The frenzy around digital tokens is taking its wackiest turn yet in the price of a token created as a joke. Dogecoin, boosted by the likes of Elon Musk and Mark Cuban, rallied more than 110% Friday before dropping by 26% on Saturday. It now has a market value of more than $36 billion and is still up 13,400% from a year ago, when it traded for $0.002 and was worth about $250 million.
Demand was so brisk for the token that investors trying to trade it on Robinhooh crashed the site, the online exchange said in a post Friday. Some $68 billion worth of Dogecoin changed hands in the prior 24 hours as of 4:45 p.m. Friday in New York, the most since June, CoinMarketCap.com data showed.
Doge’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,” Scott Knapp, chief market strategist at CUNA Mutual Group, said. “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 tech giants from PayPal to Square started enabling transactions in Bitcoin on their systems, and Wall Street firms like Morgan Stanley began providing access to the tokens to some of the wealthiest clients. All along, crypto die-hards who say the blockchain technology will rewire the financial community has been plugging crypto, getting rich in the process.
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 earlier this year when he posted a photo of a faux magazine “Dogue” featuring a dog in a red sweater.
But Michael Novogratz, chief executive officer 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.”
Yet alt-coin popularity is hard to overlook. While Bitcoin is worth more than $1 trillion, the total market cap of the token universe now 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, according to OKEX Insights Analyst Robbie Liu, citing data from Tradingview. The waning popularity 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.
With little to back up the case for buying cryptocurrencies, the possibility of them cratering remains high, leaving novice traders who jumped in on the hype vulnerable to steep losses so be careful on trading and investing cryptocurrencies.
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