In the unconventional world of cryptocurrency investing, where prices fluctuate wildly and regulation is largely non-existent, one coin manages to stand out as something of an underdog.
Dogecoin, aka DOGE, is based on a viral internet meme of a Japanese Shiba Inu, and was originally created as a joke version of Bitcoin. The coin’s official Twitter biography reads, “Dogecoin is an open-source peer-to-peer digital currency, favored (sic) by Shiba Inus worldwide. Elon Musk thinks we’re pretty cool.
Despite its playful origin story, Dogecoin is just as volatile as any other type of cryptocurrency, reaching an all-time high of 73 cents in May 2021, before dropping 78% a year later. At the time of this writing, it was trading at around 6 US cents.
Does that mean Australian investors should jump in now and “buy the dip”? Or is it time to stay away for a long crypto winter?
And, if so, should the whole concept of cryptocurrency enjoy the widest of places? The Australian co-creator of Dogecoin certainly thinks so. Yes, you read that right: Dogecoin founder Jackson Palmer is no longer a fan of crypto, saying in a recent interview that the asset class is “parasitic” and a haven for scammers.
Here is what you need to know about Dogecoin to form your own opinion.
First, (The Main) Crypto Wealth Warning
If your financial plans make it easy for you to sleep at night, cryptocurrencies are definitely not for you. And it’s not just Dogecoin that has authorities worried: even the most “mainstream” cryptos are cause for concern, according to Australian consumer advocacy group CHOICE.
CHOICE is calling for regulations to better protect consumers, arguing in a submission to the federal government that cryptocurrencies should be subject to the same consumer protection obligations as traditional financial services.
“As it stands, enforceable protections in the unregulated cryptocurrency market fall somewhere between negligible and non-existent,” CHOICE notes.
And many in the broader global financial community have concerns. For example, Susannah Streeter, senior investment and market analyst at UK financial adviser Hargreaves Lansdown, says: “If people go into products they don’t fully understand, they risk losing all their money.
Therefore, not only are cryptocurrencies notoriously volatile, but unlike other parts of the financial services market, investors are not eligible for compensation if things go wrong.
However, some injured former investors are seeking compensation. US investor Keith Johnson is suing Elon Musk, for $258 billion, claiming that Musk caused investors to lose around $86 billion through his enthusiastic promotion of DOGE on Twitter.
Fair enough. But what is Dogecoin?
Which brings us back to Dogecoin, a cryptocurrency popular with hobby investors that has even been labeled as “the people’s crypto” by Musk.
Dogecoin (DOGE trading ticker) was invented in 2013 by IBM software engineer Billy Markus and Adobe software engineer Jackson Palmer (mentioned above). Their goal was to create a joke version of the already established Bitcoin to give the public a user-friendly way to learn about the world of crypto-assets.
To the surprise of the engineers, people started using Dogecoin as soon as the product was released. However, crypto experts claim that the underlying technology of the cryptocurrency and its overall usefulness are not comparable to those of Bitcoin and Ethereum.
How has Dogecoin fared?
While Dogecoin started out as a joke, the numbers behind the cryptocurrency are deadly serious.
The value of Dogecoin has increased by more than 14,000% since the start of 2021, peaking at an all-time high of over 70 cents. However, since May 2021, the price of Dogecoin has gone into a free fall, inflated by the occasional missive from Elon Musk, but otherwise on a distinctly downward spiral. It is currently worth around 6 US cents, while price-tracking website CoinMarketGap puts its market capitalization at around $8.8 billion, down from a 2021 high of $70 billion.
In comparative terms, there remains a relative minnow behind the big two: Bitcoin with a market capitalization of $385 billion and Ethereum at $138 billion.
What Triggered Dogecoin Price Movements?
In 2021, Dogecoin’s reputation was bolstered by ironic endorsements from high-profile showbusiness names, including rapper Snoop Dogg and rock band Kiss frontman Gene Simmons.
More importantly, a 2019 Twitter poll decided that Elon Musk should be the chairman of Dogecoin. The Tesla boss saw the fun side and has since toyed with the exercise, posting supportive tweets saying Dogecoin is his favorite cryptocurrency.
With his personal Twitter account boasting 100 million followers, even a fleeting pro-Dogecoin comment from Musk has the effect of boosting the cryptocurrency’s popularity and hence its investment appeal.
In a recent tweet, Musk went so far as to describe himself as “The Dogefather.”
How to Buy Dogecoin in Australia
As Dogecoin’s popularity has grown, so has its availability. Australian investors can buy the cryptocurrency by bank transfer or credit/debit card in AUD on a variety of exchanges, including Binance, Swyftx or FTX.
Recently, other online providers Gemini and eToro have also announced that Dogecoin can now be purchased through their platforms, increasing the potential number of Australian investors who may decide to come on board.
Should you buy Dogecoin?
When it comes to cryptocurrencies of all kinds, financial professionals advise caution.
After all, any asset that potentially appreciates solely on the back of a mention on a primetime TV show or social media feed is worth stopping before hitting the “buy” button.
You may also be a victim of crime. On Christmas Day 2013, for example, 30 million coins were stolen in a cyberattack on the online platform Dogewallet.
The loss amounted to US$16,000.
Laith Khalaf, financial analyst at AJ Bell, says, “Dogecoin epitomizes cryptocurrency in some ways, having started as a joke and now finding itself rising in value. This highlights how difficult it is to accurately predict which cryptocurrencies, if any, will end up staying the course.
“That kind of flippant, casual approach to life is quite laudable in the context of a bit of entertainment, but it doesn’t make such a good bedfellow for good financial planning.”
Susannah Streeter of Hargreaves Lansdown is also wary: “Investors should be extremely careful before getting caught up in this herd mentality, as Dogecoin is a speculative bet with no reliable basis for valuation.
“The demand came from traders trying to ‘game’ the system and others hoping to benefit from future price increases rather than using coins as a medium of exchange. Predicting the point at which demand decreases and prices begin to fall is very difficult, if not impossible.
And, as with many trendy investment opportunities, from the tulip fever of the 1630s to the dotcom bubble of the early 2000s, there is also a factor of fear of missing out.
Whatever you decide, the adamant opinion of financial experts is to invest only what you can afford to lose.
This article is not an endorsement of any particular cryptocurrency, broker, or exchange, nor does it constitute a recommendation of cryptocurrency as an investment class.