Where to begin with Dogecoin (CCC:DOGE-USD)?
The logical approach would be to point out that Dogecoin is the most illegitimate of cryptocurrencies. It is, after all, a digital coin that has the image of a Shiba Inu dog on it and was started as a joke to make fun of cryptocurrencies and investors irrational exuberance for them.
But this crypto has defied logic and continues to be pushed higher by investors who do not seem to care that it has no real purpose nor practical application.
Perhaps Mike Novogratz, Chief Executive of Galaxy Investment Partners, which invests in legitimate cryptocurrencies such as Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD), said it best when he told CNBC recently that Dogecoin’s current rally is a “middle finger” to the traditional financial system.
Dogecoin: The People’s Coin
Believe it or not, Dogecoin has been with us since 2013, when it was created by IBM (NYSE:IBM) software engineer Billy Markus and Adobe (NASDAQ:ADBE) software engineer Jackson Palmer as a lark. And not much happened with Dogecoin until retail investors that frequent the WallStreetBets Reddit page took hold of the digital asset.
Now, the currency has risen nearly 14,000% year-to-date and has a market capitalization of more than $85 billion. At the start of 2021, Dogecoin was worth only fractions of a penny. Today it trades around $0.60.
This type of rally would be hard to sustain for any security, but given that Dogecoin has no intrinsic value, its current rally is mind boggling. The altcoin’s rise began in late January at the same time that the Reddit traders began pushing shares of video game retailer GameStop (NYSE:GME) to unsustainable levels and the “meme stock” craze began. Because of its grassroots support, some analysts have labelled Dogecoin the “people’s coin.”
Elon Musk’s Connection
Dogecoin’s rally seems to be reaching a fevered pitch in the lead up to Tesla (NASDAQ:TSLA) Chief Executive Officer Elon Musk hosting Saturday Night Live on May 8th. Musk has been a supporter of Dogecoin on social media and even alluded to the cryptocurrency when announcing his Saturday Night Live appearance on social media, Tweeting: “The Dogefather. SNL. May 8th.” Online chatter is speculating that Musk might discuss Dogecoin on national television. Other people are speculating that the Dogecoin bubble could burst after Musk hosts Saturday Night Live.
Another high profile supporter of Dogecoin has been billionaire Mark Cuban, whose has also pumped up the cryptocurrency on social media and whose NBA basketball team, the Dallas Mavericks, now accepts payment in Dogecoin. The endorsements of celebrity business leaders such as Elon Musk and Mark Cuban seems to be all the legitimacy retail investors need to justify buying Dogecoin. But many analysts caution that the digital coin’s ascent could end in tears for investors who’ve gone all in on Dogecoin.
Goal Of $1 Per Coin
Dogecoin true believers have long had a goal to push the cryptocurrency to $1 per coin. And many investors are using Elon Musk’s upcoming SNL spot to make a push towards that lofty height. The Robinhood trading app crashed twice in the week leading up to Musk going on SNL as users flooded the site and Dogecoin spiked sharply. And while Dogecoin has never been higher than $0.70 per coin, now might be when it finally ascends to $1.
How high Dogecoin ultimately goes is anyone’s guess. Online betting site “USBookies.com” says there’s a 16.7% implied probability that the digital coin will be worth more than $1 at the end of this year. Some observers point out that Dogecoin is easy to make and that there is a large supply of the asset available, which makes it accessible to investors. Other analysts continue to disparage Dogecoin and its followers.
Do Not Take A Risk On Dogecoin
Fear of missing out is not a good reason to make an investment decision. And right now, there is no other reason to take a position in Dogecoin. Investors who get in now would have missed the majority of the surge in the cryptocurrency and the entire rally is likely to end sooner rather than later. It’s reasonable to expect that the price of Dogecoin will crash back to earth after Elon Musk appears on Saturday Night Live. Regardless, do you really want to invest money in a digital coin whose inventors admit it’s a joke?
Investors who are desperate for exposure to cryptocurrencies would be better off putting their money into Bitcoin or Ethereum. But don’t risk your capital on Dogecoin. If you do, the joke is likely to be on you.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.