Elon Musk's favourite crypto Dogecoin is making headlines again: Here's why

Meme crypto up nearly 20% on new X update, Musk heading US government agency ‘DOGE’

Elon Musk's favourite cryptocurrency, Dogecoin, is making headlines again after rising nearly 20 per cent. Here's a closer look at what's sparking the interest in the meme coin once again.

Meme crypto up nearly 20% on new X update, Musk heading US government agency ‘DOGE’

Highlights

Dogecoin - an opportunity or still a risk to dodge a decade since its inception? Find out more..

Dubai: What is sparking the rise of Dogecoin again after a period of lull? The value of the meme cryptocurrency jumped nearly 20 per cent after its vocal supporter Elon Musk confirmed late last week that a new payment feature is being rolled out on his X (formerly Twitter) platform. But why is that?

The latest spike has also been fuelled by a spike in interest worldwide, as indicated by Google trends, for the word ‘Dogecoin’ in the same week when US president elect Donald Trump announced that Musk would head a new agency, called the Department of Government Efficiency, or ‘DOGE’ for short.

“Musk continues to influence the crypto space. His tweets and statements often lead to spikes in Dogecoin's price and popularity,” explained Brian Deshell, a UAE-based cryptocurrency trader and analyst.

“Musk's involvement with Twitter (now X) and his support for Dogecoin as a potential 'currency' for transactions on the platform has reignited interest in the cryptocurrency. As crypto markets go through cycles, altcoins like Dogecoin often see increased interest when Bitcoin's price stabilises or grows.”

What drives the price of Dogecoin up?

Dogecoin is often seen as a "safer" bet in the altcoin space, offering both novelty and volatility that attract speculative investors. There are signs of Dogecoin being used more frequently for transactions, especially on platforms that support cryptocurrencies.

“Some payment processors have integrated Dogecoin, making it easier for users to spend and trade it. After a down period in 2022 and early 2023, the overall cryptocurrency market has been experiencing renewed energy,” said Brody Dunn, an investment manager at a UAE-based asset advisory.

“As confidence returns to the market, many investors and traders turn to familiar assets like Dogecoin. This, combined with the ongoing trend of digital currencies gaining traction, have fuelled the resurgence of Dogecoin's popularity.”

The price of Dogecoin is often attracted by the attention of online supporters, who dubbed themselves the ‘Doge Army’, as well as high-profile investors like Musk, Mark Cuban, and Snoop Dogg.

As a result, Dogecoin's price soared to an all-time high of $0.73 (Dh2.68) on May 8, 2021 -- which represented a 47,279 per cent gain from its earliest trading price of $0.001540753 (0.57fils) on January 23, 2014. That rally would have turned a $10,000 (Dh36,730) investment into $4.7 (Dh17.26) million.

Dogecoin turning out to be a safe bet?

“Two major challenges prevented Dogecoin from becoming the next Bitcoin or Ethereum. First, Dogecoin is an inflationary token that doesn't have a supply cap or limited in supply,” explained Deshell.

“There are 150 billion Dogecoins in circulation, and that supply is growing by about 10,000 tokens per minute. Bitcoin has a maximum supply of 21 million tokens, and 19.8 millions of those tokens have already been mined. That scarcity makes Bitcoin more like gold than Dogecoin.

“Second, Dogecoin doesn't natively support smart contracts, which are used to develop other crypto assets. While Dogecoin's tech is faster than Bitcoin's, its inflationary nature will prevent it from being as scarce as Bitcoin. Its lack of support for smart contracts also limits its appeal among developers.”

Dunn agrees too. “While Dogecoin may appear to be a ‘safe bet’ for certain investors due to its strong community, celebrity backing, and enduring presence, it remains a speculative and high-risk asset in the crypto space,” he added.

“It’s safer compared to highly volatile newer altcoins, but it is far from risk-free, especially in the unpredictable world of cryptocurrency. Prices can fluctuate wildly, driven by speculative trading, market sentiment, and external factors such as tweets from high-profile figures.”

Key takeaways?

While Dunn and Deshell agreed that Dogecoin will likely continue to thrive on the back of meme culture and celebrity endorsements, but it may lack the technological advancements needed to push it into the next phase of technological development.

“Dogecoin will stay a volatile asset that benefits from rising markets and social media. If interest wanes, Dogecoin could risk being overshadowed by more innovative or fundamentally strong cryptocurrencies. Without meaningful upgrades