Dogecoin, a crypto coin that originally began as a meme about an exciting doggo, has surged four hundred percent over the last week. Thanks to its dramatic surge after Tesla’s Elon Musk tweeted a photo of canine barking at the moon. Well, it worked, and as of Friday, it hit the market capitalization of a whopping $45 billion.
After seeing such a surge in value, the first question that comes to mind is how on earth is this even possible? It turns out that understanding the value of modern digital currencies is not a cup of cake, especially when we are talking about Elon’s favorite and internet sensation Dogecoin.
Interestingly, unlike other cryptocurrencies like Bitcoin, Dogecoin is inflationary. Plus, it did not introduce any technological breakthrough and was originally created as a joke without any practical purpose.
What’s the Force Behind Dogecoin’s Surge?
Since the beginning of 2021, it has become a little hard for well-reputed economists and non-specialists like us to identify the driving force behind the meme coin. Yet, what most people forget are its enthusiastic fans and outstanding branding. And since the coronavirus pandemic hit the world, these two things are considered quite important.
Over the last few months, the world has seen GameStop hit new levels that are pretty hard to justify, given its original turnover and business performance. People, most of them connected through social media platforms, especially Reddit and Twitter, bought the shares for only one underlying reason: fun. To our surprise, their expectations turned out to be true, and people earned made a fortune out of it.
It would be hard to deny that Musk had no role behind the coin’s surge. Periodically, Tesla’s founder has been taking to Twitter and talking about the meme coin, which was often followed by a rise. The same thing happened on Wednesday when Musk tweeted the hilarious photo. Thirty-six hours down the lane, its price more than tripled.
Is there any other explanation behind the rally?
Most of the trading Dogecoin individuals are doing it because it’s fun, expecting the price to go up. But our focus must be on the question; why? Upon analyzing closely, it became evident that the small macroeconomic forces might be behind this surge. You might be wondering, how?
It might be because of the combination of the Biden administration’s $1.9 trillion stimulus package that includes $1400 stimulus checks, coronavirus-related savings, and low interest rates. With so much money in their bank accounts and a ban on international travel, Americans have some extra cash stacked in their accounts. So, people thought, let’s buy Dogecoin and profit.
So, is the Dogecoin overheating right now? Well, that’s an odd concept for a meme coin. Many crypto experts are still reluctant to put their investments into it. But we can’t deny people had made millions out of it since its steady climb since 2018.
Not to forget, some prominent analysts have already expressed their concerns about cryptocurrencies as a speculative bubble. But is it speculative? It would be best to wait for a while and see how the governments cope with it!
Disclaimer: The views and analysis presented in this article solely belong to the author and are not in any way financial advice for the readers.