What is Dogecoin? – Forbes Advisor Australia
In the unconventional world of cryptocurrency investments, where prices fluctuate wildly and regulation is largely non-existent, one coin manages to stand out as an underdog of sorts.
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 bio states: “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 every other type of cryptocurrency, reaching an all-time high of 73 cents in May 2021, before plummeting 78% lower a mere year later. At the time of writing, it was trading for around 6 US cents.
Does this mean Australian investors should be piling in now and ‘buying the dip’? Or is now the moment to steer clear in anticipation of a long crypto winter?
And, if so, should the whole cryptocurrency concept be given the widest of berths? The Australian co-creator of Dogecoin certainly thinks so. Yes, you read that correctly: Dogecoin founder Jackson Palmer is no longer a fan of crypto, claiming in a recent interview that the asset class is ‘parasitic’ and a haven for grifters.
Here’s what you need to know about Dogecoin so you can make up you own mind.
First, (the essential) crypto wealth warning
If your financial plans require you to sleep easily at night, cryptocurrencies are definitely not for you. And it’s not just Dogecoin that has authorities worried: even the more ‘mainstream’ cryptos are a cause for concern, according to the 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 are somewhere between negligible and non-existent,” CHOICE notes.
And there are many in the broader global financial community who have concerns. For example, Susannah Streeter, senior investment and markets analyst at UK financial adviser Hargreaves Lansdown, says: “If people dabble in 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 aren’t eligible for compensation if things go wrong.
Some aggrieved former investors, however, are agitating for compensation. US investor, Keith Johnson, is suing Elon Musk, for $US258 billion, claiming that Musk caused investors to lose around $US86 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 amateur investors that’s even been labelled as ‘the people’s crypto’ by Musk.
Dogecoin (trading ticker DOGE) was invented in 2013 by IBM software engineer Billy Markus and Adobe software engineer Jackson Palmer (mentioned above). Their aim was to create a joke version of the already established Bitcoin to give the public a friendly way to get to grips with the world of crypto-assets.
To the engineers’ surprise, people started using Dogecoin as soon as the product was released. Crypto experts, however, claim the cryptocurrency’s underlying technology and overall usefulness is not on a par with the likes of Bitcoin and Ethereum.
How has Dogecoin performed?
If Dogecoin started off as a joke, figures underpinning the cryptocurrency are deadly serious.
Dogecoin’s value rose by more than 14,000% since the start of 2021 peaking at an all time high of more than 70 cents. However, since May 2021, Dogecoin’s price has gone into free fall, pumped up by the occasional missive from Elon Musk, but otherwise on a distinctly downward spiral. It is currently worth around US 6 cents, while the price tracking website CoinMarketGap puts its market capitalisation at around $US8.8 billion — down from a high of $US70 billion in 2021.
In comparative terms, it remains a relative minnow behind the big two: Bitcoin with a market cap of $US385 billion and Ethereum at $US138 billion.
What’s triggered Dogecoin’s price movements?
In 2021, Dogecoin’s standing was enhanced by tongue-in-cheek endorsements from high-profile showbusiness names, including rapper Snoop Dogg and Gene Simmons, front man of rock group Kiss.
More significantly, a 2019 Twitter poll decided Elon Musk should be Dogecoin’s chairman. The Tesla boss saw the funny side and, since then, has played along with the exercise, issuing supportive tweets saying Dogecoin is his favourite cryptocurrency.
With his personal Twitter account boasting 100 million followers, even a fleeting pro-Dogecoin comment from Musk has the effect of bolstering the cryptocurrency’s popularity and therefore its investment appeal.
In a recent tweet, Musk went so far to describe himself as ‘The Dogefather’.
How to buy Dogecoin in Australia
As Dogecoin’s popularity has increased, so its availability has widened. Australian investors can buy the cryptocurrency via bank transfer or credit/debit card in AUD on a variety of exchanges, including Binance, Swyftx or FTX.
In recent times, additional online providers Gemini and eToro have also both announced that Dogecoin can now be bought via their platforms, thus expanding the potential number of Australian investors who may decide to get on board.
Should you buy Dogecoin?
When it comes to cryptocurrencies of any variety, financial professionals advise caution.
After all, any asset that potentially appreciates purely on the back of a mention during a prime-time TV show or social media thread is worth pausing over before hitting the ‘buy’ button.
You may also fall victim to foul play. On Christmas Day in 2013, for example, 30 million coins were stolen as part of a cyber attack on the online platform Dogewallet.
The loss totalled $US16,000.
Laith Khalaf, financial analyst at AJ Bell, says: “Dogecoin in some ways epitomises cryptocurrency, having started as a joke, and now finding itself surging in value. This highlights how difficult it is to predict with any accuracy which cryptocurrencies, if any, will end up staying the course.
“This sort of flippant, devil-may-care approach to life is entirely commendable in the context of a bit of entertainment, but it doesn’t make such a good bedfellow to sound financial planning.”
Hargreaves Lansdown’s Susannah Streeter is similarly wary: “Investors should be extremely cautious about getting caught up in this herd mentality because Dogecoin is very much a speculative bet whose valuation has no reliable basis.
“Demand has come from traders trying to ‘game’ the system and others hoping to benefit from future price rises rather than use the coins as a means of exchange. Predicting the point at which demand subsides and prices begin to fall is very difficult, if not impossible.”
And, as with many fashionable investment opportunities from the tulip fever of the 1630s to the dot.com bubble of the early 2000s, there is also a fear-of-missing-out factor at play.
Whatever you decide, the resounding opinion of financial experts is to only invest 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.