Dogecoin spikes 300% in a week, stoking fears of a cryptocurrency bubble

3 weeks ago 38

A ocular practice of dogecoin and different cryptocurrencies.

Yuriko Nakao | Getty Images

Dogecoin started retired arsenic a joke. Now it's a top-10 integer currency worthy $34 billion.

The cryptocurrency is based connected the "Doge" meme, which roseate to popularity successful precocious 2013. The meme portrays a Shiba Inu canine alongside nonsensical phrases successful multicolored, Comic Sans-font text.

Created successful 2013 by bundle engineers Billy Markus and Jackson Palmer, dogecoin was intended to beryllium utilized arsenic a faster but "fun" alternate to bitcoin. It has since recovered a increasing assemblage online.

And now, defying each odds, dogecoin present has a full marketplace worth of $34 billion, according to crypto marketplace information tract CoinGecko, adding astir $19.9 cardinal successful the past 24 hours. The integer token reached an all-time precocious of astir 28 cents Friday morning, much than doubling successful terms from a time ago.

'I conscionable became a Dogecoin millionaire'

It's not the archetypal clip dogecoin has seen a chaotic climb. Like galore cryptocurrencies, it has a inclination for volatile swings successful price. Earlier this year, dogecoin started mounting a comeback, skyrocketing connected the backmost of enthusiasm from a Reddit radical called SatoshiStreetBets.

Like the subreddit WallStreetBets, which helped substance a rally successful GameStop shares astatine the commencement of 2021, SatoshiStreetBets aims to pump up the prices of cryptocurrencies.

Dogecoin has been climbing again successful the past week, hitting 10 cents a coin for the archetypal clip connected Wednesday. It's risen by a whopping 300% successful the past 7 days.

On Friday, a Reddit idiosyncratic posted a representation of their dogecoin holdings connected the Robinhood investing app.

"Hey guys I conscionable became a Dogecoin millionaire," the idiosyncratic said, showing a equilibrium of $1,081,441.29 successful his account.

Why is dogecoin rallying?

For one, there's the Coinbase listing. The astir fashionable U.S. virtual currency speech went nationalist connected Wednesday, concisely hitting a $100 cardinal marketplace headdress successful a landmark infinitesimal for cryptocurrencies.

The excitement astir Coinbase's debut led to a surge successful the prices of bitcoin and ether. Bitcoin deed a record high of much than $64,000 connected Thursday, portion ether concisely topped $2,500 for the archetypal clip Friday morning. Dogecoin has been nary objection to the frenzied involvement successful these integer assets.

Dogecoin has been met with frenzied involvement from users of Robinhood. On Thursday, the U.S. online brokerage said determination was a "major outage" successful its crypto trading diagnostic aft facing "unprecedented demand." The diagnostic is present backmost online, Robinhood said.

Some reports person attributed the latest dogecoin rally to enactment for the meme-based token from Tesla CEO Elon Musk. Musk has made respective tweets astir dogecoin, which successful crook has helped propulsion up its price.

On Thursday, Musk posted a cryptic tweet saying "Doge Barking astatine the Moon," apt successful notation to the fashionable crypto slang phrase "to the moon."

The billionaire has called dogecoin his "fav" cryptocurrency and "the people's crypto." Musk has besides travel retired arsenic a supporter of bitcoin, with his electrical car steadfast buying $1.5 cardinal worthy of the cryptocurrency earlier this year.

But his tweets person disquieted immoderate investors, fixed their evident quality to move markets. Some bitcoin investors, for instance, person sounded the alarm astir Musk's dogecoin tweets. Nic Carter, co-founder of Castle Island Ventures, warned retail investors "are going to suffer wealth connected dogecoin," calling it a "vehicle for speculation."

Bubble concerns

Dogecoin's skyrocketing terms has led to worries of a imaginable bubble successful the cryptocurrency market. Some investors already presumption bitcoin arsenic a speculative bubble — the world's astir fashionable integer coin has much than doubled since the commencement of 2021.

"Dogecoin's emergence is simply a classical illustration of greater fool mentation astatine play," David Kimberley, an expert astatine U.K. investing app Freetrade, told CNBC.

"People are buying the cryptocurrency, not due to the fact that they deliberation it has immoderate meaningful value, but due to the fact that they anticipation others volition heap in, propulsion the terms up and past they tin merchantability disconnected and marque a speedy buck."

But, Kimberley added, "when everyone is doing this, the bubble yet has to burst and you're going to beryllium near short-changed if you don't get retired successful time. And it's astir intolerable to accidental erstwhile that's going to happen."

"This is doubly the lawsuit successful the crypto markets wherever a tiny radical of players often clasp a immense chunk of the full fig of 'coins' successful circulation. That means it lone takes 1 idiosyncratic to dump each their holdings for the full marketplace to tank."