Last edited: Dec 15, 2021

Dogecoin was the first memecoin that got major media coverage and prompted casual traders previously not invested in crypto to dive into the crypto hype. We will look at Dogecoin’s inception, Elon Musk’s involvement in causing Dogecoin’s meteoric rise during April to May of 2021, and what led to Dogecoin’s 19% upswing today.

What is Dogecoin?

Dogecoin was released on December 6, 2013. It was created by software engineers Billy Markus and Jackson Palmer, who decided to create a blockchain payment system as a “joke” on the wildly speculative and volatile nature in cryptocurrencies at the time. It is considered to be the first “memecoin,” as in the coin does not serve much utility, unlike networks such as Ethereum or Ripple, and instead is created for humor purposes.

What Led to Dogecoin’s Rise?

Dogecoin’s price remained relatively dormant between its inception in 2013 and 2021, with a few peaks in between, such as the peak of $0.017 during the cryptocurrency bubble of January 2018, and a spike in July 2020 due to a trending Tiktok video. This foreshadows the nature of Dogecoin, in the sense that it is extremely sensitive to social media activity and media attention.

In January 2021, Dogecoin went up over 800% in 24 hours, attaining a price of $0.07, as a result of attention from Reddit users and, more importantly, Elon Musk. This is during a time when traders around the world were united to buy “meme” stocks like GameStop, since hedge funds were ruthlessly shorting it, and the retail traders wanted to seek revenge against the Wall Street money managers. As a result, memecoins like Dogecoin shot up in prices along with the meme stocks.

Following this, Elon Musk released several tweets related to Dogecoin, essentially encouraging his followers to buy Dogecoin. A frantic buying spree ensued, resulting in Dogecoin’s price to spike between April and May of 2020, reaching $0.72 at one point, which represented another 1000% spike over its previous high of $0.07 in January.

What Caused Dogecoin’s Upswing Today?

After the May peak, however, Dogecoin’s prices have dramatically cooled down, in part because the price was fueled by pure social media frenzy and speculation, but also the fact that Dogecoin’s inherent lack of utility as a coin other than a store of value means that the $0.72 price tag was vastly overpriced compared to the coin’s intrinsic value.

Thus, Dogecoin began its steady decline from May onwards, reaching a low of $0.158, the lowest it has been since the April 16^th price rally.

However, the coin surged by more than 19.5% today, after Elon Musk says that Tesla will accept the coin as a viable payment method for merchandises. Again, we see a direct correlation between Dogecoin and influencers, specifically Elon Musk.

For investors to be confident that Dogecoin will continue to climb, it will need to rely on more media attention and influencer promotions in the future, which means Dogecoin will be inherently much more volatile than other cryptocurrencies, making it an extremely risky, yet high-upside, investment.

DOGE price chart over the past 24 hours (15 minutes intervals)