Dogecoin’s record-breaking rise shoots ‘joke’ cryptocurrency to wider attention

It is perhaps the ultimate symbol of late capitalism: a digital currency that started as a joke, now worth more than the Ford motor company, BP or Tesco.

Riding a wave of speculative interest despite Covid-19 triggering the worst global recession since the 1930s Great Depression, Dogecoin has been a huge hit with amateur investors. It is a cryptocurrency based on an internet meme – a humorous online phrase or photo, which on this occasion is a dog – and has shot to wider attention with a record-breaking rise in value in recent weeks.

Backed by famous supporters including the Tesla founder, Elon Musk, the rapper Snoop Dogg and the Kiss bassist Gene Simmons, the digital asset similar to bitcoin jumped by more than 40% on Wednesday to reach $0.68 (£0.49) against the dollar, according to CoinMarketCap.

With a surge of more than 14,000% since the start of the year, Dogecoin’s market capitalisation – the combined value of every coin – has now hit more than $84bn, equivalent to the annual economic output of Sri Lanka.

Analysts said the rising price of the digital currency, which is similar to bitcoin, comes amid interest ahead of Musk hosting Saturday Night Live this weekend, given the billionaire’s public support on Twitter for Dogecoin and the potential that him appearing on the popular US TV show will raise its profile further.

“Dogecoin is surging because many cryptocurrency traders do not want to miss out on any buzz that stems from Elon Musk’s hosting of Saturday Night Live.” said Edward Moya, senior market analyst at the financial trading platform Oanda.

“Also known as the Dogefather, Musk will undoubtedly have a sketch on cryptocurrencies that will probably go viral for days and further motivate his army of followers to try to send Dogecoin to the moon,” he said.

Musk already has form as a crypto maverick, buying $1.5bn of bitcoin with cash reserves at Tesla. He has previously tweeted support for Dogecoin in what may be best understood as the perpetuation of an online joke.

Having often courted controversy on Twitter for offbeat comments, costing him and his company millions of dollars and landing him in legal trouble, Musk helped raise Dogecoin’s profile in February by posting a picture of Doge on the moon, planting a flag bearing the digital currency’s logo, and captioned with one word: “literally”.

The tweet pushed up the value of the digital currency by more than 20% on the day. The phrase “to the moon” is used online to talk up investments, indicating the direction of travel for a financial asset, and was used prominently by Reddit users on the WallStreetBets forum earlier this year as small investors boosted shares in GameStop in an attempt to undermine hedge funds.

Created in 2013 by two software engineers from IBM and Adobe, the Dogecoin digital currency is based on the Doge meme, which features a Japanese shiba inu dog surrounded by grammatically incorrect phrases in a kind of inner monologue.

Written in deliberately broken English, the meme involves pairing a modifier – such as “so”, “such” or “very” – with a word that ought not to be modified, such as “so wow” or “much currency”.

Dogecoin’s rise comes on the back of the boom in bitcoin that has lifted the value of the original digital currency to more than $50,000, coming as stock markets around the world soar to fresh record highs despite the worst economic collapse for at least a generation.

Similar to internet-fuelled speculation in GameStop, the surge in Dogecoin comes as the US government sends out its third round of emergency Covid-19 payments to eligible American households.

Washington has distributed more than 163m stimulus cheques, worth $384bn, in payments of up to $1,400 per person, plus $1,400 per dependent. Although intended as support for struggling households, economists say this has helped to fuel a rise in stock markets and crypto assets such as bitcoin and Dogecoin, as more affluent recipients put their cheques into financial investments.

It also comes as traditional fiat currencies, such as the dollar, pound and euro, risk being debased by record low interest rates from central banks, and billions of dollars worth of quantitative easing; the buying of bonds to keep borrowing costs low, effectively printing new money.

Expectations are rising that stronger economic growth will take hold as the Covid vaccine enables a faster return to normal, at a time when government and central bank support remains high. Economists warn this would lead to a rise in inflation, which would erode the value of fiat money, making digital currencies a potentially attractive proposition.

“The big story underneath all of it is the money printing presses turning in the states and everywhere else too,” said Erik Britton, managing director of the economic research firm Fathom Consulting.

“Anything denominated in that money tends to rise in value, whether it’s the bitcoin or Dogecoin exchange rate, equities or any other asset – such as housing – if you print shed loads of that currency other things will tend to rise.”

Although started as a joke, some early buyers of the digital currency have become millionaires, while one anonymous trader claims to have amassed a fortune worth more than $1bn. However, analysts warn that it could quickly unravel because the digital currency has no intrinsic value; relying on investment hype, speculation, and fear of missing out.

Naeem Aslam, chief market analyst at the trading platform Avatrade, said some of the “insanity” surrounding Dogecoin was likely to ease after hitting record highs.

“Dogecoin is the most speculative coin, and most traders are just not aware of the risk,” he said.