013’s cryptocurrency frenzy with the Shiba Inu dog breed as its logo. A deluge of cash thanks to government stimulus plans, speculation coupled with a fear of missing out, a dogged endorsement from Elon Musk, and some pure online fun thanks to social media’s fondness for the Doge meme are some reasons behind Dogecoin’s dream run that has seen the currency surge more than 20,000% in the past year.
“Dogecoin mania started with primarily retail traders who came from social media platforms. The retail trading community seemed convinced Dogecoin was going to 1 dollar and for many, fundamentals did not matter,” Edward Moya, senior market analyst at Oanda, told DW. In a major boost to Dogecoin’s stardom, Musk’s commercial rocket firm SpaceX has accepted payment for a lunar satellite mission in the cryptocoin. The Dogecoin-funded mission slated for 2022 is called “DOGE-1 Mission to the Moon.” That’s been one of the most searched questions related to cryptocurrencies on Google. Dogecoin and Bitcoin are two very different beasts, even if the former is based on the same software code that underpins Bitcoin.
Dogecoin can potentially have an infinite supply, which means those looking to remain invested in the coin for longer durations stand to see the value of their investment diminish over time. Bitcoin, on the other hand, has a fixed supply of 21 mn units, which makes it scarce and in return more valuable much like gold and diamonds, which are also in limited supply. While Dogecoin was designed to be a cryptocurrency for “sillies,” Bitcoin was always designed to be a decentralised digital currency, an alternative to central bank-controlled fiat money. Many die-hard cryptofans see Dogecoin and the speculative fervour around it as undermining their larger goal of taking cryptocurrencies like Bitcoin and Ether mainstream. They say the memecoin is just a speculative asset with few institutional investors backing it.
Even though Dogecoin has come a long way from its satirical origins to now being a popular peer-to-peer cryptocurrency, it’s nowhere close to threatening Bitcoin’s dominance. Its $70 billion valuation is just a fraction of Bitcoin’s $1 trillion.
This article was provided by Deutsche Welle