Record increase of 15,000 percent this year alone and celebrity advocates make the currency, intended as a joke, hype 2021. Dogecoin is viewed differently. Some foresee a rosy future for it, while others advise against investing.
A price increase of around 15,000 percent since the beginning of the year – that is extraordinary even for the booming cryptocurrency market. Anyone who had put $1,000 (829.26 euros) into Dogecoins at the beginning of January would have multiplied the money – at least on paper – to more than $150,000 after the recent record prices. Can such a price explosion go well in the long run? What’s behind the hype?
The breathtaking rally is all the more astonishing given that the digital currency, which has been around since 2013, is supposed to be a joke. But driven by celebrities like Tesla CEO Elon Musk, rap mogul Snoop Dogg or tech billionaire Mark Cuban, Dogecoins became one of the hottest speculation objects on the financial market. You can even gamble with Dogecoin in some cryptocurrency casinos, click here to read more.
Now the hype is heading for a new peak: On Sunday night, Musk will be hosting the U.S. comedy show Saturday Night Live (SNL). The star entrepreneur has let slip that he might use the big stage for further Dogecoin promotion. This has been sending the crypto market into a tizzy all week.
For months, Musk has been firing up the Dogecoin exchange rate with benevolent tweets. Supporters of the currency love him for it. The Tesla CEO is apparently well aware of his role – he already promoted his appearance at SNL on Twitter as „The Dogefather“ in reference to the legendary mafia film „The Godfather“ („The Godfather“). The Japanese Shiba dog became the symbol for the currency.
Musk as a supporter
Influential backers like Musk have helped Dogecoins rise rapidly. For years, hardly anyone outside the crypto scene knew about the digital currency. Now it has reached a market capitalization of around $80 billion, almost equal to the stock market value of General Motors, the largest U.S. automaker.
Thanks to its recent surge, which pushed its price to a record high of more than 70 U.S. cents on Friday, Dogecoin was most recently the fourth-largest cryptocurrency by market value. Yet the whole thing was not serious at first. Jackson Palmer and Billy Markus, who started the project around seven years ago, turned a dog meme popular on the Internet into a cyber currency for fun.
Meanwhile, however, the U.S. financial market is in a new era, with low-cost brokers like Robinhood bringing in masses of younger investors via easy-to-use apps. Some of them organize themselves into online forums and bid up stocks or currencies in the style of flash mobs – a well-known example of which was the price rally of the stumbling video game retailer Gamestop.
This market environment – often detached from fundamental data and fueled by billions in Corona crisis aid from the U.S. government and Federal Reserve – is a breeding ground for speculative exuberance. Accordingly, there are many warnings of excesses. Experts urgently advise not to put money into Dogecoins or the like, the total loss of which would not be bearable.
Critics see tendencies of pyramid schemes in Dogecoins or newer alternatives like Safemoon, read more. Even outspoken crypto advocates like major investor and bitcoin billionaire Mike Novogratz are skeptical. „I think it’s dangerous because if enthusiasm wanes, it could go steeply downhill,“ he told U.S. broadcaster CNBC this week. Quite a few experts warn of a bubble.
But there are also other voices. The tech billionaire and owner of the Dallas Mavericks basketball team, Mark Cuban, for example, believes that Dogecoins definitely have potential in the long term. Unlike Bitcoins, which are used more as a store of wealth than for payments due to their limited volume, Dogecoins are suitable as a means of transaction, he says. That’s why Cuban wants to open up the Mavericks‘ fan store and ticket sales to payments with Dogecoins, for example.
Even if Dogecoin disappears into the depths of the crypto world as quickly as it rose from it, experts see a trend toward more diversity in the market. In the shadow of the best-known cyber currency Bitcoin, which has been under some pressure recently, the second largest digital currency Ether reached record highs this week. Bitcoin now only has about 46 percent of the total crypto market, according to analytics firm Coingecko. At the beginning of the year, it was still 70 percent.
New cryptocurrency Chia – Bitcoin in green
The next of several thousand cryptocurrencies has launched on the market. But the Chia project is triggering a new kind of hype: A sustainable alternative to Bitcoin, is the claim.
One thing is the same with the new cryptocurrency Chia as it is with Bitcoin: Those who want to earn money with the digital coins need strong nerves. At the start of trading on Monday – so far still on a few crypto trading sites such as Gate.io or MXC – the price, previously estimated at $20 according to the „Chia Calculator,“ briefly shot up above $2,000. It then collapsed back to $500 and held at that level over the course of the week.
Otherwise, however, the creators of Chia around U.S. programmer Bram Cohen (45) emphasize above all what they do differently than Bitcoin and most of the thousands of copies. Even the title of the concept paper reveals the claim: „Green Paper“ instead of „White Paper“. More sustainable than Bitcoin, that’s no great feat given the huge and rapidly growing consumption of resources. According to estimates by Cambridge University, the Bitcoin network now consumes more electricity than the whole of Sweden, with strong incentives to tap into precisely the dirtiest and most climate-damaging sources. In addition, there are vast amounts of e-waste due to the generations of specialized computers for Bitcoin mining that are constantly being replaced.
Is the price of electricity stopping bitcoin?
In place of mining, the exploitation of exhaustible raw materials, Cohen puts „farming.“ Like farmers, Chia creators are supposed to plow their clod, which in this case consists of hard drive storage. Because „with Chia, the resource is not computing power, but storage space,“ the „Green Paper“ says. In contrast to the „Proof of Work“ reward system that powers Bitcoin and co. with new coins for solving complex computing tasks, the Chia „Proof of Space“ system is intended to curb the hunger for energy. Those who expand the storage space of the Chia network get a chance to win new Chia Coins.
There is another alternative in the crypto world: „Proof of Stake“. Ethereum, the second most important cryptocurrency behind Bitcoin, is currently preparing to switch to such a system, in which the shares already held entitle the holder to create new coins – with the side effect that, in a kind of gateway panic, a big rally to Ethereum mining is still starting now, as long as „Proof of Work“ applies.
The simplest cryptocurrency for ordinary people
Cohen, known as the developer and operator of decentralized data transfer platform Bittorrent, claims his approach is also more democratic because it more securely guards against concentration among a few players. Instead of hiding power structures behind an anonymous blockchain, the company Chia Network is envisioned as a controlling entity. The company is even expected to go public soon. The company is looking forward to the associated regulation, explains Chia Network CEO Gene Hoffman.
At the same time, he emphasizes that Chia is „the simplest cryptocurrency for normal people.“ Anyone can join in with their unused hard drive space from home, he says. With more than 100,000 network nodes sharing the validation of transactions, Chia is already nearly as densely woven as the Bitcoin network.
However, right out of the gate, the pros have surged ahead with particularly large and powerful disks. „We’re betting everything on Chia,“ shared Rick Wilson, chief executive of publicly traded crypto maker iMD. He said the company aims to have more than a petabyte (1000 terabytes) of storage on the Chia network before the end of May. With a large data center in Utah, the next expansion is planned, he said.
And they are in the company of even bigger players: „The Chinese are moving 50 percent of their bitcoin mining to Chia,“ Wilson claimed. By way of background, the majority of the computing power behind Bitcoin is in mining pools from China, with billions invested in hardware that can hardly be used for anything else.