Dogecoin started out as a joke. Now it's one of the top 10 digital currency, valued at $ 40 billion.
The cryptocurrency is based on the "Doge" meme, which became increasingly popular in late 2013. The meme shows a Shiba Inu dog next to nonsensical phrases in multi-colored comic sans font text.
Dogecoin was developed in 2013 by software engineers Billy Markus and Jackson Palmer and was intended to be used as a faster but "fun" alternative to Bitcoin. It has since found a growing community online.
And now, despite the odds, Dogecoin has a total market value of more than $ 40 billion, according to crypto market data website CoinGecko, which has added over $ 20 billion in the past 24 hours. The digital token hit an all-time high of 32 cents on Friday morning and has more than doubled its price from last year.
"I just became a Dogecoin millionaire"
It's not the first time Dogecoin has seen a wild rise. Like many cryptocurrencies, it is prone to volatile price fluctuations. In 2018, the price of Dogecoin began to rise in parallel with other popular digital currencies. It's pretty much off the radar since then. However, earlier this year, Dogecoin soared due to the craze of a Reddit group called SatoshiStreetBets.
Much like the WallStreetBets subreddit that contributed to a rally in GameStop shares in early 2021, SatoshiStreetBets is aiming to raise the prices of cryptocurrencies.
Dogecoin rose again in the past week, hitting 10 cents a coin for the first time on Wednesday. It's up a whopping 400% in the past seven days.
On Friday, a Reddit user posted a picture of his Dogecoin holdings on the Robinhood Investing app.
"Hey guys, I just became a Dogecoin millionaire," the user said, showing a balance of $ 1,081,441.29 on his account.
Why is Dogecoin accumulating?
First, there is the Coinbase list. The most popular US virtual currency exchange went public on Wednesday and briefly hit a market capitalization of $ 100 billion in a cryptocurrency milestone.
The excitement surrounding Coinbase's debut resulted in a spike in the prices of bitcoin and ether. Bitcoin hit a record high of more than $ 64,000 on Thursday, while Ether briefly topped $ 2,500 for the first time on Friday morning. Dogecoin was no exception to the maddening interest in these digital assets.
Dogecoin has attracted a following among Robinhood users. On Thursday, the US online broker announced that there had been a "major outage" in its crypto trading role after facing "unprecedented demand". The feature is now back online, said Robinhood.
In some reports, the recent Dogecoin rally has been attributed to the support of the meme-based token from Elon Musk, CEO of Tesla. He made several tweets about Dogecoin, which in turn helped raise the price.
On Thursday, Musk posted a cryptic tweet that read "Doge Barking at the Moon," likely referring to the popular crypto slang phrase "to the moon."
The billionaire has called Dogecoin his "favorite" cryptocurrency and "the people's crypto". Musk has also emerged as a supporter of Bitcoin, as his electric car company bought $ 1.5 billion worth of cryptocurrency earlier this year.
But his tweets have worried some investors given their obvious ability to move markets. For example, some Bitcoin investors have sounded the alarm about Musk's Dogecoin tweets. Nic Carter, co-founder of Castle Island Ventures, warned private investors "would lose money on Dogecoin" calling it a "vehicle for speculation".
The skyrocketing price of Dogecoin has raised concerns about a possible bubble in the cryptocurrency market. Some investors already view Bitcoin as a speculative bubble – the world's most popular digital coin has more than doubled since early 2021.
"The rise of Dogecoin is a classic example of a bigger fool theory," David Kimberley, an analyst at UK investment app Freetrade, told CNBC.
"People buy cryptocurrency not because they believe it has significant value, but because they hope that others can pile up, drive the price up, and then sell it and make money quickly."
But Kimberley added, "If everyone does this, the bubble has to burst eventually and you will stay shorted out if you don't get out in time. And it's almost impossible to tell when that will happen."
"This is doubly the case in the crypto markets, where a small group of players often hold a large portion of the total number of 'coins' in circulation. This means that only one person is needed to manage all of their Stock up on stocks for the entire market. "