Several major events have occurred in the currency circle recently.
The first is the listing of Coinbase, the largest cryptocurrency trading platform in the United States, last week, marking an important step for the cryptocurrency industry to enter the mainstream capital market, and also driving up the prices of major cryptocurrencies. One week before Coinbase went public, the price of Bitcoin rose by as much as 15%. On April 14, the day Coinbase went public, the price of Bitcoin broke through a new high of $64,000.
The second major event was last weekend. After a great rally, major cryptocurrencies suddenly suffered a "bloodbath." On April 17 alone, Bitcoin once fell by more than 10,000 US dollars, a drop of more than 15%. Major cryptocurrencies, including Ethereum, also fell by about 20%. Many people joked that there was another "pig-killing market" in the currency circle.
However, these seem to be far less than the recent turmoil experienced by Dogecoin, the "upstart" in the currency circle.
Fans of the cryptocurrency have been tempted to stir up trouble lately. They designated Tuesday (April 20) as "Doge Day" and claimed to push the price of Dogecoin to $1. April 20 was originally the “International Cannabis Day” in cannabis culture.
You know, just a week ago on April 12, the highest price of Dogecoin was still less than 0.08 US dollars. By April 19, the highest price of Dogecoin that day had soared to nearly 0.43 US dollars. This means that in just one week, the price of the currency has increased by more than 5.6 times!
However, the fans' "self-pleasure" did not come true. On that day, the price of Dogecoin reached as high as $0.42, but the closing price fell back to about $0.33. The maximum drop throughout the day was more than 35%, which once again showed the high volatility of this cryptocurrency.
However, the trend of Dogecoin is still surprising. At the beginning of this year, its price was still hovering around $0.005. Based on this calculation, Dogecoin has increased more than 80 times this year. The increase has been so large that even Gamestop, which had previously disturbed the US stock market, was defeated.
Dogecoin price changes in the past three months.
Imagine a scenario where an investor invested $10,000 in Dogecoin on December 31 last year. As of Monday, the investor would have made a net profit of approximately $800,000. If you invest $10,000 in the S&P 500 Index Fund at the same time, you will make a net profit of only about $1,000 as of Monday; if you invest in GameStop, you will make a net profit of about $80,000 as of Monday.
It is precisely because of the "myth of wealth creation" brought about by the recent surge in price of Dogecoin that it has become a new favorite favored by many investors. Discussions surrounding Dogecoin often include expressions and slogans that once accompanied GameStop, such as "rocket" and "go to the moon." So, is it really a cryptocurrency worth investing in?
01. Cryptocurrency born for pranks
Dogecoin was born in 2013. Its founders were Billy Markus, who was a software engineer at IBM, and Jackson Palmer, who was a product marketing manager at Adobe. The two were originally inspired by Bitcoin, but they wanted to create a more fun, light-hearted currency, and Dogecoin was born.
According to Marcus, the code for Dogecoin was written in only 3 hours on Sunday. The name of Dogecoin comes from the popular Shiba Inu emoticon pack Doge: a Shiba Inu with a funny expression.
Although they are both cryptocurrencies, Dogecoin is very different from Bitcoin in terms of supply mechanism:
Unlike Bitcoin, there is no upper limit on the number of Dogecoins. For "miners" who mine new Dogecoins, the number of Dogecoin rewards received for successful mining is not fixed. Theoretically, the value of Dogecoin will likely decrease as its number continues to increase.
Since its birth in 2013, the price of Dogecoin has remained at extremely low levels. At the beginning of this year, it barely rose to half a dollar.
02. Is Musk the big banker behind the scenes?
However, starting from January 28 this year, the man who changed the "destiny" of Dogecoin appeared. He is the "real-life Iron Man" Elon Musk.
On January 28, Musk tweeted a magazine cover of a dog for unknown reasons. On that day, the price of Dogecoin immediately rose more than three times, from the opening price of about US$0.007 to as high as US$0.027.
From this day on, the "bull market" of Dogecoin began, and Musk's "promotion" of Dogecoin on social media has not stopped. Every time Musk speaks, it is almost always accompanied by a surge in the price of Dogecoin.
On February 4, Musk tweeted two tweets related to Dogecoin. One tweet was a picture of the mandrill elder lifting the lion cub Simba in "The Lion King", but the elder's face was changed into Musk, and Simba's face was changed into a dog. Another tweeted: "No highs, no lows, just dogs." On this day, the price of Dogecoin once surged by about 60%.
Screenshot of Musk's Twitter.
On February 7, Musk tweeted two more tweets, one of which wrote "Who let the dog out?" and the other forwarded a Dogecoin instructional video on YouTube. On this day, the price of Dogecoin rose by about 50%.
In the following two months, the price of Dogecoin gradually stabilized between $0.05-0.08. Until a week ago, the price of Dogecoin suddenly began to rise in a straight line.
On April 15, when Dogecoin was gaining momentum, Musk posted a picture on Twitter with the text: "Dogs barking on the moon."
On April 16, Musk simply pulled out an emoticon he had posted on July 17 last year, meaning that the "Dogecoin storm" would sweep through the financial system.
Screenshot of Musk's Twitter. Twitter@elommusk
Although Musk "dances" happily for Dogecoin on Twitter, the outside world still doesn't know why Musk began to pay attention to and "bring goods" to Dogecoin.
In February of this year, some media discovered that there was a very large "whale" in the Dogecoin market, that is, investors who hold a large amount of Dogecoin. The value of the Dogecoins owned by this "giant whale" accounts for nearly 30% of the total value of Dogecoins in circulation on the market. However, due to the anonymity of cryptocurrency transactions, the identity of the "whale" is unknown. It may be an individual, an institution or even an exchange.
But no matter what, the concentration of such a large number of Dogecoins on a single person or institution is a major risk in the Dogecoin market: the possibility of "giant whales" manipulating the market cannot be ruled out, and if the "giant whales" sell off on a large scale, it may cause a market "flash crash."
Some attentive "melon-eating people" once discovered that the "Giant Whale" account had received a transfer of 28.061971 Dogecoins, and Musk's birthday happened to be June 28, 1971. People who believe in "conspiracy theories" may wonder whether this "giant whale" is related to Musk, or even Musk himself. However, these are only speculations.
Perhaps the most relevant response from Musk was a tweet he sent on February 14: “If major Dogecoin holders sold off the majority of their coins, I would fully support it. Too much concentration is the only real problem. If they were to empty their accounts, I would pay them USD.”
03. The “Game Stop” of the cryptocurrency world
As of April 20, Dogecoin’s total market capitalization has exceeded $40 billion and ranks among the top six cryptocurrencies in the world by market capitalization.
The two creators of Dogecoin, Marcus and Palmer, no longer operate Dogecoin. Marcus never imagined that Dogecoin, which he wrote in just three hours, would grow to such a large size today.
“We didn’t anticipate the pandemic, we didn’t anticipate Elon Musk becoming the richest man in the world, we didn’t anticipate him finding Dogecoin interesting and tweeting about it,” Marcus said.
Back in 2015, Marcus sold all of his Dogecoins, earning just enough money to buy a second-hand Honda. But even today, he is not a fan of investing in Dogecoin.
"The idea that Dogecoin is worth 8 cents is the same as the idea that GameStop is worth $325. It doesn't make sense, it's ridiculous, the design of this currency is ridiculous." Marcus said, and after his comments, the price of Dogecoin has exceeded 40 cents.
Marcus’s concerns are not unreasonable. On social media such as Reddit and Twitter, the discussion surrounding Dogecoin is indeed becoming more and more “GameStop-like”.
Hot post on Reddit sub-forum Dogecoin. Image source: reddit/r/dogecoin
In addition to Musk, the biggest V on Twitter who "dances" for Dogecoin the most is Slim Jim. This is an American snack brand. Its good marketing technique is to interact with consumers through various emoticons on social media. After Dogecoin became popular, this brand showed great enthusiasm for Dogecoin and was one of the earliest promoters of Doge Day on April 20.
If you click on Slim Jim’s Twitter account now, you’ll almost see Dogecoin, Shiba Inu memes, rockets, the moon, and calls for the Doge Army. On April 20, Slim Jim also launched an NFT product (non-fungible currency product, a blockchain-based proof of digital asset ownership) based on Dogecoin design. Slim Jim tweeted that he hopes the "dog army" will push the auction price of this NFT product to the moon.
Screenshot of Slim Jim’s Twitter. Source: Twitter@SlimJim
Dogecoin, a currency that brings together emoticons, cryptocurrency, “benefit myths” and other elements, has gradually become the new “traffic password” on social media.
In early April, at the performance disclosure meeting of Slim Jim’s parent company, CEO Sean Connolly said that since the brand started adopting Dogecoin-related marketing strategies last quarter, its Twitter followers have increased by 160%, and its Twitter exposure has “reached the moon.” Connolly also said that for Slim Jim, rushing to the moon is not enough. In the future, they may use more cryptocurrency-related activities to help Slim Jim rush to Mars.
On the trading platform, Dogecoin is also the recent traffic champion. From April 15th to 16th, the trading platform Robinhood encountered technical obstacles several times due to the surge in the number of Dogecoin transactions. According to data from the cryptocurrency trading platform Kraken, between April 15 and 16, Dogecoin trading volume was approximately 70 times the 30-day average.
04. Behind the hype of Dogecoin, there are people who want to get rich overnight
At present, it is still difficult for the outside world to understand the logic of this surge in Dogecoin, but no matter what, compared to highly volatile assets such as GameStop or Bitcoin, Dogecoin’s price fluctuations and upper and lower limits seem to have greater room for imagination.
David Kimberley, an analyst at stock trading platform Freetrade, believes: “People are buying this cryptocurrency not because they think it has any meaningful value, but because they hope that others will join in and push the price up, and then they can sell off and make quick money.
“But when everyone is doing this, the bubble will eventually burst, and if you don’t get out in time, you will be left behind…and in crypto markets, typically a small group of players hold a large portion of the currency in circulation. This means that as long as one person dumps their entire holdings, the market will fall.
“Dogecoin’s recent price increase does not indicate that it provides any meaningful value, only that there is a surge in interest in getting rich quick.”
References:
https://www.wsj.com/articles/dogecoin-traders-whip-up-doge-day-frenzy-in-push-toward-1-11618842535?page=1
https://www.wsj.com/articles/dogecoin-has-a-top-dog-worth-2-1-billion-11613559022?page=1
https://www.wsj.com/articles/what-is-dogecoin-how-to-say-it-and-why-its-no-longer-a-joke-thanks-elon-11612820776?mod=article_inline
https://ca.finance.yahoo.com/news/the-history-of-dogecoin-the-joke-currency-thats-worth-more-than-barclays-and-lloyds-123540957.html
https://www.coindesk.com/much-wow-slim-jim-conagra-dogecoin-strategy
(Canadian and American financial articles, plagiarism will be investigated)
#Dogecoin#, #cryptocurrency#, #musk#
