On Tuesday morning, the meme-turned-cryptocurrency Dogecoin reached its all-time-high: it traded at around $0.48. Not bad for something that started as a joke. If you’re not sure how to feel about the fact that some of the buyers are now millionaires, you’re not alone. Dogecoin’s rise is just as remarkable as it is questionable. Will the bubble burst? Or rather: when will it burst?
The journey of Elon’s favorite Shiba Inu
Dogecoin is around since 2013, and how could the netizens not notice something so hilarious. The coin named after a cute Shiba Inu meme was a joke developed by software engineers Billy Markus and Jackson Palmer. An internet community quickly grew around it and has been through a couple of adventures. Among other things, they supported each other through a hack and managed to make Dogecoin volumes spike 683% with a TikTok challenge.
Dogecoin’s rise escalated when Elon Musk fell in love with it and tweeted that it might be his favorite cryptocurrency. Whether it’s a joke or not, the eccentric billionaire keeps sending Dogecoin to new heights, regularly posting memes and cryptic quotes. Even his upcoming SNL appearance seems to include Dogecoin.
The likes of Snoop Dogg, Gene Simmons, and Dallas Mavericks owner Mark Cuban followed. Plus, Coinbase, the most popular U.S. virtual currency exchange, went public, pushing crypto even further. Fast forward to today: a coin with a picture of a suspicious fluffy dog is now somehow the fourth-largest cryptocurrency in the world.
Dogecoin’s rise a nice story, but…
What a thrilling underdog story (pun intended), right? It’s almost shame to spoil it, but Dogecoin’s rise has its red flags. As David Kimberley, an analyst at the U.K. investing app Freetrade told CNBC, the surge won’t last forever. “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,” he described. All in all, that’s a definition of a bubble just waiting to burst. “You’re going to be left shortchanged if you don’t get out in time. And it’s almost impossible to say when that’s going to happen,” he added.
This obviously applies to multiple cryptocurrencies, although some are arguably more stable than others. But Dogecoin has one problem: one person or an entity owns around 28% of all the coins on the market. When Wall Street Journal brought it to light last February, that stake was worth a staggering $2.1 billion.
That’s simply too much power, and whoever the owner is, they could completely shake things up. Even Elon, who once changed his Twitter bio to the “former CEO of Dogecoin”, agrees.
Speaking of Elon (again), his enthusiastic tweeting might do more damage than good in the end. Charles Hoskinson, the co-founder of Ethereum, isn’t happy that the SpaceX chief is playing with his power. “Musk keeps posting and posting and posting and he really seems to enjoy doing it. But everything that goes up, goes down and our industry will be worse because of it. When the Dogecoin bubble bursts, it will be a catalyst for regulators and legislators to become more involved with cryptocurrencies and hurt the entire industry,” Hoskinson said in his surprise AMA.
Musk may want to send Doge to the Moon, but it seems that the potential crash is going to be all the more painful.
Image credit Amani