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Dogecoin (DOGE-USD) stole the spotlight from the world’s largest and second-largest cryptocurrencies Bitcoin (BTC-USD) and Ethereum (ETH-USD) this week after it surged more than 200% in 24 hours, giving it a market cap of $52bn (£37.6bn).
Over the past week it has rocketed as much as 550%, which pushed it beyond the value of several major banks on Friday, including Barclays (BARC.L), which has a market cap of $44bn, and Lloyds Banking Group (LLOYD.L), which is worth $42bn.
It was also ranked the fifth largest cryptocurrency in the world at one point.
Thousands of investors made substantial gains on the rise and social media platforms were populated with memes about the coin “going to the moon." The phrase is often used by traders that think the price of a stock or a cryptocurrency is going to see a huge increase.
But the cryptocurrency hasn’t always been as popular as it is now, in fact, it was first created as a joke by Jackson Palmer and Billy Markus in 2013.
The coin takes its name and logo from the Shiba Inu dog in the “doge” meme that became popular on the internet that same year. The pair of software engineers created Dogecoin to satirise the growth of altcoins by making the doge internet meme into a cryptocurrency.
On Christmas Day in 2013, millions of Dogecoins (worth around $16,000) were stolen during a cyber attack on the online platform Dogewallet. The incident resulted in over 30 million missing coins, according to CNET.
However, this caused the currency to be the most mentioned altcoin (an alternative coin to Bitcoin) on Twitter (TWTR) at the time, generating a rise of interest in the coin.
DOGE is a derivative of Luckycoin which forked from Litecoin (LTC-USD) and uses a Scrypt algorithm. It has 1 minute block intervals making it faster than other blockchains.
There is no cap to the supply of coins and so the coin can inflate infinitely.
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As the years went on, Dogecoin’s market capitalisation climbed slowly, and reached a peak of $0.017 in early 2018 thanks to the cryptocurrency bubble that saw Bitcoin surpass its previous all-time high of over $19,000 before it crashed.
Last year, during the coronavirus pandemic, the price of Dogecoin spiked more than 600% after a viral TikTok challenge urged a buying spree, with the aim to get the value to £$1 per coin.
TikTok user James Galante began asking followers to buy Dogecoin in late June, claiming they could "all get rich" by pushing its value.
The official Dogecoin Twitter account addressed the trend, warning against impulsively joining the viral challenge and urging followers to "be smart."
"Be mindful of the intentions people have when they direct you to buy things. None of them are in the spot to be financially advising," the account tweeted.
Dogecoin ended 2020 at less than half a penny per DOGE, according to CoinDesk’s Dogecoin price index.
In February Tesla (TSLA) founder Elon Musk also began tweeting about it. Musk sent out a flurry of tweets about the cryptocurrency, first tweeting just the word “Doge”, followed by “Dogecoin is the people’s crypto”, and “No highs, no lows, only Doge."
Other celebrities have begun tweeting about the token following the attention from Musk. Snoop Dogg has also buoyed up the price of the joke token, as has KISS singer Gene Simmons.
Despite its rise to fame, Dogecoin, and other cryptocurrencies still remain very volatile and experts continue to remain sceptical about using it as an investment.
"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,” David Kimberley, analyst at Freetrade, said.
"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.
He added: "This is doubly the case in the crypto markets where a small group of players often hold a huge chunk of the total number of ‘coins’ in circulation. That means it only takes one person to dump all their holdings for the entire market to tank.
“The latest uptick in Dogecoin’s price isn’t indicative of any meaningful value the cryptocurrency offers, it’s just a surge in interest from people looking to get rich quick. That can make for a fun bet, but it’s not good investing. And if you’re the one left holding on to the coins when the market tanks, you may regret taking a punt in the first place.”
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