Starting out as a joke by software engineers Billy Markus and Jackson Palmer, dogecoin was based on the "doge" meme that rose to popularity in 2013. The meme portrays a Shiba Inu dog alongside nonsensical phrases in multicolored, Comic Sans-font text.
When they created it, Markus and Palmer intended dogecoin to be a faster but "fun" alternative to bitcoin. But the cryptocurrency has since found a growing community online.
Now, dogecoin's market value is listed at nearly $50 million, making it one of the top five cryptocurrencies, according to data from CoinMarketCap.
This recent run isn't the first time that dogecoin's value has soared. Like many cryptos, it has a tendency for volatile price swings.
Its most recent run started off the back of enthusiasm from a Reddit group called SatoshiStreetBets. Similar to the WallStreetBets subreddit, which helped fuel the rally of GameStop stock at the start of the year, SatoshiStreetBets aims to drive up the prices of cryptocurrencies such as dogecoin. (Related: Bitcoin warning from billionaire Warren Buffett: Cryptocurrencies are a toxic bubble that will most likely "come to a bad ending.")
On Friday, on Reddit user posted a picture of their dogecoin holdings claiming to have become "a Dogecoin millionaire." The screenshot showed that they had a balance of $1,081,441.29 in their account.
Another thing driving dogecoin's rise is the recent listing of cryptocurrency exchange Coinbase. Currently the most popular exchange in the U.S., Coinbase went public on Wednesday, April 14, and briefly hit a $100 million market cap, a landmark moment for cryptocurrencies.
The excitement surrounding Coinbase's listing led to a surge in the prices of cryptocurrencies like bitcoin and ethereum. The former hit a record high of more than $64,000 on Thursday.
Dogecoin has been no exception to this rise. On Thursday, online brokerage Robinhood said that there was a "major outage" in its crypto trading feature due to "unprecedented" demand for the crypto. The feature has since gone back online.
Adding to the frenzy is support for the meme-based crypto from several big-name celebrities such as Tesla CEO Elon Musk and rapper Snoop Dogg, who've posted about it on social media. The former, in particular, has called dogecoin his "fav" cryptocurrency and referred to it as "the people's crypto."
Other supporters of dogecoin include billionaire investor Mark Cuban. An outspoken supporter of cryptocurrencies, Cuban once tweeted that if given a choice between dogecoin and a lottery ticket, he would pick the former.
Dogecoin's skyrocketing price is a boon for those who've invested in it, but the speed at which it has risen is leading to worries of a possible bubble in the cryptocurrency market. Some investors are already viewing the rise of other cryptocurrencies, such as bitcoin, as a speculative bubble.
"Dogecoin’s rise is a classic example of greater fool theory at play," said David Kimberley, an analyst at U.K. investing app Freetrade, to CNBC. "People are buying the cryptocurrency, not because they think it has any meaningful value, but because they hope others will pile in, push the price up, and then they can sell off and make a quick buck."
Kimberly added that "the bubble eventually has to burst" when everyone is doing it.
"You’re going to be left shortchanged if you don’t get out in time," he says. "And it’s almost impossible to say when that’s going to happen."
In addition, Kimberly warned that it would be quite easy for just a single investor to burst the bubble. He said that this is because, in some crypto markets, a huge chunk of the total number of "coins" in circulation is in the hands of a small group of players.
"That means it only takes one person to dump all their holdings for the entire market to tank."
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