Crypto craze fuels Dogecoin rise from joke to $50bn

While Coinbase Global captured the news using its market debut, the frenzy around digital tokens is taking its zaniest turn yet in the price tag on a token created as a joke.

Dogecoin, boosted by famous brands Elon Musk and Mark Cuban, rallied roughly 180 % Friday, according to CoinMarketCap.com, reaching a market value greater than $48 billion.

It’s now up 18,000 per cent from this past year, when it traded for $0.002 and was worth about $250 million.

Doge’s surge is part of a growth in altcoins, a term for all your digital tokens which may have sprang up in imitation of Bitcoin. Like the majority of them, its use case is bound, making it a tool for speculators and raising concern a bubble is inflating in a crypto world now worth a lot more than $2.25 trillion.

“This reminds me of the dot-com days. We knew something big was going on, a whole lot of investors were chasing it hard. That resulted in a bubble,” Scott Knapp, chief market strategist at CUNA Mutual Group, said. “For each Amazon.com there were 10 pets.com that went bankrupt. Is Dogecoin the pets.com of the cryptocurrency era?”

Interest in crypto is on the rise again after companies from PayPal to Square started enabling transactions in Bitcoin on the systems, and Wall Street firms like Morgan Stanley started out providing usage of the tokens for some of the wealthiest clients.

All along, crypto diehards who say the blockchain technology will rewire the financial community have already been plugging crypto, becoming rich in the process.

The Shiba-Inu themed Dogecoin was made as a joke by software engineers Billy Markus and Jackson Palmer in 2013. Mr Musk sparked a rally in it earlier this season when he posted a photo of a faux magazine Dogue featuring a dog in a red sweater.

But Michael Novogratz, leader of Galaxy Digital Holdings, isn’t purchasing the hype, since Dogecoin “doesn’t genuinely have a purpose".

“It’s similar to GameStop,” he said within an interview with Bloomberg TV, referring to the meme stock mania that gripped markets in February. “I'd be very, worried sick if one of my friends was buying Dogecoin at these prices.”

With little to back up the case for buying cryptocurrencies, the likelihood of them cratering remains high, leaving novice traders who jumped in on the hype vulnerable to steep losses.

“The government has pumped so much monetary and fiscal stimulus in to the economy now, even worthless assets are being bid up,” said Michael O’Rourke, chief market strategist at JonesTrading.

Yet altcoin popularity is hard to ignore. While Bitcoin will probably be worth more than $1tn, the full total market cap of the token universe now exceeds $2.25tn, according to CoinGecko.com, which tracks a lot more than 6,700 coins.

Bitcoin’s dominance in the crypto world has declined 28 % since the start of the year, according to OKEX Insights Analyst Robbie Liu, citing data from Tradingview. The waning influence started to accelerate this month and Bitcoin now accounts for less than 54 per cent of the crypto market capitalisation - the cheapest level in about 2 yrs.

“On the altcoins front, we continue steadily to see strong momentum,” said Pankaj Balani, leader of Delta Exchange, a respected crypto derivatives exchange. He noted Ether’s recent record and increased activity in decentralised finance, or DeFi, and added that “decentralised exchange coins will be in focus in the next few days, considering that the marketplace has validated Coinbase at a $100 billion valuation".

Other tokens with shaky to no fundamentals are also rising. Cardano and Polkadot, both in the most notable 10 cryptocurrencies by market cap, have surged this week.

“Polkadot and Cardano have hardly any ‘users’," said Shashwat Gupta, founder of Altcoinbuzz.io, though he added that there’s a large amount of development being built on them.

And it looks like Coinbase leader Brian Armstrong might have been to something when he said after the listing that it marks a “shift in legitimacy” for crypto.

The Coinbase listing “ultimately will deliver more ‘use cases’ for cryptos and should keep carefully the crypto market growing,” said Edward Moya, senior market analyst for THE UNITED STATES at Oanda Corp.