Dogecoin, the surging cryptocurrency created as a “joke,” has rocketed a blistering 3,000% so far this year.
The dogecoin price, which began climbing in October last year as the latest bitcoin bull run got underway, has added almost 400% this week alone—screeching into the cryptocurrency top five with its market capitalization peaking at around $50 billion.
Dogecoin mania has taken the world by storm this week but some bullish investors are forecasting the dogecoin price rally could have further to run and the memecoin is so far managing to hold onto its huge gains.
The latest dogecoin frenzy, spurred on by Telsa billionaire Elon Musk, has been driven largely by retail traders hoping to get-rich-quick and has sparked warnings those jumping on the dogecoin bandwagon could get burned. Uphold, a California-based cryptocurrency exchange, has reported the number of its users buying dogecoin has doubled in the past week.
“Dogecoin’s rise is a classic example of greater fool theory at play, dogecoin investors are basically betting they’ll be able to cash out by selling to the next person wanting to invest,” David Kimberley, an analyst at U.K.-based trading app Freetrade, said in emailed comments.
“People are buying the cryptocurrency, not because they think it has any meaningful value, but because they hope others will pile in, push the price up and then they can sell off and make a quick buck. But when everyone is doing this, the bubble eventually has to burst and you’re going to be left short-changed if you don’t get out in time. And it’s almost impossible to say when that’s going to happen.”
Others have compared dogecoin to GameStop, the video game retailer that has seen its stock price skyrocket this year as retail traders organized via Reddit, Telegram and Discord pile into the stock in an attempt to push up its price.
“In the same way that the GameStop frenzy was pitched as a battle-play of Wall Street versus The Little Guy, dogecoin is being pitched as a battle-play against the well-established crypto giants like bitcoin,” Nigel Green, the chief executive of deVere Group, said in emailed comments.
“We can expect many novice retail investors–who may not have the financial resilience needed—to get burned in the dogecoin frenzy in the same way they did with the GameStop one.”
While dogecoin is based on bitcoin’s decentralized blockchain technology, there is little developer activity and a handful of people own the vast majority of the dogecoin tokens in circulation.
“It’s very hard to compare dogecoin with the likes of bitcoin, which runs on ground-breaking tech and has a limited supply giving it scarcity value, amongst other valuable attributes,” said Green.
Last month, data revealed an anonymous person or group controls around 28% of all the dogecoin tokens.
“It only takes one person to dump all their holdings for the entire market to tank,” added Kimberley.