When people think of cryptocurrencies, bitcoin comes to mind first and foremost. But in the shadow of its big brother, two other digital currencies have also fought their way to the top: Ether and Dogecoin.
What do Tesla CEO Elon Musk, U.S. rapper Snoop Doog, and rock band Kiss' bassist Gene Simmons have in common? Aside from all being world famous, they're currently riding high on a very specific cryptocurrency: the Dogecoin. They recently shared this publicly on Twitter - and created a new trend in the crypto world with their millions of followers.
Now, at the latest, the Japanese dog breed Shiba Inu is not only known to animal lovers. Because it adorns the logo of one of the most popular cryptocurrencies. For a long time, the image was only circulated as a meme on the Internet. Now investors around the world have become aware of the coin with the dog symbol. Dogecoin temporarily rose to a new record high of 8.6 cents on Monday.
That is truly not much. But: Once thought to be merely a parody of the most important and best-known cyber currency Bitcoin, Dogecoin has recently become one of the ten largest digital currencies - with a market capitalization of over ten billion dollars.
Investors are investing in Musk's vision
Compared to Bitcoin, where the value of all "thalers" in circulation is currently around $800 billion, according to Coinmarketcap.com, this is only a fraction. However, Dogecoin has many prominent supporters, which has meteorically accelerated its rise.
Just two weeks ago, one Dogecoin cost less than a cent. Suddenly, the price skyrocketed. Similar to the Gamestop case, private investors are said to have arranged to buy via forums like Reddit.
Last Thursday, billionaire and Tesla CEO Elon Musk finally posted a picture of a moon rocket with the single word "Doge" underneath. Shortly after, he supplemented the whole thing with the words "Dogecoin is the cryptocurrency of the people" on. The value of the cryptocurrency went through the roof, increasing by about 50 percent in one day.
Musk enjoys great prestige among his followers; both as a social media player and as a businessman, said Neil Wilson, chief analyst at online broker Markets.com. "People are literally investing in him and his ideas." What those ideas are ultimately about doesn't matter, he said.
Celebrities accelerated the trend
Since Musk's tweet, Dogecoin has climbed a whopping 115 percent. Over the weekend, the Tesla CEO again promoted the currency heavily to his roughly 46 million followers. "Musk had posted an educational video about said currency, among other things, over the weekend," said analyst Timo Emden of Emden Research. "Speculators seem to continue to like the currency and blindly follow Elon Musk."
Other celebrities joined the entrepreneur. Rapper Snoop Dog, for example, posted a picture of a dog wearing a cap and leather jacket and the words "Snoop Doge." Dogecoin was again high in Twitter trends on Monday.
Yet the fun coin originally had no value at all. Jackson Palmer, an employee of the software company Adobe, wanted to make fun of the hype around cryptocurrencies in 2013 and created the crypto coin as a result. On it: the Internet meme "Doge."
Unlike Bitcoin, of which only 21 million are available in total, the number of Dogecoins is unlimited. The digital coins can be generated by "mining," as with other cyber currencies. The "miners" provide computing capacity for encrypting transactions and search for new blocks by performing some kind of computational task. As a result, they are rewarded with the respective cryptocurrency. Since Dogecoin's encryption is simpler, transactions can be processed faster than Bitcoin.
The current rally in the internet currency, which started as a joke, will turn out to be a flash in the pan, analyst Emden warned. "For investors, the market environment with Dogecoin is like going to the casino." That's because even a small amount of investors could trigger sharp price movements up or down in such a coin's price in the crypto market, he said.
Bitcoin and Ether on record chase
Dogecoin is not the only one currently soaring. After a minor dry spell as a result of a discussion about stricter regulation of the crypto market, Bitcoin also got a significant price boost on Monday and once again rose to a record high. This was triggered by a stock exchange announcement according to which Musk's company Tesla has invested in the digital currency and wants to allow it as a means of payment in the future.
Ethereum is actually not just a currency, but a platform that can also be used to map business processes. With digital contracts, so-called smart contracts, for example, transfers can be linked to the fulfillment of certain conditions or seals of approval.
According to the asset manager Grayscale, transactions with a volume of twelve billion dollars are currently processed daily via smart contracts and Ethereum. The digital currency on this platform is called Ether.
Sign against trading restrictions?
Experts at 21Shares describe the growing popularity of Ether and Co. as a sign against trading restrictions by big-tech platforms such as broker Robinhood, for example at Gamestop. The long-term promise of Ethereum is to enable applications that prevent the influence of monopolies in the digital economy, Ige and Ndinga point out.
Cameron Winklevoss, one of the founders of crypto exchange Gemini, has a similar opinion regarding Dogecoin. "Doge is a form of protest. People are tired of the modern money monopoly. They are tired of being told what money is and what they are allowed to do with it," he wrote on Twitter in late January. The crypto market is lightly regulated, which makes trading restrictions almost impossible, unlike the stock market.