Maybe you heard about dogecoin during Elon Musk’s appearance on NBC’s “Saturday Night Live.” Maybe your social media timelines are filled with shiba inu memes along with proclamations that investors are headed to the moon. Maybe you’re a crypto veteran who has known about the dog meme-inspired cryptocurrency for years.
Regardless, chances are you’ve heard about dogecoin’s recent eye-popping returns. Even by cryptocurrency’s lofty standards, the token’s rise has been meteoric. The digital currency currently trades for more than 57 cents per coin after trading for just fractions of a penny to start the year. At its 74-cent peak just ahead of Musk’s early May SNL appearance, the coin had risen by more than 15,000% in 2021.
If you don’t know much about it, you probably have questions ranging from “How the heck did this happen?” to “Should I put my life savings into this investment?” For answers to these and more, read on.
What is dogecoin?
Dogecoin (pronounced “dohj,” with a soft G — like loge, or, if you’re fancy, Limoges) is a digital currency like bitcoin or ethereum, but with a much sillier origin story. The coin was started as a joke by two software engineers in 2013, intended to be a satirical take on bitcoin based on a meme about a grammatically idiosyncratic shiba inu.
The coin soon attracted a small but loyal fanbase happy to get in on the fun. In April 2014, a group of reddit users donated 65 million dogecoins, then worth $55,000, to sponsor NASCAR driver Josh Wise’s car for a race at Talladega, complete with a paint job featuring a shiba inu on the hood and a rocket ship behind a rear tire with the words “to the moon.”
Why has dogecoin gone up so much in value?
The groundwork for dogecoin’s eventual rise was laid in 2018, says Shidan Gouran, co-founder of Gulf Pearl, a merchant bank that was an early investor in cryptocurrency. “For whatever reason, in 2018, Robinhood had it as one of the cryptocurrencies it carried,” he says. “People say it was Elon Musk, but Robinhood made it what it is.”
Fast-forward to late 2020, and risky corners of investment markets were exploding. Social media users, led by users of reddit’s wallstreetbets page, pumped up the prices of so-called meme stocks. Prices of major cryptocurrencies such as bitcoin began to shoot up.
“You have to understand that all of the tokens are pretty correlated. When there is a bull run and bitcoin goes up, a bunch of other tokens go up, too,” says Brady Dale, a senior reporter at cryptocurrency site CoinDesk. “Someone has a thought that, ‘Hey, dogecoin is largely forgotten — it might make sense to buy some of that.’ People see that it’s starting to go up and start piling in.”
“The wallstreetbets guys started talking about it, and it became much more popular,” says Gouran. “It feeds on itself — if there’s all of this volume, it becomes an easy thing to gamble with.”
Then came the fame, and as media outlets covered the rise, celebrities from Musk to Snoop Dogg to Mavericks owner Mark Cuban boosted the coin’s popularity on social media.
For some investors, dogecoin is appealing precisely because it’s a joke, says Giacomo Arcaro, a crypto investor and self-described “growth hacker” who told Grow that he paid last month’s rent in dogecoin profits. “People are so sick of the actual financial environment that they’ve lost faith in everything,” he says. “Instead of going out into the streets and protesting, they’re taking their dollars out of banks and putting it into dogecoin.”
How do I buy dogecoin?
Dogecoin (symbol: DOGE) is available for purchase through mobile brokerages, as well as popular cryptocurrency exchanges such as Binance and Kraken.
Crypto exchange Coinbase does not currently offer dogecoin, but CEO Brian Armstrong said on a recent earnings call that the firm plans to list the coin on its platform sometime in the next 6 to 8 weeks.
All of the tokens are pretty correlated. When there is a bull run and bitcoin goes up, a bunch of other tokens go up, too.
SENIOR REPORTER, COINDESK
Can I buy anything with dogecoin?
Although more retailers are beginning to accept various cryptocurrencies as valid forms of payment, your pickings will be slim if you’re looking to spend your dogecoin.
Want to spend a couple relaxing nights at the Thesis Hotel in Miami? You can pay for your room with dogecoin, as well as other cryptocurrencies. Mark Cuban has put his money where his mouth is as well and recently tweeted that dogecoin-based sales at the Dallas Mavericks team store have been off the charts.
To buy most things, though, you’ll likely have to convert dogecoin back to dollars, a functionality offered at all online crypto brokerages and exchanges. All in all, dogecoin is a long ways away from functioning as a replacement for traditional currency.
Is dogecoin a good investment?
When it comes to investing in cryptocurrencies, it’s hard not to get lured in by the tales of massive gains and overnight crypto millionaires. But you’d be wise to approach investing in any cryptocurrency with extreme caution, says Gouran. “It’s all speculation right now,” he says. “Even in the dotcom bubble, those businesses were understood to be businesses. No one knows what these tokens represent.”
Even in the world of digital currencies, so-called altcoins — tokens other than bitcoin — are on the riskiest end of the spectrum. “Bitcoin and ethereum have a much more fundamental case. They have real things going on with them,” says Dale. “But every bull run, people say it’s ‘altcoin season,’ because altcoins move faster than the bigger coins. People want to get in on those big moves, but there are questions as to whether they have long-term value.”