After ‘mooning’ earlier in 2021 on the Elon Musk effect, is Dogecoin a viable cryptocurrency?
For a period, the ‘joke’ crypto wildly outperformed the entire market. But from its peak, it then lost around three-quarters of its value. In terms of numbers, Doge started the year rocketing up from $0.063 to $0.94AUD, a monstrous 12,000% gain, then subsequently crashed down to $0.26. We take a quick look at the outlook for Dogecoin.
Dogecoin may be a ‘joke,’ but who’s laughing?
Dogecoin’s origins began as an intentional joke in the cryptocurrency community. It was a fork, of a fork, of a fork, Bitcoin to Litecoin to Luckycoin to Dogecoin. More on this here.
It almost sounds like a gastronomic joke; how many forks does it take to eat at the traditional monetary system? Dogecoin, however, never has shied away from the humour. Instead, it leaned into it. And this may ultimately be where its use cases and actual value lies. So with the cryptocurrency market still growing collectively year by year, it turns out there is still room at the monetary buffet.
Elon Musk’s influence
Most of Dogecoins’s big moves can be traced back to Elon Musk’s posts and comments in the last year. The Tesla chief’s constant stream of humorous memes and Twitter posts effectively elevated Dogecoin from a blip on the crypto radar to a full-blown competitor for market share. Ultimately the last joke bombed, with Musk performing on the American comedy show Saturday Night Live, only to mock the coin in a sketch where he confided that “Dogecoin is a hustle”.
But as much as Musk jokes, he is still a pioneer of one of the world’s largest payment systems, Paypal. Musk himself notes various factors for future improvements to Dogecoin, including transaction volumes and settlement times.
Bitcoin versus Dogecoin
One of the primary differences between Dogecoin and Bitcoin is inflation. Bitcoin’s protocol is deflationary and limits its supply to 21 million coins, while the Dogecoin protocol can produce unlimited coins. Read more about it here .
Here’s why that matters. Bitcoin’s finite supply is part of a competitive monetary environment where central banks’ fiat currency seems to have gone into inflationary overdrive. When you have lots of something, and it’s easily acquired, it’s natural for the value of that thing to deteriorate. Bitcoins’ low transaction speeds and finite supply make it harder to use for smaller transactions, hence its ‘store of value’ status. Doge, however, may prove to be well suited to smaller transactions on forums and the like as a ‘tipping’ or reward system. Just as comedians can become very wealthy, Internet culture can reward valuable participants with Dogecoin.
At the end of the day, this is Dogecoin’s most potent use case. People who don’t get Dogecoin may scoff at its value, but that doesn’t matter for Dogecoin users and fans. Dogecoin has been the popular kid recently, maybe even the class clown. Yet money talks, and when a cryptocurrency still after its crash has a market cap of AUD 34 Billion, it’s no laughing matter, still 6000% up YTD.
As an investment, Dogecoin is more responsive to the dynamics of Internet culture and uptake in online communities than the more macro-dynamics that drive Bitcoin’s place in the cryptocurrency market. It may be suited for a speculative chunk of your crypto capital instead of forming the foundation of your portfolio. In a nutshell, Dogecoin shows how you should never underestimate the power of laughter. And make money from it.