For something to gain the attention of the world’s wealthiest citizens, it has to be very notable. That is why it was an extremely weird experience when the world’s second-richest person, Elon Musk, tweeted about an obscure cryptocurrency named Dogecoin. Musk’s repeated tweets in support of Dogecoin have sent the cryptocurrency’s value soaring. According to Yahoo Finance, Dogecoin had a 52-week low of $0.0012 before Musk’s tweet. After the tweet, however, Dogecoin rose to a 52-week high of $0.0808. Initially started as a meme, Dogecoin has soared in popularity because of Musk’s support. But what is Dogecoin, and does it have a future in the cryptocurrency space?
So, what is Dogecoin exactly? The New York Times discusses this piece in their article titled, “Dogecoin, the Cryptocurrency That Started as a Joke, Is Spiking.” In it, the author writes, “Dogecoin is called the “fun and friendly internet currency” by its creators. The token was created in 2013 as satire about the proliferation of dubious crypto coins at the time. The “Doge” internet meme, featuring a perpetually surprised Shiba Inu dog, was gaining viral fame at the time.” (1) Dogecoin is traded on several exchanges, including Binance. Dogecoin is also available to be traded on popular brokerage Robinhood; however, on Robinhood, the actual coin is not able to be bought and sold. Rather, Robinhood allows users to buy and sell monetary representations of cryptocurrencies. Musk’s support for Doge is quite peculiar and has many traditional investors scratching their heads.
Elon Musk’s cryptic tweet seems to suggest that he strongly supports the future of Dogecoin. However, Musk is not the only celebrity that has shown support for Dogecoin. As the New York Times reports, “Dogecoin, a digital currency created as a joke, is now the world’s 10th largest cryptocurrency, according to CoinMarketCap. Its price is up by more than 1,600 percent so far this year, pushed in recent days by celebrity cheerleading from the likes of Tesla’s Elon Musk, the rapper Snoop Dogg and the rocker Gene Simmons of Kiss, who all promoted Dogecoin on social media.” (2) With the support of huge celebrities such as Snoop Dogg and Elon Musk, why is there such hype over this meme cryptocurrency?
In comparison, the United States Dollar, in simple terms, is completely based on trust. Following a time when the U.S. Dollar was supported by gold reserves, the U.S. Dollar is completely based on trust in the United States government and the government’s ability to sustain that value and minimize inflation. This trust in the United States government caused the United States to become the reserve currency for the world. According to Investopedia, “Today, more than 61 percent of all foreign bank reserves are denominated in U.S. dollars, and nearly 40 percent of the world's debt is in dollars.” (3) This trust in the U.S. Government causes the United States currency to be one of the world’s strongest currencies currently in circulation. With Dogecoin also based on nothing, many supporters of Doge use it as a juxtaposition to the United States Dollar.
Dogecoin, the United States Dollar, and even Bitcoin are based on nothing but trust in the system. As the trust in the system increases, so will the worth of Bitcoin, Doge, and the U.S. Dollar. And as the world transitions to a completely virtual and online system of payment, cryptocurrencies continue to increase in value. With Dogecoin and its extremely prevalent support from Elon Musk, can we see Dogecoin become the people’s currency? Probably not, but with what we saw with r/wallstreetbets pumping GameStop, anything is possible.