Wild volatility in Dogecoin (DOGE-USD), the cryptocurrency that surged 400% in a week before losing about a quarter of its market cap, is prompting questions about its purpose and true value.
“There are many that believe it has value, therefore it has value,” Noelle Acheson, CoinDesk’s Director of Research, told Yahoo Finance Live, when discussing the altcoin’s meteoric rise. “It calls into question our long-standing assumptions of how markets should move.”
Dogecoin’s surge has certainly defied investment norms. After being created as a joke in 2013 by two programmers who used a meme of a Shiba Inu dog, the cryptocurrency has soared in popularity. A growing number of investors now view the cryptocurrency as a legitimate investment opportunity, driven in part by recent endorsements from well-known names like Shark Tank investor Mark Cuban and Tesla (TSLA) CEO Elon Musk.
The @dallasmavs have done more than 20,000 #Dogecoin in transactions, making us the LARGEST #DOGECOIN MERCHANT IN THE WORLD ! We thank all of you and can only say that if we sell another 6,556,000,000 #DOGECOIN worth of Mavs merch, #dogecoin will DEFINITELY HIT $1 !!!🚀🚀🚀
— Mark Cuban (@mcuban) March 6, 2021
“The fascinating thing about Dogecoin is it has done so well, it has lasted so long, and it has such a loyal following without a clear purpose,” added Acheson. “What it is doing is calling into question our understanding of value. It doesn't really have a purpose… Even its founders disavowed the project a long time ago.”
The value aspect of Dogecoin is something many on Wall Street and Main Street are trying to decipher. Chamber of Digital Commerce President Perianne Boring told Yahoo Finance Live that she’s watching Dogecoin with "great concern" due to the fact that it "lacks many fundamental attributes."
“It should not be compared to Bitcoin, which is a store of value. Dogecoin lacks many fundamental attributes of a serious cryptocurrency,” said Boring. “If you are an investor in Doge and you cannot afford to lose the money that you put into it, you need to think very long and hard about that and consider getting out.”
One of the distinct differences between Dogecoin and Bitcoin is the number of coins in circulation. Dogecoin has an unlimited supply compared to Bitcoin’s lifetime cap of 21 million, which in theory could help Bitcoin grow its value in the future.
Earlier this week on Yahoo Finance, Mike Novogratz, CEO of Galaxy Digital, cautioned that Dogecoin’s rally likely won’t last because "nobody is working on how to make Doge part of your portfolio." However, he stopped short of predicting it will no longer exist.
“I think the price of Doge will head back much lower than it is as the energy gets lost in #Doge420 or the excitement of the young kids trying to push it up,” said Novogratz. “But I am not positive it goes to zero. There will be some die hard Doge community that supports it somewhere.”
Seana Smith anchors Yahoo Finance Live’s 3-5 p.m. ET program. Follow her on Twitter @SeanaNSmith