Why the Dogecoin Pump is Bad for Cryptocurrency

Connor D | November 20, 2021

Last updated on February 5th, 2022

While writing this article, Dogecoin prices sit at approximately $0.29. At its all-time high, Dogecoin reached  $0.43. When Elon Musk first started tweeting about Dogecoin, I thought it was funny to see Dogecoin gain so much value. Now the situation has gotten out of hand. Over the last year, Dogecoin has gone from less than half a cent to almost a dollar, outpacing most other mainstream cryptocurrencies. This high price is unsustainable and likely to be a bubble waiting to pop.

Dogecoin offers little to no value

Dogecoin has no intrinsic value. When Dogecoin launched in 2013, it was seen as a simple transactional cryptocurrency that was “fun” more than it was functional. In 2021 the competition for transactional type cryptocurrencies is saturated by cryptocurrency tokens that offer value-added propositions. Dogecoin, frankly, does not. Today there is no longer a team or leader working to develop and improve the Doge ecosystem. There is no one committed to fix problems if something goes wrong. Before the recent surge in value, it cost more to mine Doge than could be earned as mining rewards. There is no ongoing development in the Dogecoin ecosystem and only basic, if any, intrinsic value. Many new retail investors have been led to believe that Dogecoin “is going to the moon” and has value that will only increase. This blind belief, rather than fundamental value, has driven Dogecoin prices to an all time high but how long before the stream of new investors pumping in value runs out?

Dogecoin is likely to crash

The rapid inflation of a token without value is unjustified and is likely to crash. A crash would impact a large number of investors who have been misled to believe dogecoin is not only valuable, but will continue to outperform the market. This misconception and eventual loss of value will inevitably reflect negatively on the greater cryptocurrency community. While the crypto community is no stranger to ups and downs, this situation now has a broader impact and could be a catalyst for regulators to step in.

Dogecoin investors stand to lose billions on a project with no value. The forces pushing Doge up are different than those driving other projects. Investors in doge have not bought into the project because doge promises to change the world, but because someone on Twitter says it’s going up. Some regulators may point to this bubble without reason, as proof that we cannot regulate ourselves and that additional rules are required to protect the retail investor. The reason I believe this is because of Dogecoin’s now large market cap. At 40 Billion dollars, Doge’s market cap has reached a point where serious amounts of retail money stand to be lost when this bubble bursts.

With billions to be lost, regulators may get involved

Pump and dumps happen in the market everyday. What is different about Dogecoin is the scale. While rapid climbs and falls in small coins can be easily absorbed by the market,  when you see  pump and dumps like dogecoin happening, with market caps in the tens of billions, it is only a matter of time before regulators will get involved. As an industry founded on empowering users, the last thing we need as an industry is more regulation.

Dogecoin was created in 2013 as a joke, playing off the popular Doge meme. While it may have been fun for a time, Dogecoin remains a joke and does not offer intrinsic value to merit being treated like a serious asset. With no one developing its ecosystem to add value or provide support, it is only a matter of time before this bubble bursts.

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