This is perhaps the ultimate symbol of late capitalism: a digital currency that started out as a joke is now worth more than the auto company Ford, BP or Tesco.
Riding a wave of speculative interest as Covid-19 triggered the world’s worst recession since the Great Depression of the 1930s, Dogecoin has been a huge hit with amateur investors. It is a cryptocurrency based on an internet meme – a humorous online phrase or photo, which on this occasion is a dog – and which has gained wider attention with a record increase in its value in recent years. weeks.
Backed by famous supporters including Tesla founder Elon Musk, rapper Snoop Dogg and Kiss bassist Gene Simmons, the bitcoin-like digital asset jumped more than 40% on Wednesday to reach $ 0.68 (0, £ 49) against the dollar, according to CoinMarketCap.
With an increase of over 14,000% since the start of the year, the market cap of Dogecoin – the combined value of each coin – has now reached over $ 84 billion, equivalent to Sri’s annual economic output. Lanka.
Analysts said the rise in the price of digital currency, which is similar to bitcoin, comes amid interest before Musk hosts Saturday Night Live this weekend, given the billionaire’s public support on Twitter for Dogecoin. and the potential for him to appear on the popular American television show. will further enhance its profile.
“Dogecoin is booming because many cryptocurrency traders don’t want to miss the buzz that comes from Elon Musk’s hosting of Saturday Night Live. Said Edward Moya, senior market analyst for the Oanda financial trading platform.
“Also known as Dogefather, Musk will undoubtedly have a sketch of cryptocurrencies that will likely go viral for days on end and further motivate his army of followers to try and send Dogecoin to the moon,” he said. he declares.
Musk is already in the form of a crypto maverick, buying $ 1.5 billion worth of bitcoin with cash reserves at Tesla. He has previously tweeted his support for Dogecoin in what can best be understood as the perpetuation of an online joke.
Having often courted controversy on Twitter for offbeat comments, costing him and his company millions of dollars and causing him legal trouble, Musk helped raise Dogecoin’s profile in February by posting a photo of Doge. on the moon, planting a flag with the digital currency logo on it. , and captioned with a word: “literally”.
The tweet pushed the value of the digital currency up by more than 20% on the day. The phrase “to the moon” is used online to refer to investments, indicating the direction of travel for a financial asset, and was used prominently by Reddit users on the WallStreetBets forum earlier this year as small investors were increasing GameStop shares in an attempt to hurt hedge funds.
Created in 2013 by two software engineers from IBM and Adobe, the Dogecoin digital currency is based on the Doge meme, which features a Japanese shiba inu dog surrounded by grammatically incorrect sentences in a sort of inner monologue.
Written in deliberately broken English, the meme involves pairing a modifier – such as “so”, “such”, or “very” – with a word that shouldn’t be changed, such as “so wow” or “much currency”. .
The rise of Dogecoin follows the bitcoin boom that brought the value of the original digital currency to over $ 50,000, as stock markets around the world hit new records despite the worst economic collapse in at least a generation.
Similar to the internet-fueled speculation in GameStop, the Dogecoin surge comes as the US government sends its third round of Covid-19 emergency payments to eligible US households.
Washington has distributed more than 163 million stimulus checks, worth $ 384 billion, in payments of up to $ 1,400 per person, plus $ 1,400 per dependent. Although intended to support struggling households, economists say it has helped fuel a rise in stock markets and crypto assets like Bitcoin and Dogecoin, as better-off beneficiaries invest their checks in financial investments.
It is also traditional fiat currencies, such as the dollar, the pound and the euro, which risk being downgraded by historically low central bank interest rates and billions of dollars in quantitative easing; purchasing bonds to keep borrowing costs low, effectively printing new money.
Stronger economic growth is expected as the Covid vaccine allows a faster return to normal, at a time when government and central bank support remains high. Economists warn that this would cause inflation to rise, eroding the value of fiat currency, making digital currencies a potentially attractive proposition.
“The big story behind it all is the money presses running in the United States and everywhere else as well,” said Erik Britton, managing director of economic research firm Fathom Consulting.
“Anything denominated in that money tends to rise in value, whether it’s the exchange rate of bitcoin or Dogecoin, stocks, or any other asset – like housing – if you print charges of. this currency, other things will tend to increase. “
Although it started out as a joke, some early digital currency buyers have become millionaires, while an anonymous trader claims to have amassed a fortune of over $ 1 billion. However, analysts warn that it could quickly collapse because digital currency has no intrinsic value; relying on the investment hype, speculation and fear of missing out.
Naeem Aslam, chief market analyst for the Avatrade trading platform, said some of the “madness” surrounding Dogecoin is likely to subside after reaching record levels.
“Dogecoin is the most speculative coin, and most traders just aren’t aware of the risk,” he said.