It is a joke which is worth more than 50 billion dollars and risks, Tuesday, April 20, to fly even higher.
Dogecoin, the cryptocurrency founded in 2013 with the sole purpose of parodying bitcoin and demonstrating how easy it is to create such an asset, has become the darling of investors in recent days.
Dogecoin is the only one among the top ten cryptocurrencies whose price has increased significantly over the past week, according to the CoinMarketCap site, which tracks the valuation of all these dematerialized currencies.
And not just a little: the currency gained 400% in seven days, while bitcoin fell 10% and ethereum (the other major cryptocurrency) fell 2.72% over the same period.
Elon Musk's influence
And the dogecoin madness is likely to increase further this Tuesday.
The community of aficionados has taken it upon themselves to push the price of this cryptocurrency to the maximum on April 20, which has been designated "Doge Day", mainly because it is Elon's favorite day of the year. Musk, the eccentric billionaire who is one of the most famous supporters of dogecoin.
They are hoping to push the price of a dogecoin up to $ 1 when it is currently at $ 0.39.
That's little compared to a bitcoin, which is worth $ 55,000, but for a cryptocurrency that doesn't rely on any solid project, that would be a hell of a performance.
The valuation of all dogecoins in circulation would then amount to around $ 130 billion, making it the third most important cryptocurrency.
Above all, it would be a golden transaction for investors.
"Someone who invested $ 10,000 on January 1, 2021, when dogecoin was still worth only $ 0.005, would then be more than a millionaire," said Vincent Boy, analyst at IG France and cryptocurrency specialist, contacted by France 24.
This crazy ride to the top of a currency that made people smile in its early days owes a lot to Elon Musk.
The entrepreneur, who has already been pinned by the SEC (the US Stock Exchange Constable) for tweets that have ignited the stock of his Tesla company, has twice declared his love for dogecoin on Twitter since early April .
Messages which "have done a lot to democratize dogecoin", assures Vincent Boy.
Especially since Elon Musk is "as listened to by investors for ideas that are out of the ordinary as Warren Buffet is for traditional stock market values", adds Nathalie Janson, economist and cryptocurrency specialist at the Neoma school of management Business School, contacted by France 24.
Doge Barking at the Moon pic.twitter.com/QFB81D7zOL
- Elon Musk (@elonmusk) April 15, 2021
When bitcoin started falling early last week, investors fell back to Elon Musk's new crypto-darling.
"It is a known phenomenon in the world of cryptocurrencies: every time bitcoin drops, a cryptocurrency rises, and this time, it is dogecoin which has benefited from it", summarizes Vincent Boy.
"Reflection of the current stock market universe"
Cryptocurrency also has an asset that many of its competitors lack: a strong, very active community. "It's a currency that unites around a certain form of humor - rather schoolboy - very promising on the Internet", underlines Nathalie Janson. Dogecoin thus benefits from the "same dynamic as during the GameStop episode, when an army of Internet users supported the share price of small stock markets in the sights of large hedge funds", adds Vincent Boy.
This dynamic is perhaps even more important in the case of dogecoin.
Indeed, in economics, "the value of a currency depends a lot on the support it receives, and a strong community creates a network that promotes its adoption", explains Nathalie Janson.
This is why the stratospheric valuation of dogecoin does not seem so absurd to him.
But others do not share his opinion, starting with Billy Markus, one of the co-creators of dogecoin.
"It's totally absurd, I've never seen anything like it," said this computer scientist, interviewed by the Wall Street Journal.
Vincent Boy also judges that this outbreak is disconnected from any economic reality. But for the IG analyst, the recent crazy history of dogecoin is also a "perfect reflection of the current stock market universe". "We are in a market of 'hype', in which the economic fundamentals do not justify the evolution of the prices of a part of the shares. What seems to prevail is the sheep effect, which means that when 'a group or a community pushes certain values, the others follow in the hope of making money quickly ", he summarizes.
"There is so much liquidity in the market - injected by central banks to support the economy - that investors are starting to run out of options for placing the funds, and they're like, 'why not give dogecoin a try. ? '", adds Nathalie Janson.
It remains to be seen if this crypto-joke can go even higher.
For Vincent Boy, investors will have to come back to Earth at some point.
"Can you imagine if the dogecoin reaches 10 dollars? That would mean that a cryptocurrency conceived simply as a parody would have a valuation equivalent to 40% of the GDP of France!", He underlines.
Dogecoin will also have to get rid of its purely speculative side if it wants to continue to progress.
"If concrete use cases for this currency do not materialize, investors will get bored and move on," said Nathalie Janson.
For now, major companies that accept dogecoin are rare.
You can already pay with this cryptocurrency to spend nights in some luxury hotels in the United States, and the Dallas Mavericks, an American basketball franchise, have announced that dogecoin will soon be accepted to buy t-shirts and other accessories of the United States. club.
But it is far from constituting a sufficient ecosystem.
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