DOGE coin seems to be defying gravity breaking new all-time highs and leaving crypto veterans like myself scratching our heads. Constantly asking ourselves the fundamental question, is DOGE really going to the moon, or is it flying too close to the sun?
I’ll be taking an in-depth look at the DOGE coin and explaining exactly what it is and how it functions. I’ll also be analyzing its market trends and breaking down some of the most important factors that appear to be powering it forward? I will finally, I’ll be letting you folks know where I think doge is headed.
What is DOGE coin?
So what the hell is this infamous internet meme that Elon Musk can’t stop tweeting about. Well, it was a cryptocurrency that was started as a joke. Really, no joke, a cryptocurrency in the top 10 of market caps, that was launched for fun.
It was founded by two Engineers called Billy Marcus and Jackson Palmer, Marcus worked at IBM and Palmer at Adobe, neither of which had any experience in crypto. In fact, Mark has taught himself how to develop a coin, using a guide he found online.
The year was 2013 and at the time there was a meme of a Shiba Inu looking quizzically into a camera.
According to this article in Business Insider, the original intent of the project was to be a quote parody of all the serious clone coins that were trying so hard to differentiate themselves, but all seen the same.
So, the DOGE coin was the self-deprecating example of a clone coin trying to be the next Bitcoin, and on the 6th of December 2013, the first block was mined.
On the technical side. DOGE coin is based on a Proof-of-Work (PoW) cryptocurrency called Lucky Coin. This was actually a fork of Litecoin which is why the DOGE coin can be merged mined with Litecoin (LTC) and more on that in a bit. I know much random. But, that’s not as random as the original block reward structure.
Block rewards can be anywhere from one DOGE per block all the way up to 1 million DOGE per block. Pretty crazy.
Now I should also point out that there was no pre-mine of the DOGE coin. The founders mined at the same time as the new miners and kept very little of the DOGE for themselves. That just shows you how much they thought of DOGE coin as a joke and less than a year after founding DOGE coin Marcus left the project and handed all dev work to Palmer.
Quick point on that random block reward, it turns out that it was not as random as they initially thought, and some DOGE coin miners were able to find a way around it, and disproportionately, mint high-value blocks. When this was found out in 2014, it was posted on the DOGE coin subreddit, the developers, then decided that they would remove the randomness component altogether and the block reward was fixed at 10,000 DOGE per block.
Since a DOGE coin block is mined every minute this meant a supply growth of 5.2 billion DOGE. Therefore with the current supply of 129 billion DOGE, this implies an annual inflation rate of about 4%. So unlike Bitcoin, which is a cap supply, the DOGE coin will have an inflation rate that will approach zero over time. That’s an important point to get across.
When it comes to network efficiency, DOGE coin can handle around 30 transactions per second which imply a transaction time of about 5 to 10 minutes. The average transaction fee is about 1 cent.
Now, this is faster and cheaper than Bitcoin mainly because the block times are one minute as compared to 10 minutes for Bitcoin. Although this is faster and cheaper than Bitcoin, it is a lot less efficient than most other blockchains out there. It is after all still a proof-of-work chain.
When it comes to security, it has the backing of Litecoin miners. This is because as a fork of Litecoin (LTC), it uses the script mining algorithm. Through DOGE coins auxiliary proof-of-work (AuxPoW) upgrade in 2014, Litecoin miners can also earn DOGE block rewards while mining LTC.
So, you have greater hash power securing the network that you would not have had were DOGE coin using a unique consensus mechanism. So, that’s a rough overview of the tech behind DOGE coin, not the most complicated out there, but then again, it is a meme. Coin. Having said that though, are there really any actual use cases for DOGE?
DOGE coin Use Cases?
There is only one really legitimate use case for the DOGE coin, and that would be as a medium of exchange. Indeed while cryptocurrency was created as a joke, the underlying incentive was to create one people could easily send to friends and family as a less threatening version of Bitcoin, and to that end, the DOGE coin has indeed been quite effective.
For example, did you know that in 2014 DOGE community members raised $30,000 to send the Jamaican bobsleigh team to the Sochi Winter Olympics in Russian Federation. Seems like they must have loved the Cool Runnings movie as much as I did.
Now, of course, fundraising was not always for the lulls. DOGE community members also raised 50K in order to help give drinking water to people in developing countries.
Then as things started to pick up with DOGE coin over the past year, there’s been an avalanche of merchants who have started to accept DOGE as a method of payment.
Now there are some really amazing things that you can now buy with DOGE including Dallas Mavericks basketball tickets, Supercar, hotel bookings Electronics, a subscription for classic films, and of course, thousands of other smaller merchants that are looking to ride the DOGE wave.
Now, this use case, as a medium of exchange is quite stock standard for most cryptocurrencies. It has some value and as such can be used as peer-to-peer digital cash. Admittedly, it has lower transaction costs and fees than Bitcoin but is still way less efficient than a number of proof of stake chains out there.
There are no other use cases, there are no smart contracts, so you can’t develop DApps like you can on Ethereum and a host of other smart contract blockchains. DOGE coin also cannot be considered as a store hold of wealth. That’s because it has a ridiculously large supply, and the inflation schedule is still quite high.
That’s even without considering the fact that a store held of wealth has to be highly trusted. I think you’ll struggle to find anyone in the crypto community, who has long-term faith in the continued robustness of the DOGE coins code. In fact, the most recent changes that were made happened all the way back in 2019. There has been talking of DOGE coin core devs, making some improvements this year, including a faster sync speed, but these are still minor updates in the grand scheme of things.
Given that DOGE coin exists as a stock standard proof-of-work, digital cash. The only other use case I see for it is speculation. In other words to be traded on the markets and to make or lose money on those trades. And to that end DOGE has been going insane.
Its trading volume over the last weekend made it the second most actively traded cryptocurrency. You heard that right. It had a higher volume than ETH, and it’s just on the spot market either.
Eager to capitalize on this insane interesting DOGE, a number of exchanges have started to offer futures products on it. That’s right, 100x leverage on a meme coin that is more volatile than the British weather.
And I have a feeling that we’re probably not even seeing the full extent of this DOGE trading volume. That’s because one of the most active markets for DOGE is not even an exchange, but a trading app. Robin Hood offers DOGE as one of the cryptocurrencies on its app. When users by do sure they’re not really buying DOGE, but trading on its price movement.
Hence, the trading volume is not captured on sites like coin market cap at all. To give you an idea of just how crazy the markets for DOGE are on Robin Hood, trading volume was so intense that it actually brought down the app a few days ago. Yep, it overloaded the system’s forced it offline.
So it’s quite clear that DOGE is a highly speculative asset with insane trading demand. Retail investors are piling into it like nobody’s business, but this begs a very important question. Why? And why is there all of a sudden this insane demand for DOGE
Why DOGE Pumps?
I happen to think that it comes down to four things: Meme culture, Social media, Elon Musk, and Robin Hood.
Let’s start on that first one. Now, we live in an age of memes. An era, where something as simple as an unfortunate class photo can become synonymous with misfortune. One where mistimed image can exist in the ether for years. There are even instances where memes become memeş, meme derivatives for endless laughs.
It, therefore, makes sense that a Shiba Inu mean like DOGE coin would take off so well. It’s instantly relatable and easy to remember. People will have seen it on the internet somewhere and will therefore know more about it than most other cryptocurrencies. It’s a lot easier to market a meme dog than it is to promote the complex tag involved in ETH 2.0 for example, simplicity sells.
Next, have social media. As we know, social media is able to amplify memes and make them go viral. It’s the nature of their algorithms where the more engagement there is with a particular topic, the better it organically performs. Memes feed on themselves and supercharged that engagement.
This is even more prevalent on the likes of Tik-Tok where short-form content, and memes are able to go viral much more easily than traditional social media platforms. It ain’t your granddad’s Facebook.
It’s, therefore, no surprise that some of the biggest trends for DOGE coin have been over on Tik-Tok. I recall what happened last year where a user called James G97 posted a video encouraging all his followers just to buy $25 of DOGE coin so that when the stock hit $1 users would have 10 grand.
More recently there was a DOGE coin trend where users were trying to get DOGE to $1 on the 20th of April, 4/20. And I want some of whatever it was they were smoking.
Now, jokes aside is this sort of simple engaging content mixed with a generally young and inexperienced Tik-Tok user base that means these vids can get flying pretty quickly. Of course, they do sometimes need some help and that is where cult-like figures with massive Twitter followers come in.
Elon Musk is not just content on sending rockets to space. He also wants to send DOGE to the Moon. Elon has been riding the DOGE coin meme like nobody’s business. Indeed, you can almost perfectly track the price in DOGE to his tweets about it, and given that is easy to share a meme on social media and Tik-Tok, his simple tweet is amplified and creates a lot of hype.
I and you don’t a mere tweet of a dog by Elon can make the DOGE price pump. That’s the combined power of a tweet and an instantly recognizable mean.
Of course, this would not really be possible were not for the fact that these Tik-Tok users had easy access to a tool to trade DOGE. This is a course where Robin Hood comes in.
There’s no doubt that the era of Robin Hood has opened up trading to a whole new generation of users; simple, fractionalized, and commission-free trading. Of course, the main mo of Robin Hood was stopped trading, but they’ve now been offering crypto for quite some time. Moreover, those users on Robin Hood don’t have to worry about private keys or offline addresses.
Of course, we then have the secondary effects of this pump. As we know, bubbles feed on themselves as users are convinced that the price rise is confirmation in the underlying investment thesis. The higher the DOGE goes the more attention it grabs and the more media coverage it gets. This then brings in more investors happy to try their hand on the DOGE wheel of Fortune. This raises a very important question though. Why are people so keen to pump the price of DOGE?
Who Invests in DOGE?
It’s hard to determine other people’s motivations for buying DOGE coins. However, having followed the trends and studied the markets I can posit a few theories as to the motivations.
Some people, genuinely having fun. They love the community and enjoy the memes. They know that DOGE really is a meme and they treated as such. They join in on the trends and get involved in the hype. This is the category that I think Elon Musk falls into. He wants to have fun with the memes. Elon is a bit of a mean lord in general and DOGE coin is but one of his many masterpieces.
Another type of DOGE trader is those that are trying to make money on its pumps. These are the users who know exactly why it pumps and how to get in front of the trend. They also know that DOGE is a joke but are happy to gamble on it.
There are some in this category who have made millions doing so. However, they are well aware that the DOGE coin is really just a meme and are cognizant of the risks that they’re taking. They're investing in the hope that someone else will come and buy at a higher price than they bolted.
Now, there is, of course, another type of investor, that’s unaware of these risks. They think that the DOGE coin really could become a global currency and overtake Bitcoin. They’re trying to make DOGE the next Bitcoin and feel as if the might of their community is all that is required to do that.
I think it has a lot of the same narrative that’s being spun by the GameStop investors over on Wall Street Bets. The only difference is that there is no one to short squeeze with DOGE and Bitcoin is a decentralized currency, not a hedge fund.
I also happen to think that a lot of people in this category have invested a considerable amount of money in DOGE. They're spurred on by stories like this one, where a guy was able to buy a house thanks to his DOGE investments.
Indeed, there are legitimate groups out there with those millionaires who further feed the narrative that this mythical meme coin is going to help make someone else and millionaire in their turn.
Now, I really hope that people who are buying into this narrative are not investing more than they can afford to lose, and I’m sure their financial advisors would say the same thing. That’s my read of the current situation, just my assumptions, and I can’t speak for everyone in the crypto space. However, the most important question now comes down to whether DOGE can realistically, reach $1. It has after all been defying all reason recently.
Can it Reach $1?
There are a number of factors that determine the price potential of crypto. One of the most important has to be tokenomics. And when it comes to tokenomics, price and market cap are the two most misunderstood, especially when it comes to those new to cryptocurrency.
You cannot determine the value of a cryptocurrency based on its price per token. What do you have to look at is the price of the token times by the outstanding supply. That is the market cap and this will let you determine exactly how large a cryptocurrency is compared with its peers.
Although DOGE coin is worth less than $1 its market cap at the time of this publishing is already 50 billion dollars. Let’s put that into perspective, that’s larger than the market cap of Cardano (ADA), Polkadot (DOT), Spotify, and the Ford Motor Corporation.
In order for those to reach $1, that would give it a market cap of 129 billion dollars. It would be the third most valuable crypto in market cap rankings. Now, does that sound like good value to you?
You should also consider that the DOGE inflation rate is almost double that of Bitcoins. This means that more coins are being added to that supply which is of course drag on price. Even ETH which has protocol inflation could see that eliminated with the release of EIP-1559.
I should also point out that for a decentralized cryptocurrency DOGE coin is actually quite centralized. The top wallets hold over 75% of the total DOGE supply and get this, the richest DOGE wallet holds almost 30%. Now, no one knows who is behind these wallets, it’s not the founders as there was no pre-mine and they sold what they mined.
Irrespective of food is they could very easily dump that DOGE on the market. They are not obligated to hold it, and if they were looking to sell out, they could soon take advantage of the liquidity and price. In fact, this concentrated supply point is something that Elon actually raised himself. He tweeted that DOGE will only really get his full support if major DOGE coin holders sell.
Now, despite all these factors I can’t tell you with 100% certainty, DOGE won’t hit $1. Markets can remain a rationale for long periods of time, and all DOGE needs to increase its price is the constant hype being created on the markets.
I also can’t entirely rule out the possibility of a Coinbase listing. They are a public company now and they have to keep up their profitability. They will want to compete with the likes of Robin Hood, and as we can see, there is insane demand for DOGE. Coinbase listed some pretty average projects in the past so DOGE coin would not be that much of a stretch.
The DOGE coin community is also really determined to get Coinbase listed and we know they are a large community. And we all know the impacts of a Coinbase listing, it invariably always leads to a rally in the price of the coin. So, one has to wonder whether this combined with the community hype could push DOGE two new all-time highs.
Now, even if the DOGE coin were to rally to new all-time highs, even if it did reach $1, I am still of the view that it’s a bubble and it will come crashing down again. It’s not a matter of if, but when? And that could have broader implications, not only for the DOGE coin community. But for crypto as a whole, allow me to explain.
Implications for Crypto
There is a lot of new and young retail money riding on DOGE. As I explained earlier some of these investors do not really know the risks of investing in a meme cryptocurrency.
Some people also appear to have over-leveraged themselves and I doubt that they will have invested in a prudent manner. So when does she eventually does start to fall, a lot of people are going to lose a lot of money? And this is not just me talking here, there are hundreds of crypto investors and community members that are sounding the alarm about the risks of DOGE coin. Eventually, there will come a point when there will no longer be new buyers to sustain the price.
Some people will want to make a profit which will then lead to a fall in price, and who knows how quickly it could fall. Panic selling can be quite strong and this is especially the case when most of the traders are new retail traders, and not the institutions with oceans of capital to tide them over. There are those who are investing with full knowledge of the risks, and I hope that they’re managing those risks accordingly. However, there are many others who could be throwing a lot of money at this. Money that could be life-changing in other circumstances.
It is also pretty likely that there are people out there taking out debt to buy a meme coin. When this bubble does pop, there are going to be people who lose a lot of money. Younger investors, who will have their perception of cryptocurrencies completely tainted because of a massive loss in their first foray. Now, apart from those who will be financially impacted by it, there are likely to be regulatory and reputational implications for the entire crypto space.
By the way, in it, the Cardano founder explains what the consequences could be of a DOGE meltdown. There could be inquiries they could be hearings and they will most definitely be mainstream fud and clickbait headlines. You know that they are dying for a reason to tarnish crypto and they would love to paint all other cryptos with the same brush.
I’m also quite wary as to what politicians will try to do here. We know that they love to create regulations and burdens on the crypto sector. We’ve already come so far to get to where we are and I would hate to see some of these advances being rolled back in the name of consumer protection. So yes, I do share the same concerns as Charles (Founder of Cardano) and I’m sure that there are many others in the crypto community, who feel the same way.
That’s it for most of this publishing, it’s time for a few quick closing thoughts from here. DOGE is a really fascinating cryptocurrency. I will admit that I never expected it to reach this level, and I have to say that I am impressed. Despite having some pretty simplistic crypto tech, it has captured the attention of millions of users who otherwise would not have been using crypto.
There are also some really strong trends that are sending it higher. Trends including its meme value Elon Musk, and Tik-Tok. Add to that mix the simplicity of Robin Hood, and you have the perfect ingredients for sending try soaring.
I also can’t stand here and say that the trend won’t continue. Parabolic price action can be irrational and I sure as hell won’t be shorting DOGE something the hedge funds who shorted game learned pretty quickly. But, there will come a time when larger holders take profit and this will lead to a collapse in price. It’s merely logical, memes are fun and games and I do love the Shiba trends. The community is cool and dynamic and I love its enthusiasm. However, many are investing with real money, and when they lose it won’t be a joke.
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