author: Adam Lukaszewski
Dogecoin Shoots for the Moon Thanks to Elon Musk and Reddit
The value of memetic cryptocurrency Dogecoin has grown by a thousand percent at its peak, all thanks to a campaign by Reddit users and tweets by Elon Musk pushed Dogecoin for top spot among cryptocurrencies according to their market capitalization.
- Dogecoin recorded a 10-fold increase (by 1000%) in value during a single day;
- Reddit users, as well as Elon Musk, are responsible for the cryptocurrency's surge;
- Dogecoin is generating a lot of interest, and those in charge of the investment app Robinhood have made a controversial decision restricting the ability to invest in this cryptocurrency.
The beginning of 2021 will certainly make financial and investing history books. Not so long ago, we watched an epic chess game between retail investors from WallStreetBets, which pushed up the price of GameStop stocks, at the same time causing huge losses to some investments funds (via Wall Street Journal, the hedge fund Melvin Capital Management lost 53% of its capital in January, which means losses counted in billions of dollars). Now we are witnessing an equally interesting story about the spectacular rise of a cryptocurrency called Dogecoin.
A few words about Dogecoin
Dogecoin (DOGE) is a blockchain-based cryptocurrency alternative to Bitcoin, developed by Billy Markus and Jackson Palmer and heavily inspired by the famous meme of a cute shiba inu dog (commonly known as a "doge"). It publicly debuted in 2013 and was initially intended as a kind of joke to warm up the negative media image of cryptocurrencies as a means of payment used by criminals in illegal transactions. However, time has shown that a joke and a positive message do not preclude the emergence of a fully functional cryptocurrency, which not only impresses with its market value, but also constitutes one of the hottest topics for the online community.
This year's rise in Dogecoin's value is truly impressive. As recently as last Thursday (i.e. January 28), a single Dogecoin was trading at just $0.0074 (that's the lowest price recorded at the time), which meant that its value was less than a regular one-cent coin. However, very soon miracles began to happen, as just a day later, on January 29, the price of one Dogecoinwent through the roof - to as much as nearly $0.078 (the highest price recorded at the time).
Granted, Dogecoin is still only a fraction of the value of a dollar, but the increase in its price from $0.0074 to almost $0.078 represents a 10-fold (1000%) increase in value over the course of a single day. This raised the market value of all Dogecoin in circulation to over $9 billion and allowed it to briefly rise into the top 10 highest valued cryptocurrencies in general. Such a strong rise was followed by the realization of gains, and as of now, Dogecoin's total capitalization has fallen below a "modest" $5 billion at a price of around $0.033 a piece.
What links Reddit, Elon Musk and Dogecoin
The reasons for the described Dogecoin appreciation are unlikely to be a mystery, and the clues lead to Reddit users and Elon Musk. The SatoshiStreetBets subreddit, which describes itself as a "cryptocurrency" version of WallStreetBets, has been heavily pushing for Dogecoin wherever possible, and has even set a (coveted) target price of 1 dollar. Dogecoin's massive grassroots marketing campaign continues all the time, although it can be disruptive at times (for example, it was regularly "spammed" on WallStreetBets' Discord server over the past few days). While the Reddit community has recently shown incredible strength, the contribution of the richest man on the planet - Elon Musk- cannot be ignored . The founder of SpaceX and Tesla has already let it be known what he thinks about Dogecoin back in 2019..
However, the real blast came with his tweet of January 28 this year, in which he posted a fake cover of Dogue magazine (referring to the fashion magazine Vogue) with a fine reference to Dogecoin. It's also no coincidence that it was on January 28 that some of Dogecoin's more dynamic value increases took place.
Huge interest in Dogecoin and above-average increases in its value led even Robinhood (i.e. the popular application that enables users to invest in financial instruments) began to restrict trading in this cryptocurrency, i.e. by suspending the possibility of immediate use of deposited funds, explaining this move by extraordinary market conditions. This is, by the way, another controversial decision by the people in charge of this investment app, which is slowly turning from retail investors' favorite into their main enemy.
Dogecoin is yet another example of the strong influence of Reddit users (i.e. small investors) and influential celebrities on financial instruments and markets. Of course, the sustainability of such increases can be discussed (time will tell), but there is no doubt that we are witnessing extremely interesting phenomena in the world of investing and cryptocurrencies.