Elon Musk tweet on Dogecoin: should you invest in Dogecoin in 2021
As technology began to flourish in the mid-20th century, attempts were made to provide alternatives to the traditional systems in every walk of life. Since the business fraternity always sought safer and cheaper ways to conduct businesses around the globe, many theories were proposed to switch from the traditional finance system to that of a digital one.
SNEAK PEEK INTO THE HISTORY
It was not until 2009 when an ingenious idea hit the world which set the pace for a financial revolution. The world was introduced to digital currency, cryptocurrency Bitcoin, based on block-chain technology. It was presented as an alternative to the traditional banking system following the great financial crisis in 2008. It is a decentralized, peer-to-peer system, with low cost, high security and faster transactions. Bitcoin has since been a trendsetter in the ever-growing realm of cryptocurrency. Since its inception, other cryptocurrencies were then introduced; all claiming to be a better version of Bitcoin. Although around 4,000 cryptocurrencies now exist as of January 2021, Dogecoin (CRYPTO: DOGE) is recently getting the limelight. It was introduced in 2013 by engineers Billy Markus and Jackson Palmer. Dogecoin is an open-source, peer-to-peer digital currency that was created as a payment system that is fun, instant and free from banking fees. Interestingly, Dogecoin can be considered as a technical replica of Bitcoin. But unlike Bitcoin, it uses scrypt technology in its proof-of-work algorithm. This technology requires FPGA and ASIC mining devices instead of SHA-256 mining equipment required for bitcoin, which are more complex to produce. Despite being technical replicas, Dogecoin doesn’t share the same revolutionary motive as Bitcoin. While Bitcoin was introduced as an alternative to facilitate daily transactions independent of the government-controlled banking system, Dogecoin was created well, just for fun!! The creator clearly states that his intention was not so divine like Bitcoin; rather he wanted to make people smile and had a good laugh. This intention is clearly depicted in the name Dogecoin and the now-famous logo, which features Shiba Inu with reference to a popular meme at that time. Soon after its launch, Dogecoin modest intentions were to help people all around the globe, attracting many people to invest in it.
DOGECOIN TRADING HISTORY
As with every digital currency, Dogecoin also has a volatile trading history. As soon as it was launched, Dogecoin started gaining value. Since it entered the crypto realm with a fun-filled intention, creators thought it would be great to further their intentions by contributing their profits to noble causes around the globe. Interestingly, Dogecoin enjoyed its first peak at around 300% rising from $US$0.00026 to $0.00095 soon after its launch. This hinted that a lighthearted version of Bitcoin is in demand. This sudden rise in price occurred when other cryptocurrencies were stumbling as a result of China’s decision to prohibit Chinese banks from investing in Bitcoin. A few days later, Dogecoin was hit by its first crash when its value dropped by 80%. Dogecoin’s security features were soon questioned when on December 23rd 2013, the Dogecoin wallet was hacked. Millions of coins were stolen, causing thousands of people to lose their money. Keeping the facts straight, such a blow to any other digital currency would have completely wiped it out, but surprisingly Dogecoin survived. The Dogecoin community rose up to the challenge and donated wholeheartedly to the fundraiser organized by Dogecoin by the name “SaveDogemas”. Within a few days all investors who lost their money were repaid. This indeed was a unique depiction of true goodwill and has set the guidelines for Dogecoin’s future. January 2014 bought some luck to Dogecoin when this altcoin experienced an increase in trading volume and surpassed Bitcoin and all other cryptocurrencies, although its market capitalization remained far below Bitcoin. During the cryptocurrency bubble from 2017 till 2018, Dogecoin peaked at $0.017/coin making its total market capitalization close to USD 2 billion. In July 2020, following a TikTok trend aimed at getting the price to $1, Dogecoin price spiked. In January 2021, Dogecoin succeeded in getting attention from many business executives. Its price achieved new milestones as it went up to over 800% when the Reddit community started promoting it.
ELON MUSK INFLUENCE ON DOGECOIN
One cannot simply deny that Tesla and SpaceX CEO, Elon Musk’s words have a far-reaching impact on the world’s economy. We can safely quote the world’s richest person as the market mover. With over 50 million people following him on social media platforms, his words are not only read but also acted upon. Recently Elon Musk showed immense interest in cryptocurrency. His tweets in late 2020 regarding Dogecoin resulted in an immense increase in investments in cryptocurrency. That is not just the first time he advocated Dogecoin. Since then, Musk has been very loud and clear on Twitter hinting at his interest in Doge. In December 2020, Tesla and SpaceX CEO wrote “just one word-Doge” and changed his Twitter bio to “Former CEO of Dogecoin”. Surprisingly, Dogecoin’s value soared to 17% instantly, moving from $0.0039 to $0.0046. After few hours it reached a gain of 25% which later fell to 15%. Earlier in February, Dogecoin was flying high with its all-time high price following Elon Musk’s tweets. Later he posted a Twitter poll asking the future currency of Earth, to which he gave two options: “Dogecoin to the moon” or “all other crypto combined.” The result showed 2.4 million voters going for Dogecoin to the moon would be the future of currency. This resulted in Dogecoin moving up from $0.048356 to $0.065448. Earlier this month on April 1st 2021, Musk tweeted that SpaceX is going to put literal Dogecoin to the literal moon. According to a Business Insider report, Dogecoin price skyrocketed to $0.70 on the Bittrex exchange, causing a 29% rise from the point Musk put out the tweet. Besides, now it’s crystal clear that he is a vocal fan of Doge and has even bought some for his nine-month-old son.
SHOULD YOU INVEST IN DOGECOIN IN 2021?
Elon Musk latest tweet to take literal Dogecoin to the literal moon might not actually hint towards him taking it to the moon. According to Sarthak Dogra of India Today, “in investing circles, “to the moon” is a term used for investments that continue to soar high over a long period of time. The upward trend can hence be regarded as a rocket ride to the moon.” If that is the intention behind the tweet, then it has served its purpose because Dogecoin’s price increased by 10%. Musk continuous support from last year for Dogecoin might seem alluring to invest in it. But one cannot neglect the immediate fall in price soon after an abrupt increase. In January 2021, its price went up to 400% in just a few days and only after a couple of weeks dropped by one-third. Part of it is due to its low credibility as compared to other cryptos. It gained its hype only after online communities and celebrities started promoting it, but the fundamentals haven’t changed; i.e. it lacks any predefined purpose. Its uptrend is because people started investing in it, but since it doesn’t reflect any use-case, its future is still doubtful. Dogecoin can be categorized as a lucrative short-term investment. Clearly, if you have invested at the right time and sold at the right moment, there is a chance for you to make money. However, short-term investments proved to be extremely risky with a great potential to lose a lot of money. Moreover as seen in the trading history, the rise can be attributed to a certain event in history followed by a sharp drop. The same is the case with Musk promoting Dogecoin. As long as he keeps showing his support, people are likely to buy it. But investing in a cryptocurrency following social media hype seems like a smart strategy, it doesn’t guarantee a successful long term effect. With no proven track record, extreme volatile nature and shaky fundamentals, Dogecoin might not pass for a good long term investment.
In a nutshell, investment in Dogecoin might come in handy for people ready to gamble their money against the thought that social media hype will drive the price high in the long run. But at the same time, it would be unfair to call it an investment since no one can predict when the price might crash down.
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