Dogecoin (CCC:DOGE-USD) started as a joke.
If you bought Dogecoin during its recent run-up, the joke is on you.
Dogecoin retraced its entire May run-up in 11 days. When I started writing this, early on May 19, it was at about 37 cents per coin. Bulls will note that it was less than a penny at the start of January.
Dogecoin was created in 2013, amid the early flutter of interest in crypto-currency. It uses a Shiba Inu dog’s head as its mascot, because that was a popular internet meme at the time.
Co-creator Billy Markus has called Dogecoin a learning tool for new traders. Those traders are learning some harsh lessons right now.
The Dogecoin Boom
There’s less real about Dogecoin than there is about Bitcoin (CCC:BTC-USD). Bitcoin’s total supply is strictly limited. There can never be more than 21 million of them. Dogecoins, however, are limitless and easy to create, so there are lots of them, over 129 billion at last count.
Like other artificial assets Dogecoin rides on news and celebrity. TV billionaire Mark Cuban said recently he let his own son invest in Dogecoin so he could learn about cryptocurrency markets. He also opened sales at his Dallas Mavericks basketball franchise to Dogecoin, making it the largest such merchant in the world. The idea of “smart contracts” for Dogecoin, which would make it more useful in the real world, has also spurred interest.
But the biggest influence on the recent price has been Tesla (NASDAQ:TSLA) CEO Elon Musk. His tweets sent it up. Then he called it “a hustle” on Saturday Night Live and it crashed. Now he says he’s working with its developers to improve its energy efficiency.
Dogecoin, however, remains highly volatile. I began writing this story at around 8 AM EST, with Dogecoin above 37 cents. When I looked at the price 40 minutes later, it was around 34 cents. Just 20 minutes later, it was at 28 cents.
Here at InvestorPlace we have many writers much wiser than this reporter who have said positive things about Dogecoin. Brenden Rearick says Dogecoin may soon move to a “proof-of-stake” model that’s more energy efficient. David Moadel reports that Coinbase (NASDAQ:COIN) will soon enable Dogecoin trading, which would be a huge catalyst.
These kinds of moves are typical in cryptocurrency markets. The fight against pandemic deflation has resulted in central banks creating enormous amounts of new money. There aren’t enough good assets to satisfy traders, so crypto has boomed.
A rush of buy orders can raise a coin’s value quickly. A rush of sell orders can destroy that value. In the end, the value of any coin is up to the people trading it, as Nicolas Chahine has written. He recently recommended buying Dogecoin when its price fell below 45 cents.
It has. It’s still falling.
The Bottom Line
It’s all fun when asset prices are rising, but real money gets lost when they fall, as our Matt McCall wrote recently.
The recent 11-day fall in Dogecoin has cost traders $60 billion in market cap. That’s over twice the value of ViacomCBS (NASDAQ:VIAC). With AT&T (NYSE:T) having tied its own TV content to Discovery (NASDAQ:DISCA, NASDAQ:DISCB), Viacom is now the cheapest big media company on the board.
I’d rather speculate on Shari Redstone making a big move, which would have real world repercussions, than on Elon Musk’s tweets and tweaks to an imaginary currency fronted by a meme dog.
But that’s just me. At time of writing, Dogecoin’s low for the day is 23.6 cents.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.