Since the beginning of the year, the digital coin has grown in price by 11,821% and took the fourth place in terms of capitalization among cryptocurrencies. What can prevent it from staying at this level and becoming a full-fledged payment instrument
Dogecoin cost $ 0.54 for the first time in history on May 4. According to CoinMarketCap, with $ 70.5 billion in capitalization, altcoin ranked fourth in the ranking of the largest cryptocurrencies.
On the eve of May 3, the eToro trading platform announced plans to start trading Dogecoin and make it available to its 20 million users. The decision was made due to high customer demand for the digital coin, the company said in a statement. Today, May 4th, Bitfinex added new Dogecoin pairs to the US dollar and Tether stablecoin.
Strong demand may be due to the fact that Dogecoin has strengthened by 11,821% since the beginning of 2021. According to this indicator, it is many times ahead of the largest cryptocurrencies in terms of capitalization – Bitcoin (96% growth since the beginning of the year) and Ethereum (347%).
In late January, Tesla CEO Elon Musk began to actively mention Dogecoin in his tweets. Apart from the digital coin jokes and memes that he posted back in 2019, he started talking about the challenges and prospects of Dogecoin. For example, according to Musk, the main disadvantage of altcoin is that its reserves are concentrated in a small number of addresses. Musk even offered money to the largest Dogecoin holders to sell their digital coins.
Against the background of these statements and statements on the Wallstreetbets forum (an active community of amateur traders on the Reddit site), the value of Dogecoin has grown several times, reaching $ 0.087 at the end of January. The next cycle of the coin's growth began in April, when Elon Musk again spoke about the cryptocurrency. On April 1, he probably joked that his company SpaceX would literally send Dogecoin to the moon. Half an hour after the publication of this tweet, the digital coin has risen in price by 20%.
The wider adoption of Dogecoin as a means of payment continued. For example, Newegg, a large online store of computer components and consumer electronics, began accepting cryptocurrency for payment. In mid-April, the owner of the Dallas Mavericks NBA basketball club, Mark Cuban, announced that his team had amassed over 120,000 Dogecoins in just a month. In March, the club began accepting digital coins as payment for tickets to games.
And in early May, the Oakland Athletics, California baseball club, began selling tickets for the games that will take place May 3-6 for Dogecoin. The fans of the team now have the opportunity to purchase tickets for two for 100 Dogecoin.
In addition to Elon Musk's tweets, there are other reasons for the growth of Dogecoin, says Artem Deev, head of the analytical department at AMarkets. Dogecoin and other coins such as TRON, Binance Coin and Ripple are on the rise, he said, as investors shift assets from bitcoin to altcoins in search of maximum returns.
“The coin is showing signs of a bubble – in a short period the asset has increased its capitalization to $ 70 billion,” explained Artem Deev.
Most of the cryptocurrency is concentrated on a small number of wallets, so the exit from the asset of one holder will immediately bring down the rate, the analyst explained. He believes that along with the growth of Dogecoin, the hype around the coin will end.
Dogecoin has a price limit, since the coin has a negative factor in the form of unlimited emission, explained Andrey Podolyan, CEO of the cryptorg.exchange crypto exchange. According to him, new digital coins continue to be “printed” and this process cannot be stopped, since there is no such mechanism in the source code of the altcoin.
“What happens to an asset that is printed in unlimited quantities? That's right, it starts to fall in price, ”the expert noted.
Now Elon Musk and his followers have the opportunity to pump up the price of Dogecoin with their capital and influence, but soon these opportunities will run out, Andrey Podolyan is sure. He argues that a positive scenario for the altcoin is only possible if the code of the digital coin is edited to make its emission limited. Otherwise, Elon Musk will eventually forget about Dogecoin and find himself another coin for speculation, the specialist concluded.