Soaring Dogecoin: It's valuable because it's worthless

Original source: Late Latepost

Originally written by Chen Geng and Cheng Manqi

Dogecoin, or Dogecoin, is the fastest-rising cryptocurrency in the past week.

The immediate cause of its fame is inflation.

At 11:53 am on January 28, WSBchairman asked on Twitter: "A lot of you are talking about Dogecoin. What" s that? A meme crypto? "

Photo note: A screenshot of the user's Twitter feed

After the tweet, the price of Dogecoin, which started at $0.0078 (less than a penny), jumped 76% to $0.014 in 1.5 hours, according to CoinDesk. By around 13:00 on Jan. 29, Dogecoin had advanced further to its first-round uptrend high of $0.082. In 24 hours, Dogecoin had gained 822%, as much as Tesla had gained in the last 10 months or Apple in the last nine years. At the time, Dogecoin was valued at $10.5 billion, making it the seventh largest cryptocurrency in the world.

According to the tweet of WSBchairman, the trigger for Dogecoin's rise, it is closely related to the recent "WSB retail investor war short" incident in the US stock market, which can be said to be the continuation of WSB in the cryptocurrency market.

Apart from the wealth effect, Dogecoin is attracting more attention from celebrities, including Tesla founder Elon Musk.

At 4 p.m. on Feb. 4, as Dogecoin had dropped 50% to $0.04 from a six-day high of $0.082, Elon Musk tweeted a parody of the classic movie "The Lion King" with the caption "Ur welcome."

Rafiq the baboon, who has been changed into Elon Musk, holds up Simba the lion cub, who has been changed into Doge, Dogecoin's logo. In the original film, it was Rafiq introducing the newborn future king to the entire animal kingdom.

Musk also tweeted five times the same day that "Dogecoin is the people's cryptocurrency and anyone can easily own it."

In a chat room in the Clubhouse at 1am on Feb. 1, Musk said it would be funny and ironic if Dogecoin became the currency of the future planet, then suggested it might be, by saying, "But fate is always ironic."

That leads to a different direction in the Dogecoin debate: the possibility of the Dogecoin as a currency.

At noon on Feb. 6, Musk put his thoughts more bluntly when he launched a poll: What will be the future currency of the planet? Dogecoin, or all other cryptocurrencies?

As of 11am this morning, 2.38 million people had voted, with 71% of them choosing Dogecoin. It was one hour before the polls closed.

A similar petition on Change.org calling on Amazon to accept Dogecoin as currency for the platform has attracted nearly 80,000 supporters.

Perhaps Dogecoin is more than just another novelty.

It's about speculation at its most naked: the more extreme, frenzied ups and downs of dogecoins and investors in the unregulated world of cryptocurrencies, and it's a window into what's happening in finance.

It is also about imaginative imaginings of exploring a new system beyond the existing financial system -- one that, some imagine, also includes "gold", currencies and exchanges... And they're all built on decentralized networks, and Dogecoin will be part of that future.

It may also be a philosophical issue about how to make sense out of nonsense. It is hard to imagine that the origins of today's $10 billion market capitalization and sparking serious discussion were nothing more than a joke eight years ago.

1. Valuable because it has no value

The invention of Dogecoin took three hours.

It was December 2013, four years and 11 months after Bitcoin's birth, when Billy Markus, a software engineer at IBM in the US, and Jackson Palmer, an engineer at Adobe in Australia, created Dogecoin based on the Bitcoin code.

With minimal investment and a desire to have fun, the founders had no idea what Dogecoin would be worth today. In an interview with CNET published in February, Palmer laughed: "We think it's one big joke that's doomed."

In fact, the joke is so tenacious that over the past eight years, more than 1,000 small currencies have gone to zero in value, representing 62% of the total number of cryptocurrencies still traded. The exchange rate between Dogecoin and Bitcoin has been relatively stable, and after a recent rally and retreat, Dogecoin's total market value is still $5 billion. As Musk tweeted on Feb. 4, "Up and down, Dogecoin forever."

Dogecoin is also highly active: The number of active addresses on Dogecoin's chain has been above 10,000 per day since 2015, according to CoinMetrics, a cryptocurrency data monitoring site. Before the boom, Dogecoin was at a high of 390,000 transactions a day on its chain, second only to Ethereum (about 1m at its high) and Bitcoin (about 520,000 at its high). On-chain transactions are costly and difficult to fake, which is a strong indicator of Dogecoin's health.

The strong vitality is related to the characteristics of Dogecoin at its birth, which can be summed up in two aspects: "the cheapness and contempt brought by the excessive hair" and "the cultural identity brought by the parody".

Block chain quantitative trading tools BitUniverse currency optimal partner, is also a dog of the Chinese community is one of the sponsors zhi-hong xu told the late LatePost Dogecoin unique philosophy is: if the currency is the rebellion of traditional financial system, Dogecoin is the rebellion of the currency, it dissolves the COINS a major feature of fixed amount, not more.

Palmer and Marcus modified the rules of Bitcoin, and 100 billion Dogecoin coins were issued in the first year. Since then, nearly 5% more Dogecoin coins have been issued every year. Today, the total number of Dogecoin coins has reached 128 billion, or 6,000 times the number of bitcoin coins.

A direct consequence of large numbers is cheapness. Even at its peak, a Dogecoin was worth just $0.082.

Cheap has advantages, too: Centralised institutions and other careerists look down on Dogecoin, which reduces the risk that it will be controlled by a few big moneys-what Mr Musk calls "the people's currency".

The decentralized nature of Dogecoin is further reinforced by the fact that the two founders of Dogecoin have abandoned the maintenance project in 2019.

One cryptocurrency investor shared his feelings about Dogecoin -- a traffic currency, a grass-roots cultural totem, and a commentary on the decentralized spirit of blockchain: "It's not hard for ordinary people to get access to Dogecoin."

Dogecoin's spooky quality is reflected in its logo, the famous Shiba Inu emoji Doge. This image appeals to American and European Internet users, and combined with Dogecoin's cheapness, it has spawned a relatively high frequency of real usage -- tips exchanged on Reddit -- that is rare among crypto offerings today.

For longtime Reddit users, a good answer, a simple gesture, or a joke can earn you Dogecoin, a sort of spontaneous QCoin on the Reddit community. Before Zuckerberg's Libra project in 2019, when he tried to combine cryptocurrency and social networking, this crossover had already happened by accident.

Reddit community is also the birthplace of WSB. WSB, or R /WallStreetBets, is a stock trading subforum on Reddit where a large number of retail investors play the U.S. stock market as a casino. In late January, these retail investors waged war on Wall Street's short sellers, including Citron and Melvin, pushing shares of offline gaming retailer GameStop (GEM), which had been trading at $18, to $483.

The close connection between Dogecoin and the Reddit community partly explains why Dogecoin was the first stop when the WSB movement spread to the cryptocurrency market. This includes the cry of opinion leaders, but also the feelings of the Internet community.

"Every copycat that tries to be the second bitcoin will never catch up with bitcoin. Dogecoin, unlike Bitcoin, is a special part of the multicultural and ecological makeup of the blockchain." "Said Xu Zhihong of Dog China Community.

2. When Dogecoin goes out of the loop

On Jan. 29, when Dogecoin prices rose 822 percent in 24 hours, Wang remembered that he had 1.1 million dogecoins.

Wang Yishi has been investing in cryptocurrencies since 2013. He was an early member of Babbitt, a well-known cryptocurrency forum in China. Now he is in charge of the development of hardware wallet at Bitletter, a cryptocurrency wallet company.

The first million came at the end of 2013. At an offline event organized by Babbitt in Hangzhou, Mr. Wang drew a picture for a friend, who thanked him and sent him a million Dogecoin.

Around the 2018 Spring Festival, Wang Yishi, who had joined Bitletter, received another 100,000 Dogecoin red envelopes from the company, which he later passed on to friends, with a value of around a few dozen yuan.

At the market's high of $0.082, 1.1 million dogecoins would be worth 590,000 renminbi. But as Wang Yishi expected, "the private key can not be found."

It was just one of many stories of remorse from the day of Dogecoin's rise on Jan. 30.

An old cryptocurrency man joked in Moments: "How many people are searching for Dogecoin in old exchanges and wallets today?"

Some people find the private key, but they miss it. In a WeChat group called "U.S. Stocks and Bitcoin," one cryptocurrency investor said he sold 40 million Dogecoin in the early stages of the rally, missing out on a bigger gain because he thought Dogecoin might not go much higher. With just a few more hours, the 40 million dogecoins would amount to more than $3 million, or about 86 bitcoins.

Behind the sobs and jokes is the similar mentality of the old people in the coin circle towards Dogecoin: they think it is a fun but not important thing.

"Save (private key) is not well saved, no one care, just find a place to put." Wang Yishi recalls the attitude toward Dogecoin.

Xu Zhihong, who helped launch the Dogecoin China community in 2019, told Latepost that until then, Dogecoin could not be traded on Binan, Huobi or OKEx. Xu remembers that when he communicated with Huobi, the exchange's response was: "The dog hasn't died yet?"

"People have been ignoring Dogecoin," one person who has run a blockchain marketing service since 2017 told LatePost after Dogecoin's recent surge.

Even Mr. Xu didn't play a direct role in the trading, telling reporters that he would do quantitative trading through Pai.com to profit from Dogecoin's fluctuations, but that he hadn't bought Dogecoin directly recently.

On the other side of the coin coin circle, the old folks are familiar with the new elements in the Dogecoin boom: exits and the influx of "cute newcomers."

Some analysis points out that the boost Dogecoin rise of the buyers, and the WSB in the United States stock retail coincidence.

On the Reddit community, Dogecoin is a heated discussion among users on the WSSB forum, which now has 8.6 million users, the Dogecoin forum with 900,000 users and Satoshistreetbets (Nakamoto Street Gambling) with 275,000 users. Among them, Dogecoin Forum is the second largest forum on Reddit after WSB.

On the boards, Reddit users urged people to buy Dogecoin as if it were GME stock and not sell it, with the goal of "1 Dogecoin = $1."

In terms of trading data and behavior, cryptocurrency data monitor CoinMetrics says that while Dogecoin's price and volume have soared, there has been no reciprocal increase in active addresses on the chain, suggesting that more people may be buying Dogecoin on a centralized off-chain exchange such as Binan, or on an Internet brokerage such as Robinhood. At the same time, Dogecoin's surge coincided with the time when Robinhood, WSB's main retail trading channel, restricted retail buying of GME shares.

Binance data shows that the volume of the two trading pairs, Dogecoin/USDT and Dogecoin/Bitcoin, on January 28 and 29 were both 100 times that of the previous day; The total value of transactions rose from the equivalent of 1 billion Dogecoin to 100 billion Dogecoin.

The behavioral characteristics of preferring to trade via an exchange or broker over direct on-chain trading suggest that many of the people who have recently traded Dogecoin may be new to cryptocurrencies, as exchanges are less complex, less costly and friendlier to newcomers than on-chain trading.

The evidence suggests that Dogecoin's buyers, many of whom were not previously cryptocurrency investors, may well overlap with the group of retail investors who bought GME shares.

Thanks to the influx of new players, Dogecoin's rise and fall has led to two notable developments:

The old story is from the original leek, a year old withered and prosperous, is the cycle of market ups and downs; The new story, illustrated by the "Currents of the Earth" survey Musk launched on February 6th, is about a novel future.

Chicken Feathers and the New World

Similar to GME's story, Dogecoin briefly rose and then fell quickly. In the perpetual, 24/7 cryptocurrency market, it all happens faster.

By 4 a.m. on Jan. 31, Dogecoin had fallen to $0.022 from its all-time high a day earlier, and trading volume had dropped 72%. Until February 4, the price had fluctuated between $0.03 and $0.04.

After 3:30 p.m. on Feb. 4, with the aforementioned Musk's new "platform," Dogecoin rallied from $0.04 to $0.055 in an hour, wobbling a few times before descending again.

In the relatively unregulated cryptocurrency market, there is a lot of room for manipulation due to the recent collective behavior of opinion leaders and fans flocking to money to follow.

Even Dogecoin, which has not been taken seriously, is becoming centralised. At the start of Dogecoin's rally a week ago, the largest number of anonymous addresses on the chain owned 27% of Dogecoin, according to blockchain search engine Blockchair. Yesterday, that number had risen to 29 percent. The top 20 anonymous addresses owned 54 percent of dogecoins. Today, those numbers have risen further to 30.6 per cent and 57.8 per cent.

One interesting question is, does Musk own Dogecoin? When the market rises and falls with his tweets, Mr Musk himself, or someone with knowledge of what he is about to send, will in theory have room to trade ahead of time.

In traditional financial world, similar behavior suspected violations, came up to me and steaming, the encryption of money market is still in the period of "wild, wild west" of the lack of specification - rather than more extravagant, retail investors are more enthusiastic, blood make, anaemia appear frequently, it jumped after the recent in Dogecoin slump of two kinds of encryption monetary wave field (TRX) and the Rayleigh wave (XRP) on the performance is more obvious.

In the case of TRON, the plot culminates in a Telegram group called "WSB Official", which was created at 11pm on January 29. The creators of the group say they will launch a "Telegram group" in January.

The selected project will be announced at 1am on the 30th.

30 minutes, 10 minutes, 5 minutes... Countdown laying suspense, the group number also reached the upper limit of the telegram group, 200,000, finally wait until 1 a.m., thousands of calls, only one trade: TRX/BTC. (TRON/Bitcoin, which calls on people to buy TRON with Bitcoin.)

In 4 minutes, TRX went from $0.033 to $0.038, a 15% increase. But the flash was short-lived, and TRX immediately reversed course, falling to 35 cents 15 minutes later at 1:19 a.m., and back to 33 cents by 1:39 a.m.

The trend that rises sharply falls sharply, very dangerous to the investor that buys call option, if the operation when turning around falls is not timely, the possibility is exploded storehouse. The use of call options is exactly what WSB retail investors used to leverage when buying GME.

Some people speculate that TRX this wave of market, may be targeted at retail "bureau", because only choose TRX/BTC this transaction, there are a lot of TRX funds, can take this opportunity to sell TRX, for bitcoin.

The news, the atmosphere, the money, the price, the sharp rise and fall that happened in the cryptocurrency market this week is very similar to what US regulators have warned about.

"Leek memory, only 7 seconds." One cryptocurrency investor explains why similar events keep happening again and again.

Beyond the cyclical market ups and downs, there are also concerns about the new meaning of cryptocurrencies -- Bitcoin's followers claim to be building a new, decentralized financial system beyond the long-entrenched world of traditional finance.

One motive is that the status quo is unsatisfactory. Xu Zhihong has an observation that Bitcoin appreciates not because people believe in Bitcoin, but because they don't believe in the US dollar: "Only in a world that is not so good can cryptocurrencies appreciate because of the epidemic, the economic downturn and the overissuance of fiat currencies."

So some, like Mr. Musk, have begun to imagine a new system in which cryptocurrencies play an important role. His intense interest in Dogecoin revolves around the keyword "new currency".

Dogecoin does seem to have some potential as a currency of the future: it's very cheap, it's cheap for the average person, and it's relatively decentralized. The latest round of trading has further increased Dogecoin's popularity and the number of users.

Speaking in the Clubhouse on Feb. 1, Musk said it's not out of the question that Dogecoin could be the future currency of the planet. He also regrets not getting into bitcoin earlier because he believes it is on the verge of widespread acceptance.

Beyond the celebrities in the spotlight, attitudes are changing: In September 2018, a petition asking Amazon to accept Dogecoin as a platform payment currency garnered 22,000 signatures a year later.

In the past week, the petition has been revived and now has nearly 80,000 supporters, with one new supporter every five minutes, with the ultimate goal of collecting 150,000 signatures.

Amazon may not accept Dogecoin just because 150,000 people say so. But after the frenzy, something new did attract more serious attention, which was the beginning of the brewing of future change.

What is a cryptocurrency? It is the disillusionment of the desire for instant wealth for the serial retail investor. For the house, it is a real arbitrage opportunity; For institutions, it is a new asset class; For regulators, it is something new in need of regulation; For a curious person, it is an observable object of study.

Xu Zhihong, who has run Dog China for two years, also offers one answer: "It's a magic mirror for the real world."

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia