What’s Behind the Dogecoin Craze? Your Top 8 Questions Answered
Dogecoin prices dropped by more than one third over the weekend after Tesla CEO Elon Musk, one of the cryptocurrency’s most dogged proponents, called it a “hustle” while hosting SNL on May 8.
As of Monday, May 10, the canine-themed virtual coin was trading at just below 50 cents. Despite the recent drop, you’d still be a Dogecoin millionaire had you invested a little over $10,000 at the beginning of the year, when it was trading at about half a cent. Woof.
So what exactly is Dogecoin? How do you even pronounce it? Can you actually buy anything with it? If you and your dog aren’t sure what to think, read on.
How Does Dogecoin Work? 8 Questions Answered
1. What is Dogecoin?
Dogecoin is a cryptocurrency created by software engineers Billy Markus and Jackson Palmer in 2013. A cryptocurrency is a virtual form of money that you can also buy and sell as an investment. Like other cryptocurrencies, it runs on blockchain technology, which is basically a giant public record of transactions.
Markus and Palmer created Dogecoin as a joke, combining the Bitcoin craze with the then-popular Doge meme featuring a Shiba Inu dog. Both ended their involvement with Dogecoin in 2015. In fact, Markus recently wrote on Reddit that he sold his coins for about enough to buy a used Honda Civic.
2. Why am I suddenly hearing about it?
Dogecoin’s prices have rallied in 2021 for several reasons, including Reddit user activity, surging cryptocurrency prices and tweets from celebrities, particularly Tesla CEO Elon Musk. In February, after Musk tweeted “Doge” and “Dogecoin is the people’s crypto,” the price surged by 50%. On April 1, Musk tweeted — in what many believe was an April Fools’ Day joke — that his SpaceX company “is going to put a literal Dogecoin on the literal moon.”
Brands like Slim Jim, Snickers and Milky Way jumped on the bandwagon with Dogecoin-related tweets.
3. How do you pronounce it?
4. What’s the point of #DogeDay?
Dogecoin enthusiasts declared April 20, 2021 #DogeDay and vowed to push the price of coins over $1. For most of the cryptocurrency’s history, they’ve been worth about half a cent. The 4/20 date is, of course, celebrated by marijuana lovers and is said to be Elon Musk’s favorite holiday.
#DogeDay was mostly a bust. The cryptocurrency started out trading at 42 cents on April 20. It ended the day at 33 cents.
5. Is there a limit on the supply of Dogecoins?
No. That’s an important distinction between Dogecoin and Bitcoin. Bitcoin’s creators capped the amount of coins that can be mined at 21 million. Proponents of Bitcoin argue that the limited supply makes the cryptocurrency an effective store of value.
But no such limit exists with Dogecoin. As with Bitcoin, new coins are unlocked through a process called mining by solving complex mathematical problems with computers. But Dogecoin is much easier to mine compared to Bitcoin. Millions of Dogecoins are mined every day. Currently, more than 129 billion Dogecoins are in circulation.
6. What can I buy with Dogecoin?
Not much. Dallas Mavericks owner Mark Cuban announced in March that the team would accept the cryptocurrency as a form of payment. Reportedly, the Mavericks have generated $122,000 worth of merchandise revenue through Dogecoin sales. Latvian airline airBaltic, electronics retailer Newegg, and luxury resort group the Kessler Collection are among those that accept Dogecoin payments. But overall, usage is pretty limited.
7. What’s the total value of Dogecoins?
As of Monday, May 10, about $66 billion. That makes Dogecoin worth more than Walgreens, Ford or Roku, all of which have market capitalizations just shy of $50 billion.
8. Should I invest in Dogecoin?
If you want to put a few extra bucks into Dogecoin just for fun, that’s your call. But you should only do so if you don’t have high-interest debt, your emergency fund is healthy, and you regularly contribute to a retirement account, like a 401(k) or Roth IRA.
You could make some cash on Dogecoin, but you could just as easily see the bulk of your money disappear. If Dogecoin buys you entertainment, great. But only invest if you can afford to lose.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected].