In one night, the price of the digital currency Dogecoin climbs to a record $90 billion. The crypto hype could even cause problems for gold – according to some analysts.
For anyone who still thinks Dogecoin is a joke, there are now 90 billion reasons to believe otherwise. That’s how high the dollar value of the digital currency is, having risen 40 percent in 24 hours through Wednesday. Useless or not, the hype around cryptocurrencies has flushed the coin upward, and in an environment of lavish cheap money from central banks. What’s happening is the latest culmination in a year of speculative excess in a market that Nouriel Roubini once called “the mother of all bubbles.”
Whereas trillions of dollars in stimulus from governments and central banks would have previously driven investors with inflation fears into gold – and the intrepid into risky equities – this time a flood of cash is pouring into the burgeoning crypto market. Few examples illustrate this better than Dogecoin, an essentially useless cryptocurrency that has been pounced on by a horde of day traders, who in turn have been egged on by Internet buzz and a self-ignited buying frenzy.
“At a certain point, something is just real,” said Sam Bankman-Fried, managing director of Hong Kong-based crypto exchange FTX. “If Dogecoin is stupid and worthless, it shouldn’t be valued at $90 billion. What about gold, bitcoin or euros? Our collective imagination has given them value, and now we just see them as having value.”
Price doubled in one week
The overnight price gain gave Dogecoin a 129 percent increase in just one week and a value of $85 billion, according to CoinMarketCap.com data. That dwarfs even the largest gold exchange-traded fund and stocks like Fedex Corp. and Snap Inc. A year ago, fun currency stood at just $315 million.
The crypto frenzy could even hurt gold, according to some analysts. Capital has flowed out of the precious metal in recent months, while a glut of government funding has lifted the value of the global crypto market to a record high of $2 trillion.
Dogecoin, which was launched in jest in 2013 in reference to the Shiba Inu breed of dog, may also soon be accepted by the mainstream as a retail payment method, Bankman-Fried believes. At Blockfolio, an FTX firm that assists clients in managing their crypto portfolios, trading volumes increase with each Dogecoin high – a sign that it is now central to the ecosystem.
Feverish Dogecoin buying again briefly crashed Robinhood’s trading app on Tuesday. Other coins skyrocketed, including Dash, up 18 percent in 24 hours into the European morning on Wednesday, and Ethereum Classic, up nearly 45 percent.
DogeDay has been trending
While it’s difficult to pin Dogecoin’s skyrocketing to exact causes, there are a few factors that fueled it. On April 20, a day that is also celebrated as International Doge Day, some users made the hashtag #DogeDay trending to drive the price up. Later, celebrities such as Tesla co-founder Elon Musk and billionaire Dallas Mavericks owner Mark Cuban also jumped on the bandwagon. The Winklevoss twins’ crypto exchange Gemini finally announced Tuesday that it will soon allow trading of the coin.
“It’s been ignored for so long by all the honorable institutions, and now it comes out of nowhere and surprises the crypto market,” says Laurent Kssis, global head of exchange-traded products at 21shares AG in Zug, Switzerland. “Everyone is just going for the quick profit.”