Dogecoin soars from joke to $48 billion, fueled by crypto craze
The frenzy around digital tokens is taking its zaniest turn yet in the price of a token created as a joke, buckling the cryptocurrency trading system at Robinhood Markets.
Dogecoin, boosted by the likes of Elon Musk and Mark Cuban, rallied more than 110% Friday, according to CoinMarketCap.com, reaching a market value of more than $45 billion. It’s now up 18,000% from a year ago, when each token traded for $0.002 and it had a market value of about $250 million.
Demand was so brisk for the token that investors trying to trade it on Robinhood crashed the site, the online exchange said in a blog post Friday. Some $68 billion worth of Dogecoin changed hands in the prior 24 hours as of 4:45 p.m. in New York, the most since June, CoinMarketCap.com data showed.
Dogecoin’s surge is part of a rise in “altcoins,” a term for all the digital tokens that have sprung up in imitation of bitcoin. Like most of them, its use case is limited, making it a tool for speculators and raising concern that a bubble is inflating in a crypto world now worth more than $2.25 trillion.
“This reminds me of the dot-com days. We knew something big was going on; a lot of investors were chasing it hard. That led to a bubble,” said Scott Knapp, chief market strategist at Cuna Mutual Group. “For every Amazon.com there were 10 Pets.com that went bankrupt. Is Dogecoin the Pets.com of the cryptocurrency era?”
Interest in crypto is on the rise again after payment systems including PayPal and Square started enabling transactions in bitcoin and Wall Street firms such as Morgan Stanley began providing access to the tokens to some of their wealthiest clients. All along, cryptocurrency die-hards who say the blockchain technology will rewire the financial community have been plugging the coins, getting rich in the process.
The developer’s crypto embrace includes accepting bitcoin rent payments at the Grove and Americana, part of a venture with the Winklevoss twins.
The shiba inu-themed Dogecoin was created as a joke by software engineers Billy Markus and Jackson Palmer in 2013. Musk sparked a rally in it this year when he posted an image on Twitter of a faux magazine cover titled “Dogue” featuring a dog in a red sweater.
But Michael Novogratz, chief executive of Galaxy Digital Holdings, isn’t buying the hype, since Dogecoin “doesn’t really have a purpose.”
“It’s reminiscent of GameStop,” he said in an interview with Bloomberg TV, referring to the meme stock mania that gripped markets in February. “I would be very, very worried if one of my friends was investing in Dogecoin at these prices.”
With little to back up the case for buying cryptocurrencies, the likelihood of them cratering remains high, leaving novice traders who jumped in on the hype vulnerable to steep losses.
It’s unlikely Bernie Madoff ever got into cryptocurrency from his prison cell, but he might have appreciated the logic.
“The government has pumped so much monetary and fiscal stimulus into the economy now, even worthless assets are being bid up,” said Michael O’Rourke, chief market strategist at JonesTrading.
Yet altcoin popularity is hard to ignore. Bitcoin is worth more than $1 trillion, and the total market cap of the token universe exceeds $2.25 trillion, according to CoinGecko.com, which tracks more than 6,700 coins.
Bitcoin’s dominance in the crypto world has declined 28% since the beginning of the year, said Okex Insights analyst Robbie Liu, citing data from TradingView. The waning influence started to accelerate this month, he said in an email Friday, and bitcoin now accounts for less than 54% of the crypto market capitalization — the lowest level in nearly two years.
“On the altcoins front, we continue to see strong momentum,” Pankaj Balani, CEO of crypto derivatives exchange Delta Exchange, said in a note Thursday. He noted Ethereum’s recent record and increased activity in decentralized finance, or DeFi, adding that “decentralized exchange coins will be in focus in the next few days, given that the market has validated Coinbase at a $100 billion valuation.”
Other tokens with shaky to no fundamentals are also rising. Cardano and Polkadot, both in the top 10 cryptocurrencies by market cap, have surged this week.
“Polkadot and Cardano have very few ‘users’” currently, Shashwat Gupta, founder of AltcoinBuzz.io, said in an email Wednesday, though he added that there’s a substantial amount of development being built on them.
And it looks like Coinbase CEO Brian Armstrong may have been on to something when he said after the listing that it marks a “shift in legitimacy” for cryptocurrencies.
The Coinbase listing “ultimately will deliver more ‘use cases’ for cryptos and should keep the crypto market growing,” said Edward Moya, senior market analyst for North America at Oanda Corp.
The debut was a mark of success for Coinbase, which was valued at just $8 billion in its most recent funding round in 2018, and a win for Nasdaq, which hosted its first direct listing.
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