The Dogecoin (CCC:DOGE-USD) cryptocurrency is getting traction from high-profile investors. Back in February, it was actually more of a rounding error, as it was trading for $0.002.
But as the crypto craze got into gear, Dogecoin would quickly go on to hit a high of $0.082605 before crashing and bouncing even higher. It’s trading this morning at somewhere around $0.14.
The origins of Dogecoin go back to 2013. The founders included Billy Markus, who was a software engineer at IBM (NYSE:IBM) and Jackson Palmer, who was a developer at Adobe (NASDAQ:ADBE).
“The cryptocurrency DogeCoin gained popularity in 2013, after its creators created a satire about the proliferation of dubious crypto coins during that same year,” said James Page, who is a technical writer and executive for Cryptohead. “It is said to be started as a joke, because it was inspired from a viral meme ‘Doge.’”
But of course, Dogecoin is now pretty serious. So why is this the case? And what are the prospects for this digital currency?
Well, let’s take a look.
The two founders of Dogecoin have since left the project. However, they did create a thriving community on Reddit which has allowed for strong growth.
An example of the power of this is when the Dogewallet was hacked in the early days.
“Normally, this would be a bad PR day for any cryptocurrency or firm,” said Richard Gardner, who is the CEO of Modulus. “In this case, however, the community came together to compensate the victims, and a tragic event brought users even closer together. It is the sense of community that makes DOGE coin, parody or not, really quite unique among the altcoins market.”
Keep in mind that Dogecoin is used primarily for smaller transactions, say for tipping people. “I think it’s because of this usability that demand naturally increased over time,” said Morgan Taylor, who is the CEO of Sourcery.
The Dodgecoin platform is based on open source and has a robust technology core.
“Today it has some serious benefits like super-fast transactions that you can send to anyone anywhere in the world for less than a penny in fees,” said Ben Weiss, who is the CEO of CoinFlip. “Dogecoin was never designed to hold much intrinsic value. Unlike Bitcoin, there is no cap on how many dogecoins will be minted.”
Now one of the biggest recent catalysts for Dogecoin has been Tesla’s (NASDAQ:TSLA) Elon Musk. He tweeted the following: “Dogecoin might be my fav cryptocurrency. It’s pretty cool.”
But of course, there are also a myriad of other influencers that are fans of Dogecoin. One is billionaire Mark Cuban, who has announced that his NBA team – the Dallas Mavericks – will accept the currency for the payment of tickets and merchandise.
As should be no surprise, there are many price targets for Dogecoin. And some are quite bullish. For example, Coinpedia predicts that it will hit $1 by the end of this year. The same goes for the European Review.
This may be a stretch. But then again, if there continues to be more adoption and a few more tweets from Musk, Dogecoin could certainly see more gains. There is also buzz that Coinbase may put this digital currency on its platform. If so, this would represent a nice source of demand.
Yet there is the nagging problem that Dogecoin can be easily created. This is in contrast to Bitcoin (CCC:BTC-USD), which has a relatively fixed supply. Because of this, a shortage can dramatically increase the value of this digital currency.
In other words, it’s a good idea to be cautious Dogecoin. The crypto market can be quite volatile and it is not necessarily clear which digital coins will ultimately prevail.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.