The crazy Dogecoin rally makes investors dream of easy money.
But be careful: the DOGE bubble is off
There is currently no way around Dogecoin. For almost two weeks now, the DOGE rate has been stirring up the crypto market, breaking one record high after the other. It wasn’t until Monday, February 8th, that the Dogecoin rally hit a new all-time high of $ 0.083. The meme coin with the Shiba Inu emblem has made its way into the ten largest cryptocurrencies, the market capitalization has already exceeded the 10 billion US dollar mark and the DOGE exchange rate is targeting the 10 cent mark. But even if the numbers are cause for euphoria, one number clouds the optimism.
128 billion: That is the previous Bitcoin Rush app amount in circulation. The fact that the market capitalization is spread over a high supply may not initially be an investment exclusion criterion. A worrying fact from an investor’s point of view is the non-existent upper limit. Since the Dogecoin co-developer Jackson Palmer lifted a supply limit in 2014 , the amount in circulation has grown steadily. Almost 5 billion coins flow into the DOGE supply every year and dilute the market capitalization.
Investors who hope for a price level like Bitcoin from the Dogecoin hype, alone teaches the constant Doge inflation wrong. As a BTC parody, Dogecoin is in fundamental contrast to the original. The Bitcoin supply is limited to 21 million units. Dogecoin, on the other hand, was never designed as a store of value, on the contrary. Dogecoin shows the laws of the market in an ironic way. With the exception of a few use cases and a few PR gags such as sponsoring the Jamaican bobsleigh team at the 2014 Winter Olympics, Dogecoin remains limited to its status as a fun coin – Dogecoin has no intrinsic value.
However, this does not currently prevent investors from transferring significant sums to the cryptocurrency. As of January 27, the market capitalization was under $ 1 billion. In the course of the Wallstreetbets erosion, a dynamic set in motion on the social channels in a very short time that swept 9 billion US dollars into Dogecoin in less than two weeks.
In addition, the doge rally is largely the product of Tesla boss Elon Musk, who regularly supplies the waiting doge community with doge tweets. With Gene Simmons and Snoop Dogg , the e-car pioneer has also found two prominent supporters who are rekindling the rally glow.
Bubble formation with height of fall
This dynamic may now blind some investors. The fact that younger investors in particular are also enthusiastic about a Dogecoin investment, as shown at the Tik Tok Challenge last year , puts the role of Musk and Co. in a slightly different light. During a recent clubhouse appearance , Musk said:
Dogecoin was made as a joke to make fun of cryptocurrencies. […] Fate loves irony. […] The most entertaining result and the most ironic result would be that Dogecoin will become the currency of the earth in the future.
A less entertaining, albeit equally ironic result would be the total loss of thousands of small investors. By persistently inflating the hype, Musk creates an ever increasing height of fall. The impact could cost some private investors dearly with widespread profit-taking. So whether Musk played a notable role in the Doge explosion can be doubted – as much as the community hopes for him as a crypto figurehead.