Dogecoin (CCC:DOGE-USD) has been in the limelight in 2021. Starting the year at just $0.005, Dogecoin was at a record high of $0.0872, or 8.7 cents, by early February. Now it’s at 5.7 cents.
That doesn’t sound like a lot but it’s really a huge increase in percentage. The price of Dogecoin is up 900% so far this year.
The past 12 months have witnessed a surge in trading and investing in cryptocurrencies, including Bitcoin (CCC:BTC-USD), Ethereum (CCC:ETH-USD), Litecoin (CCC:LTC-USD), among others. Bitcoin, the most popular name, is up 95% in 2021, priced just over $57,000. Meanwhile, interest rates in many countries are at record-low levels. Therefore, a large number of investors are looking at cryptocurrencies as a store of wealth, similar to that offered by gold or other commodities.
With a market capitalization of $7.3 billion, Dogecoin is now one of the most valuable cryptocurrencies. Usman Chohan of the University of New South Wales Australia, says Dogecoin’s market cap is was only $60 million in 2014, but is “driven by an online community base which generates brand” loyalty and demand inelasticity.”
He notes that Dogecoin also has an aggressive production schedule. There were 100 billion coins by mid-2015, and about 5.2 billion new coins are being created each year.
Despite potential short-term volatility, given investors’ risk appetite in cryptocurrencies, I expect Dogecoin will see new highs sooner than later.
Meme Cryptos, Reddit Traders, Elon Musk, and Coinbase
Dogecoin was invented by software engineers Billy Markus and Jackson Palmer in 2013. Their main aim was to create an instant payment system free from traditional banking fees. Unlike Bitcoin, Dogecoin does not limit the number of coins that can be produced.
The creators also brought in the “fun” element by adding the face of the Shiba Inu dog from the “Doge” meme as its logo and namesake. That is why Dogecoin is also referred to a “meme cryptocurrency.”
Initially, Dogecoin was mainly used for “thanking” others on the Internet for “positive acts,” such as an idea or a web-related service. But since 2013, interest has been slowly building up in DOGE.
Then, January 2021 saw the start of significant rallies in Gamestop (NYSE:GME) and AMC Entertainment (NYSE:AMC), mostly due to the interest by Reddit traders. As these retail investors searched for the next trend, Dogecoin piqued their interest.
There was also celebrity support from Elon Musk, whose job title is now “Technoking” of Tesla (NASDAQ:TSLA). He wants Dogecoin listed on the digital crypto platform Coinbase for increased accessibility.
In addition to his personal approval of Dogecoin, Tesla has recently announced the purchase of $1.5 billion in Bitcoin and used Coinbase to initiate the investment.
The Bottom Line on Dogecoin
Dogecoin, initially regarded somewhat as a parody coin, now has one of the highest market caps among thousands of cryptocurrencies. Yet, calculating the fair value of a Dogecoin is no easy task. Market participants debate whether the current value represents an overvaluation or undervaluation.
However, what we see is that cryptos, including Dogecoin, have positive momentum behind them at this point. It is not possible to know whether Dogecoin will rally all the way to $1 as its investors hope. More than likely, its price will ebb and flow for the time being.
If you’re an investor with ample time in your hand, you might consider investing in Dogecoin, with the clear understanding that it is a speculative investment. Price could “go to the moon” or might simply tank, too.
I expect to see new highs in Dogecoin in 2021. However, the stellar returns are not likely to unless cryptos move from being speculative assets to having regular retail use with the financial system.