While Coinbase Global Inc. made headlines with its market debut, the frenzy surrounding digital tokens takes its most bizarre turn yet in the price of a token made like a joke.
Dogecoin, boosted by the likes of Elon Musk and Mark Cuban, rose about 180% Friday, according to CoinMarketCap.com, hitting a market value of more than $ 48 billion. It is now up 18,000% from a year ago when it traded for $ 0.002 and was worth about $ 250 million.
Doge’s rise is part of a rise in altcoins, a term for all digital tokens that came into being in imitation of Bitcoin. Like most of them, its use has been limited, making it a resource for speculators and raising concerns of blowing up a bubble in a crypto world now worth more than $ 2.25 trillion.
This reminds me of the dotcom days. We knew something big was going on, a lot of investors were chasing it hard. That sparked a bubble, ”said Scott Knapp, chief market strategist at CUNA Mutual Group. “For every Amazon.com, there were 10 pets.com that went bankrupt. Is Dogecoin the pets.com of the cryptocurrency era? “
Interest in crypto is on the rise again after companies from PayPal to Square began enabling transactions in Bitcoin on their systems, and Wall Street companies such as Morgan Stanley began granting access to the tokens to some of the wealthiest customers. All the while, crypto diehards who say the blockchain technology is rewiring the financial community have plugged in crypto and gotten rich in the process.
The Shiba-Inu themed Dogecoin was joked by software engineers Billy Markus and Jackson Palmer in 2013. Musk led a rally earlier this year when he posted a photo of a fake magazine ‘Dogue’ with a dog in a red sweater.
But Michael Novogratz, CEO of Galaxy Digital Holdings, isn’t buying the hype, as Dogecoin “doesn’t really have a purpose.”
“It’s reminiscent of GameStop,” he said in an interview with Bloomberg TV, referring to the meme stock mania that gripped the markets in February. “I would be very concerned if one of my friends were to invest in Dogecoin at these prices.”
Since there are few arguments in favor of buying cryptocurrencies, the likelihood of them crating remains, leaving hype beginner traders vulnerable to big losses.
“The government has now pumped so much monetary and fiscal stimulus into the economy that even worthless assets are being offered,” said Michael O’Rourke, chief market strategist at JonesTrading.
Still, the popularity of alt coins is hard to ignore. While Bitcoin is worth more than $ 1 trillion, the token universe’s total market cap is now $ 2.25 trillion, according to CoinGecko.com, which tracks more than 6,700 coins.
Bitcoin’s dominance in the crypto world has declined 28% since the beginning of the year, according to OKEX Insights analyst Robbie Liu, citing data from Tradingview. The diminishing influence began to accelerate this month, he said in an email Friday, and Bitcoin now accounts for less than 54% of crypto market cap – the lowest level in nearly two years.
“We continue to see strong momentum in altcoins,” Pankaj Balani, the CEO of Delta Exchange, a leading crypto derivatives exchange, said in a note on Thursday. Noting Ether’s recent record and increased activity in decentralized finance or DeFi, he added that “decentralized exchange coins will be in the spotlight in the coming days as the market has validated Coinbase at a valuation of $ 100 billion.”
Other tokens with shaky to no fundamentals are also rising. Cardano and Polkadot, both in the top 10 cryptocurrencies by market cap, are up sharply this week.
“Polkadot and Cardano currently have very few ‘users,’” Shashwat Gupta, founder of Altcoinbuzz.io, said in an email Wednesday, although he added that a significant amount of development is being built on them.
And it appears that Coinbase’s CEO, Brian Armstrong, may have come up with something when he said after the listing that it marks a “shift in legitimacy” for crypto.
The Coinbase list “will eventually provide more use cases for cryptos and should grow the crypto market,” said Edward Moya, senior market analyst for North America at Oanda Corp.