Anyone who has been in the crypto space over the last few years will undoubtedly be familiar with Dogecoin (DOGE) and how social media activity drives its price action. A “fork of a fork” based on Litecoin (LTC), the coin has earned a unique reputation and a considerable cult status within the cryptocurrency space.
Unlike other projects, Dogecoin has not seen any protocol upgrades or developments since 2015. Indeed, the success of DOGE derives more from the community-based efforts and the power of memes than from any tangible technical advancements.
However, it would be incorrect to say the “coin” has zero utility. In fact, its early adoption was in the microtipping arena on social media. Dogecoin showcased one of the earliest examples of how cryptocurrencies could be used to monetize the content creation space. Rather than the usual “likes,” forum posters could receive more impactful recognition in the form of a meme coin with actual U.S. dollar value.
The Dogecoin scene has such synergistic community participation that tokenholders famously supported NASCAR driver Josh Wise and the Jamaican bobsled team back in 2014.
Who let the DOGE out?
Dogecoin briefly entered the top 10 cryptocurrencies by market capitalization for the first time since 2015 after a dizzying climb that saw the token price increase almost tenfold. It all started when irreverent retail traders on the U.S. stock market were prevented from buying more GameStop and AMC stock on Thursday.
At the time, the retail horde that had banded together on r/Wallstreetbets had seemingly caught established Wall Street short-sellers in a huge short squeeze. While retail brokers suspended the trading of GME and some other stocks, some Redditors were probably still pumped with nervous trading energy and turned their attention to DOGE.
On Thursday, Twitter user “WSB Chairman” asked, “Has Doge ever been to a dollar?” to his almost 750,000 followers. A storm of social media activity ensued, with Dogecoin becoming the first-ever altcoin to surpass Bitcoin (BTC) in terms of daily Twitter mention volume.
Commenting on the link between social media activity and Dogecoin price action, Joshua Frank, co-founder and CEO of crypto research firm The Tie, told Cointelegraph: “Everyone universally agrees that no one is investing in ‘fundamentals’ of Dogecoin.” He added further:
“As DOGE enjoys substantial support on different social media platforms, its price reacts very heavily to spikes in conversation. We have also noticed that support for Dogecoin comes in waves, there will be periods of days or weeks when the DOGE meme gets hot again and a lot of retail customers start putting their money behind it.”
Dogecoin’s price surge did coincide with a flurry of new activity in the crypto space, with exchanges like Binance reporting a flood of new account openings. Indeed, several exchanges halted withdrawals of the altcoin, with the volume dipping significantly.
Changpeng Zhao, CEO of Binance, also weighed in on the relationship between social media hype and Dogecoin price action, telling Cointelegraph that DOGE is “probably and measurably the most successful joke in history, with a current market cap of over $7bn.” He went on to add:
“As it was born of a meme it’s an attractive target for groups on social media. Being relatively smaller than other cryptos but with a large awareness means that it’s likely more straightforward to mobilise a campaign or movement around it with an immediate and major impact on the price.”
This service disruption typical of Bitcoin price movements has seen the DOGE token price decline 50%. However, social media sentiment is still high, with several posters calling for a $0.10 price as a short-term target.
Dogecoin will need a 2,000% price rally to reach the $1 milestone set by WSB Chairman. Also, as previously reported by Cointelegraph, Dogecoin’s 24-hour trading volume surpassed the $5-billion mark for the first time on Binance, exceeding Bitcoin’s trading activity on the platform.
Memetic price action for DOGE
The current enthusiasm around Dogecoin is not the first social-media-driven hype cycle in the history of the popular meme coin. Indeed, DOGE’s entire existence is built on memetic engineering and the emerging meme economy.
Back in 2020, Tesla CEO Elon Musk tweeted about Dogecoin on two separate occasions, with the token price responding positively in both instances. Last year, Musk came out on top in a Twitter poll to decide who should become the CEO of Dogecoin. The Tesla CEO would later refer to himself as the “former CEO of Dogecoin.”
Musk’s impact on crypto price action is not only restricted to Dogecoin. Bitcoin went on an upward trajectory after Musk updated his Twitter bio to feature only one word: “Bitcoin.”
Related: World's richest man Elon Musk boosts Bitcoin price by 20% — Is $40K back in play?
Just as in the case of Dogecoin back in 2020, Musk flying the Bitcoin flag triggered a massive “Elon candle” for BTC price action. The largest crypto by market capitalization surged by over $5,000 in only a few minutes, eclipsing the $38,000 mark for the first time since mid-January.
Following Musk’s lead, other notable crypto proponents both within and outside the industry — including participants in the wider tech and social media space — have also begun to fly the Bitcoin banner. Reddit co-founder Alexis Ohanian, a noted Ethererum proponent, has also joined the trend.
Apart from Musk, a viral campaign on the social media platform TikTok also created a significant upward push in Dogecoin price action. Indeed, DOGE managed to ride the enthusiasm created by the viral videos to reach a two-year high at the time.
Asset valuation in the age of social media
The GameStop saga once again put the efficient market hypothesis argument, which says that stock prices are a reflection of fair market value, into stark relief. Indeed, retail traders using publicly available information correctly deduced that mass-buying GME stock would put short-selling hedge funds in trouble.
Under the hypothesis, such a situation — beating the market — can only be achieved by pure luck. However, in the modern age of social media, such concepts are now being increasingly challenged by a horde of irreverent folks who seemingly have an ax to grind with the establishment.
For Aaron Khoo, head of listings at crypto data aggregator CoinMarketCap, the Dogecoin surge is indicative of a much deeper reawakening among retail investors, as he told Cointelegraph:
“Much like the GME Gamma squeeze, Dogecoin’s ascent epitomizes a psychological desire to take the mickey out of the man — a loose agglomeration of individuals ultimately wanted to make a statement that the ostensibly credentialed Wall Street hedge funds were in no better position to arrogate upon themselves the right to make pronouncements on what an asset’s fair valuation ought to be.”
For now, Dogecoin is still flashing green in terms of its 24-hour price action. The earlier jump above $0.08 constituted an all-time-high price for the meme coin, becoming one of the few altcoins to reclaim and go beyond its 2018 price records.
It is a commonly held belief that a Dogecoin pump is one of the precursors of an “alt season.” Indeed, given the cyclical nature of Dogecoin’s price action, a reversal of the DOGE/BTC chart often signals periods of significant gains for the altcoin market.
The reason is fairly simple, as DOGE pumps are based purely on “pumpamentals” — retail presence spurred on by a social media hype — which often causes the price of Dogecoin to spike. This retail-driven fear of missing out usually spreads to other altcoins.
However, bullish fatigue in the Bitcoin space is also another ingredient for alt season. At the moment, BTC appears to still have more fuel to burn, so the market may have to wait and see. Also, the traditional alts have to deal with pressure from the decentralized finance space — blue chips that have proved to be favorites among crypto investors.