First of all, let me start this by saying: I am NOT a financial advisor, and none of the below should be taken as financial advice.
While the internet went nuts about GameStop shares, the cryptocurrency Dogecoin skyrocketed in the slipstream from $0.0067 to an all-time high of $0.0779! In the last 7 days, it has fluctuated between $0.0224 and $0.057, meaning its “new low” is still close to a 400% return of investment for anyone who owned any Dogecoin before the 27th of January.
Where is the hype coming from?
I think a lot of it is coming from the man that is to investment what Kanye is to fashion. The (most days of the week) richest man alive. Elon.
Yes. this is real.
What makes Dogecoin different?
1. Dogecoin is built on a community
When Dogecoin started, the Doge meme was in its prime, and everyone was creating their own cryptocurrencies. So it was only natural that someone decided it would be funny to have a currency with a Doge on it. The subreddit r/dogecoin was created and soon filled with a bunch of people who like the idea of printing their own Doge-themed money.
In 2014 (When Dogecoin was worth literally nothing — I think there was a single pizza place in the whole world that would accept Dogecoin), they raised $55,000 to sponsor a NASCAR driver and have his car be covered in Doge.
The only other cryptocurrency that has an actual community is Bitcoin. Bitcoin was the first crypto. The people that joined in and made it what it is today did not have in mind to get rich. They just liked the concept.
Other crypto communities are usually just filled with people who try to make money but haven’t gotten in on Bitcoin early enough.
2. It has an unlimited supply
At some point, there will be no more Bitcoin to mine. And nobody really knows what happens next. Since transactions can only be done if someone is mining (which is crypto for processing transactions), the whole market might stop, once there is no reward in it anymore.
Dogecoin has an infinite amount of coins. Once a threshold has reached the reward for mining, a block will permanently be 10.000 Doge. This means people will never stop mining.
People who are in on Bitcoin always argue that there has to be a cap, or else there is no perceived value. But money doesn’t work that way. Money itself has no “value” it is only worth what it can buy. Bitcoins value is therefore based on artificially created rarity. Dogecoin’s value is based on natural value, meaning the price will only change due to inflation/deflation and the market.
Crunching some numbers
Right now, there are 6888 Dogecoins for 1 Bitcoin. Using that ratio and the current Bitcoin price of $37,613.70, we can calculate that — in order for Dogecoin to draw level — the value of one Dogecoin needs to be at $5.461.
That’s over 100x the current value. That means it is not even close to being the new Bitcoin, but it would make now the right time to get in if you believe in Dogecoin. Currently, 65% of all Dogecoin are owned by people who own at least 1% of the total volume. In contrast — for Bitcoin, it’s only 10%. That means there are a lot of big wallets that will eventually try to cash some of it out and drop the market. So strap in — it will be a wild ride.
If there is any cryptocurrency that will replace money, it will be Dogecoin.
- It is built on a community, not on greed. Apart from Bitcoin, there is no other popular cryptocurrency that was not made for the purpose of making the creator rich.
- It’s has infinite mining reward and no artificial rarity, so it could really serve an “eternity.”
- It was not the first of its kind, so it will not have the image of being more of a casino bet than a currency like Bitcoin.