Dogecoin may be considered one of the wonders of the crypto space given its humble beginnings and its current standing. Two engineers – Billy Marcus and Jackson Palmer – created the cryptocurrency in 2013. Marcus and Palmer created Dogecoin as a joke with Palmer branding it after the dog breed Shiba Inu. The coin was aimed to poke fun at the king of the market – Bitcoin. However, the cryptocurrency took a drastic shift in the bull run of 2021.
Initially after its conception, the Doge community tried to push the cryptocurrency high by tactics like sending a team to the Olympics or sponsoring NASCAR. However, most of the initial efforts fell short and Dogecoin could not establish itself higher. Users on a Reddit forum vowed to push DOGE towards the moon in 2021 since then things started to change for the cryptocurrency. Many high-profile figures also took notice of the token and furthered its journey to the moon.
So, what is Dogecoin?
Dogecoin is a cryptocurrency like Bitcoin and Ethereum. Cryptocurrencies run on the blockchain which is much like an accounting ledger but all transaction data is public and their verification is done in a decentralized manner with no central authority having major control. What sets Dogecoin apart is the fast transaction processing speed. It takes, on average, 10 minutes for a transaction to be verified on the blockchain of Bitcoin while it takes only 1 minute.
Is the DOGE price rally sustainable?
The billionaire CEO Elon Musk had been named the “Dogefather”. Musk has vowed his support for cryptocurrency and has been rigorously working with the development team. Musk’s vision is to make Dogecoin the standard for digital payments. Mark Cuban – the billionaire investor – is another high-profile figure to support the cryptocurrency. Cuban has called Dogecoin “the strongest” cryptocurrency for digital payments. Tesla CEO and “Dogefather” agreed with Cuban and resulted in a price rally.
Although Dogecoin has exploded by more than 12,800% in 2021. However, the price rally is regarded to not be sustainable by many because the price surges are short bursts of upside movements after high-profile figures state anything positive about it. The rally has not been sustainable until now.
There are some fundamental issues with Dogecoin. The cryptocurrency operates through a proof-of-work mechanism which has been facing increasing criticism lately. The PoW mechanism is highly energy intensive and not environmentally sustainable. Moreover, the supply of the cryptocurrency is inflationary with no hard cap on the upper limit. This means that there could be as many DOGE tokens as mined.
With unlimited supply, scarcity cannot drive the price up of the cryptocurrency which is another major downside. Lastly, the reputation Dogecoin had established as a meme token and a joke is still prevalent. Many investors still regard Dogecoin to have no intrinsic value with the price rally being purely speculative.
Unless the development team and Elon Musk is able to solve the problems that Dogecoin is facing, the negative sentiments for Dogecoin will likely persist despite the bullish outlook.