Dogecoin Price Surges, Then Quickly Falls

Dogecoin surged in value last week, until Thursday when it fell quickly, Wednesday saw the mime-inspired currency hit a new record high of 69 cents. Thursday morning saw it fall nearly 11 percent, with Dogecoin investors cashing in on recent gains. With the currency nipping way at 70 cents, investors might have felt it was time to cash out.

At the same time, Dogecoin was falling, other cryptocurrencies were rising in value with Bitcoin jumping 3.7 percent and Ethereum up 3.04 percent.

Dogecoin has skyrocketed this year, and its price has risen over 12,000 percent. It is being hyped by big names like Elon Musk and, alongside Bitcoin, Dogecoin has become a real buzzword in crypto.

Meltem Demirors, chief strategy officer of CoinShares notes, that even with the hype, there are big differences between the two. She went on to say, “Perhaps among the most important difference is supply”.

Ms. Demirors notes that Dogecoin is inflationary. More is being printed every minute of every day, giving it a potentially infinite supply. As it stands, 10,000 Dogecoins are being printed in volume, day in and day out. As such, there is, theoretically, an infinite supply.

With volume such as this, the output of Doge is almost 15 million every day which equates to more than five billion every year. Without a cap on supply, the value, over time, can be negatively impacted.

Bitcoin is Limited by a Finite Supply

There is a 21 million cap on Bitcoin. Unlike Doge, there is a predictable scarcity built-in. Bitcoin can be compared to diamonds or precious metals. They are valuable due to their scarcity. It is the scarcity of Bitcoin that is central to the argument put forward by Bitcoin bulls. Bitcoin is seen as a long-term investment, as demand increases, so should the price.

Ms. Demirors suggests that it is this difference that motivates people to see Dogecoin as a short-term investment. Dogecoin investors hope to make a quick profit while holding Bitcoin for a longer time.

Dogecoin Was Created as a Joke

Another significant difference between the two coins is the premise on which each was created.

Bitcoin dates back to 2009 when a very detailed white paper was written by Satoshi Nakamoto, the name used at the time by the creator, or one of the creators, of Bitcoin. From the outset, the intention was for Bitcoin to become a prominent decentralized digital currency. From the outset, supporters of Bitcoin have seen it as digital gold and a strong hedge against inflation.

Over the cryptos 12 years, trust has grown with both retail and institutional investors. This trust has led to the record high prices that have been seen recently.

Dogecoin, on the other hand, was created as a joke. Billy Markus and Jackson Palmer, both software engineers, created it based on the Doge meme which portrays dog breed common in Japan. There was never any intention on the part of the creators for Dogecoin to be taken seriously.

Markus wrote, “This coin was created for sillies.” It took no more than three hours to throw together with no plan or expectation. The result is a coin with little security and technical development.

The developers were upraised to see the rapid growth of the Dogecoin community, putting it down to a love of the meme. Recently, thanks to the interest shown by Musk and Mark Cuban, the crypto has exploded.

Bitcoin’s Ecosystem

Although Dogecoin utilized the same code as used for Bitcoin software, Bitcoin, unlike Dogecoin has a well-funded eco-system, one that does not exist with Dogecoin.

Bitcoin is a well-thought-out and well-distributed store of value, one that has grown in adoption over its 12 years. Dogecoin, on the other hand, has two guys who own a considerable amount of the supply.

Novogratz, during a recent interview with CNBC, noted his concern, saying he worries that the enthusiasm may wear thin and when it does, there is no institutional interest to support it. However, he did go on to say, “It is the people’s coin at the moment. It is a bit of a middle finger to the system.” Novogratz sees this attitude as being dangerous because once the current hype and enthusiasm has calmed down if it dies, it has a long way to go down.”

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Author: Jason Donaldson