- Recently, Dogecoin showed a spectacular rally of over 880 per cent within just two trading session.
- What fuelled the rally was a bunch of tweets by Tesla CEO Elon Musk, openly endorsing Dogecoin.
- The richest man in the world has again proved that a handful of his tweets are enough to move the markets.
Dogecoin is a cryptocurrency just like Bitcoin but with a much smaller market cap (about $6 billion). The currency was invented by two software engineers Billy Markus and Jackson Palmer way back in 2013. The currency features a logo of “Shiba Inu”, a famous dog breed.
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Recently, Dogecoin witnessed a spectacular rally, jumping from US$0.0075 on 27 January 2021 to a mind-boggling high of US$0.0736 on 29 January 2021. That’s an outstanding return of over 880 per cent within just two trading session. The surge in the price was so sharp and powerful that one of the biggest retail brokers in the US, Robinhood turned off its “instant buying” feature for Bitcoin and Dogecoin on the platform. This disallowed users to instantly transfer funds into their trading account to purchase these cryptocurrencies.
This was around the same period when the Reddit traders’ buying frenzy was going on in the US. However, it was not the same army of Reddit traders who went on a buying spree on this counter but a different set of bullish Dogecoin investors.
This rally was fuelled by a bunch of tweets by Tesla CEO Elon Musk, openly endorsing Dogecoin. One of his tweets said, “Dogecoin is people’s crypto”. A few such tweets by the Tesla boss were enough to fire up the demand for Dogecoin, which eventually led to a drastic price surge.
It wasn’t the first time that Elon Musk has backed Dogecoin. Earlier too, he had also posted a number of tweets favouring Dogecoin over other cryptos. In April 2019, he tweeted “Dogecoin might be my favourite cryptocurrency. It's pretty cool.”
The richest man in the world has proved time and again that a handful of his tweets are enough to move the markets. One recent instance was the Bitcoin scenario when he updated his Twitter bio with “#Bitcoin” and Bitcoin rallied by more than 10 per cent on that day.
Is Dogecoin a better and cheaper alternative than Bitcoin?
There are two aspects to it. Bitcoin is one of the very few cryptocurrencies that has started to gain traction as a payment option. This enhances its value and separates it from the rest of the junk currencies. Dogecoin has just begun its journey into the mainstream crypto market and it may take time before it gets widely accepted as a payment option like Bitcoin.
Looking from an investment perspective, no cryptocurrency has an intrinsic value of its own, and its value is what the market participants perceive it be. How long the rally would sustain in Dogecoin is questionable as the recent buying frenzy was driven on market sentiments which generally revert to reality when the dust settles.