Cryptocurrency isn’t as novel as it was back in 2010. Today, it’s easier than ever to start investing in crypto through apps like Coinbase. Although Bitcoin and Ethereum are still the most popular types of cryptocurrency, another name has been making headlines in recent days.
It goes by the name Dogecoin and it started out as a joke. Now, it has made some people millions of dollars by rapidly increasing in value. The so-called meme-coin has garnered support from Elon Musk and countless people on social media, helping drive its value up even further.
That being said, the idea of investing in a cryptocurrency that started as a joke is nerve-wracking to many people. It certainly isn’t the best choice for those that aren’t willing to tolerate some risk. However, it does demonstrate the massive growth potential of cryptocurrency in today’s digital world.
Here’s what you need to know about Dogecoin as it continues its impressive run. Of course, this article is strictly for information purposes and shouldn’t be considered investment advice.
What is Dogecoin?
At the end of 2013, former tech employees Billy Markus and Jackson Palmer activated the Dogecoin network. The two have repeatedly commented that building the coin took less than three hours to complete.
Now, almost eight years later, Dogecoin has become an international sensation. Since the start of 2021, its value has risen by more than 140,000 percent. At the time of this writing, a single Dogecoin costs just over 29 cents. However, it used to be worth mere fractions of a penny.
When Markus and Palmer first started the Dogecoin network, the two used it as a way to send tips to each other. Thanks to posts on Reddit and other social media sites, the coin jumped in value by nearly 300 percent within a few weeks of its launch.
Over the years, Dogecoin has built on its success by following the same strategy. Its popularity today largely depends on the amount of social media chatter it’s getting.
How Does Dogecoin Work?
Interestingly, Dogecoin itself isn’t much different from Bitcoin. The two cryptocurrencies are closely related because they share much of the same code.
Markus worked extensively with Bitcoin’s code to create Dogecoin. In one interview, he even noted that he copied the code and replaced instances of Bitcoin with Dogecoin. With that in mind, Bitcoin is the most popular cryptocurrency in the world and emulating it probably isn’t a bad idea.
Dogecoin operates on a one-minute block time. In other words, a new block of transactions is added to the chain every minute. This is different from Bitcoin’s block time, which is 10 minutes.
Also unlike Bitcoin, Dogecoin doesn’t have a cap on the number of coins in circulation. It originally launched with 100 billion coins available. Those were quickly mined by 2015. In response, the creators of Dogecoin issued an additional five billion coins. Now, an additional five billion coins are added to circulation every year. That ensures there is always fresh Dogecoin to mine.
Why is Dogecoin Skyrocketing?
As noted, Dogecoin’s value has been skyrocketing recently. In fact, its recent spike has helped it become a top-10 cryptocurrency. It’s only fitting that Dogecoin would rise to prominence in the same year that Redditors tried to take down hedge funds by pumping GameStop’s stock.
Part of Dogecoin’s recent rise can be attributed to Elon Musk. Although he isn’t associated with the coin directly, he seems to have become the figurehead for it. On Thursday night, Musk tweeted “Doge Barking at the Moon,” suggesting that the digital coin is “going to the moon.”
In the online world of meme finance, that means something’s value is rising drastically. As soon as Musk hit send, people started buying the cryptocurrency like crazy. Dogecoin spiked overnight by almost 500 percent.
Another reason for the coin’s rise is the fact that people aren’t feeling secure with traditional investments. With interest rates near zero and the regular stock market being more unpredictable than usual, people are searching for new ways to invest.
As noted, Dogecoin certainly isn’t a safe option. Then again, no type of cryptocurrency is. Those willing to take a chance, however, have plenty to gain by purchasing some digital coins.
The fact that Dogecoin is literally turning people into millionaires overnight is also contributing to its hype. One Reddit user posted on Thursday saying, “Hey guys, I just became a Dogecoin millionaire.”
As with any sort of trendy investment, Dogecoin’s value is being driven by public sentiment rather than its actual worth. In reality, the coin has very little backing it up. The only thing pushing it higher is the fact that people keep putting money into it in hopes that others do the same.
So far, that strategy has been lucrative. It has also created a massive “bubble” that is destined to pop eventually.
Financial analyst David Kimberly told CNBC, “People are buying the cryptocurrency, not because they think it has any meaningful value, but because they hope others will pile in, push the price up, and then they can sell off and make a quick buck.”
In today’s extremely volatile financial world, it’s a strategy that can’t be written off. Still, those who aren’t able to withstand some losses should probably steer clear of Dogecoin as a primary investment.
It will be interesting to see how this cryptocurrency fares in the coming days and how long it is able to sustain its current run. With a little help from Elon Musk, anything seems possible.