Dogecoin has recently gained a lot of attention after the world’s wealthiest man Elon Musk promoted it. Other celebrities on Twitter also joined the trend. But how serious is Musk about Dogecoin? Is it all just a giant joke, or is he actually trying to make the cryptocurrency into something big? And is Dogecoin a viable digital asset or just a joke?
Is Dogecoin a joke?
In essence, it seems like Musk is just giving a boost to the biggest meme-based phenomena in the financial world that we have witnessed. Elon Musk has a huge following on social media. Traditional media tends to report his every move there as well. The best answer to this question might be Elon’s famous tweet “Who controls the memes, controls the Universe”.
Another, more serious answer could be extracted from Musk’s recent warning to Dogecoin whales. Roughly 20 wealthy owners (whales) are estimated to own half of the entire supply. Musk has offered to personally buy these coins from them. He even threatened to stop supporting the cryptocurrency unless these whales let go of their holdings and sell them on the open markets. The purpose of this is to distribute Dogecoin more evenly to a wider audience. Musk sees that as a necessity for the coin to evolve into a true online currency.
Is this a joke? Elon Musk’s Dogecoin hype: good or bad for crypto?
This question is prominent in cryptocurrency-related forums at the moment, and there’s no clear answer. The hype is giving more attention to cryptocurrencies and boosting their adaption. More people start using cryptocurrencies and find out how they function thanks to Musk. For these reasons, it can be seen as positive hype for crypto. A less fortunate aspect may be that many people will try to get rich quickly by investing in Doge and waiting for the next Musk tweet. It is wise to recognize that the volatility is very high. Chasing quick wins, as opposed to, for example, investing in bitcoin long-term, may result in big losses as well.
Much like the WallStreetBets movement, Musk is also a strong believer in the power of memes. WallStreetBets showed how the influence of memes can also impact the financial world. The whole Dogecoin hype is a continuation of the Gamestop saga, which Musk has also acknowledged in earlier tweets. But still, is Dogecoin a joke or a real deal?
Does Dogecoin have any technical merits that could make it a viable competitor to BTC or any other cryptocurrency?
Dogecoin was created by software engineers Billy Markus and Jackson Palmer. They envisioned a payment system that is ”instant, fun, and free from traditional banking fees.” In technical aspects, its protocol is quite similar to Litecoin, which in turn is mainly based on Bitcoin. However, since Dogecoin started as a joke and its supply also reflects real-world inflation, its development and chances to succeed in the long term are uncertain at best.
Transactions in the Dogecoin network are fast, reliable, and cheap at the current volumes. It can therefore be seen as a viable choice for cryptocurrency transactions. A noteworthy fact is also that Dogecoin has maintained its value compared to bitcoin much better than most cryptocurrencies. Doge also had a superior market performance in 2020.
Dogecoin is a useful cryptocurrency, but it is very unlikely that it could challenge leading cryptocurrencies in the big picture. Few would seriously suggest Dogecoin could actually surpass Bitcoin. But of course, such curious future scenarios cannot be completely ruled out.
Such token, much wow
Exchanges offering Dogecoin made a lot of profit from the trading fees during the market frenzy. The exchanges may continue to do so if interest for the asset persists. The biggest risk of getting hurt is for those who don’t have experience with investing in volatile asset classes. Those who take bigger positions than they can handle are facing a bigger risk than other investors. In conclusion, Dogecoin has a lot of potential but should also be approached with caution much like other high-risk investments.
While Dogecoin is not listed on Coinmotion, it is available through our Private Banking service. Coinmotion is also expanding its selection in the near future by introducing new batches of cryptocurrencies. Based on customer feedback and interest, we may also consider adding Dogecoin in a future batch.