What Started As a Joke, Now Taking Over Wall Street
Dear Rich Lifer,
A cryptocurrency called Dogecoin that was created as a joke has completely taken over Wall Street! Its 2021 returns are above 8,100% — more than double the gains on the S&P 500 since 1988.
Everyone, from Elon Musk to Mark Cuban, is racing to get in on the Dogecoin action. This cryptocurrency began as a parody over a decade ago, but now, individual investors are charging ahead on the heels of Coinbase Global Inc.’s public debut.
At the beginning of the year, Dogecoin was valued at less than one cent.
On April 19, the value reached a peak high of 43 cents. The total value of Dogecoin in circulation is currently almost $40 billion, with pricing and values changing every minute. At writing, it is ranked No. 7 in market cap of all cryptocurrencies, according to CoinMarketCap.
People have a lot of questions about the quirky cryptocurrency. So today, we will explain how Dogecoin exploded and why people are so invested in it.
What is Dogecoin?
Dogecoin, pronounced “dohj coin,” began as a joke in 2013. Billy Markus, an IBM programmer from Portland, Oregon and Jackson Palmer, who worked for Adobe, created Dogecoin as a satirical nod to bitcoin.
It’s named after an internet meme centered around the image of a Shiba Inu dog with bad spelling habits (hense “doge” instead of “dog”).
Neither original founder works on the Dogecoin anymore, and Mr. Markus actually sold all his Dogecoin in 2015, giving him just enough to buy a Honda Civic.
He recently commented, “The idea of Dogecoin being worth 8 cents is the same as GameStop being worth $325. “It doesn’t make sense. It’s super absurd. The coin design was absurd.”
Like all cryptocurrencies, Dogecoin is a digital currency that can be bought and sold like an investment and spent like money. Every crypto is different, but Dogecoin shares some similarities with other digital currencies. For example, its code is based on the script for litecoin, the No. 9 ranked market cap crypto at writing.
However, unlike bitcoin, which has set 21 million as the finite amount of the digital currency, Dogecoin has 129 billion coins in circulatIon and will continue to make new blocks of coins available to mine each year. This is why Dogecoin is so cheap, while bitcoin is currently trading anywhere from $50 – $60k.
Unlike some other cryptos that are gaining mainstream use, it only has a few niche markets, like using Dogecoin to tip artists online.
Another big differentiator is its active online community, which has raised Dogecoin funds for charitable causes or passion projects — like in 2014 when a successful Dogecoin crowdfund resulted in Nascar driver Josh Wise agreeing to advertise Dogecoin on his car.
Why Has It Become So Popular?
As we mentioned, Dogecoin is no longer a joke and this might be because of Elon Musk, the billionaire boss of Tesla.
For unknown reasons, on January 28, Mr. Musk tweeted a faux “Doge” magazine cover.
Since then, he has continued to tweet about Dogecoin. He even shared a meme based on the movie The Lion King, with the Shiba Inu dog superimposed on Simba’s face. Another time, he wrote, “Who let the Doge out,” and “No highs, no lows, only Doge.”
Most recently, in April, he tweeted “Doge Barking at the Moon.”
His lighthearted but cryptic comments have resulted in Dogecoin’s popularity skyrocketing. Celebrities like Snoop Dog and Gene Simmons have joined the bandwagon, posting tweets and memes about Dogecoin. All the attention caused the price of Dogecoin to shoot up from less than a cent to 45 cents… though back down to 29 cents just a couple days later.
How to Buy Dogecoin
Dogecoin can be bought with a credit card on multiple cryptocurrency exchanges, including Bittrex Global GmbH and Payward Inc.’s Kraken. It can also be purchased on platforms like the popular brokerage Robinhood Markets Inc.
On April 15, some Robinhood customers noticed issues in completing Dogecoin trades, reminding them of prior technical glitches on the app that sidelined traders. On April 16, Robinhood tweeted that it was “experiencing issues with crypto trading” due to unprecedented volumes. Later that day, they stated it has restored crypto trading.
Currently, Coinbase does not offer trading in Dogecoin, despite Dogecoin surging the day Coinbase went public.
Most retailers do not accept Dogecoin as a form of payment. The creators of the website Shibe Mint sell copper tokens—stamped with a “D” and the year 2014—for $12 apiece, which you can buy with Dogecoin (they are currently sold out).
You can also get your doge swag, such as a “doge dealer” T-shirt from dogeswag.com. Mark Cuban, the owner of The Dallas Mavericks basketball team, started offering merchandise for sale in Dogecoin.
What Are the Risks of Dogecoin?
Cryptocurrencies in general are volatile and prone to large swings in either direction. For example, Bitcoin surged from $30,000 at the end of 2020 to $63,000 in April of this year.
Dogecoin may be even more volatile than the lot of ‘em.
Garrick Hileman, head of research at blockchain.com, the cryptocurrency transactions company, commented, “I do worry about all the attention paid to a cryptocurrency that historically has not seen real-world traction and is a bit of a joke—literally.”
Many argue that this latest craze is just another sign of market madness fueled by online forums. However, almost a decade later, Dogecoin has been strongly supported by its online community, which is now growing rapidly.
Whether it’s actually a smart investment remains an ongoing question. Will Dogecoin become the top cryptocurrency on the market? — highly unlikely. Will it be another GameStop-esq phenomenon with huge surges and steep drops? — more likely, but still remains to be seen. In any case, plenty of people have already made millions trading the coin. But if you’re an investor looking for safer gains, this isn’t the coin for you.
April 20th was deemed “Doge Day” by many online forums, an attempted effort at pushing the price of Dogecoin to $1. We have seen how online organizers have continued to sway the markets dramatically, but we will have to wait and see if these doge-dazed supporters can reach their goal by the end of the day.
For now, Dogecoin seems to reinforce a main lesson in trading: the most unconventional trades can sometimes yield the most incredible — if irrational — gains.
To a richer life,
The Rich Life Roadmap Team