What is Dogecoin anyway?
For all practical purposes, it is just another cryptocurrency like Bitcoin with a few technical changes that aren’t important to the context at hand. It was developed by a couple of engineers from IBM and Adobe. Its symbol is inspired from Japanese dog breed Shiba Inu. Its unique name and symbol sets it apart from other cryptocurrencies out there.
Why is it suddenly famous?
Elon Musk had recently started showing interest in cryptocurrencies. He first tweeted about Bitcoin and then moved on to make multiple tweets about Dogecoin. As one can probably guess, this sent the cryptocurrency market into a frenzy. People started buying it- thereby creating huge demand which pushed the price of 1 Dogecoin from $0.007 to $0.07 in one day. That’s 10x in a day- crazy even by cryptocurrency standards.
Why do Musk’s tweets matter?
Apart from the fact that he is the world’s richest person and widely accepted as a genius, there’s basic finance at play. People assume that since Musk is interested in the coins, he’ll buy them (and Musk’s numbers would be big!). So everyone starts buying it expecting the price to go up. The price goes up because everyone is buying it. Wait, am I going round in circles?
Should you buy Dogecoin?
Well, it depends on your risk appetite. Generally, equity markets are governed by the way a company performs. With cryptocurrencies, however, things are different. Fundamental news that we see in equities (quarterly revenue, new deals etc.) aren’t common here. These are run purely on the basis of the investor’s trust in the technology on which these currencies are built and its future potential. However, normal traders don’t understand these technologies. Hence, this might very well end up being another episode of GameStop (call back).
If you have money to spare and want to make a “go for glory” trade - sure, go ahead and buy Dogecoin. The price fluctuations will be enough to keep you awake at night (could be out of happiness too). Personally, I feel it is funny how we have people that save hard earned money over years and invest them in mutual funds for 12% year over year returns and then we have those who invest in Dogecoin!
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