Do 90 million Dogecoin wallets mean this memecoin is no longer a joke?

The cryptocurrency – one of the 10 biggest in terms of market cap – could have a wider effect on the industry

Elon Musk first endorsed Dogecoin on Twitter on April 2, 2019, saying the cryptocurrency might be his 'fav'. Bloomberg

Dogecoin, the memecoin made popular by X's billionaire owner Elon Musk, made headlines for recently crossing a threshold that some analysts believe is an indication of the direction in which the highly-volatile cryptocurrency industry is heading.

The made-for-fun cryptocurrency pipped the 90-million wallet mark on Thursday, pointing to a resurgence in the industry. Wallets are used to store and transact with cryptocurrencies.

This indicates "increased interest and adoption of the memecoin", aligned with a "general recovery in the cryptocurrency market from which Dogecoin could benefit", said Mazen Salhab, chief market strategist for the Middle East and North Africa at broker BDSwiss.

"However, trading volume remains subdued compared to the past few months."

What is Dogecoin?

There are 10,037 cryptocurrencies globally as of June, data from Statista shows, but what made Dogecoin popular is the hilarity it brings to the table. Software engineers Billy Markus and Jackson Palmer created it in 2013 as a joke to poke fun at the scepticism on the industry at the time.

Its website – mostly in a Comic Sans-inspired typeface – describes it as "the accidental crypto movement that makes people smile", complete with a manifesto that contains some serious visions "for the people".

Dogecoin's logo resembles a Japanese shiba inu; the dog that inspired it, named Kabosu, died in May. An unrelated Shiba Inu coin was created in 2020, meant to rival Dogecoin.

Kabosu, the Japanese shiba inu dog that inspired the Dogecoin logo, died in May. Reuters

"Dogecoin is popular for its community and meme culture, not technological innovation ... it is mainly used for small, fast and cheap transactions and community activities like tipping," Arun John, chief market analyst at Dubai-based Century Financial, told The National.

"It is often seen as a speculative asset driven by social media."

What is a memecoin?

As you may have surmised, a memecoin is a cryptocurrency that, by default, is not intended to be taken seriously. Coinbase describes it as being inspired by internet memes or trends, "typically supported by enthusiastic online communities and are generally intended to be light-hearted and fun".

And that is wherein the trouble lies: memecoins are typically characterised by their volatile tendencies.

But, despite their inherent risk, memecoins have still been able to grab attention because of their potential for high returns and their "role in digital culture", Coinbase said.

There are more than 1,300 memecoins, according to CoinMarketCap – with some amusing names: among the top-performing memecoins are HarryPotterObamaSonic10Inu, Cat Girl, Jesus Coin, Pooh, Doge Eat Doge, Elon, Super Trump Coin and Maga, whose unit is "Trump".

How did Elon Musk get involved?

The amusement gained further steam when Mr Musk, the world's wealthiest person, first endorsed Dogecoin on Twitter on April 2, 2019, in which he declared that the cryptocurrency might be his "fav".

He has since used the platform he bought for $44 billion in 2022 to express his views on the cryptocurrency. He has also floated plans to use it as a payment method on the microblogging platform.

In May 2021, Mr Musk's start-up SpaceX announced that it was planning a rideshare mission to the Moon completely funded by Dogecoin, which made it the first space mission to be financially backed by a cryptocurrency.

And because Mr Musk has used X to heavily promote Dogecoin, some quarters believe this amounted to market manipulation. This eventually landed him in hot water in 2022, when he was named in a Manhattan lawsuit that accused him of artificially inflating the cryptocurrency.

Between April 3 and 7, 2023, X, still known as Twitter, changed its logo from its iconic bird to Dogecoin's shiba inu mascot. It has remained unclear if the move was meant to promote Dogecoin or was a late April Fool's Day prank.

Is Dogecoin worth the risk?

Cryptocurrencies are extremely and notoriously volatile. But Dogecoin, its meme and "joke" status, is quite sturdy.

Dogecoin is the top memecoin, with a market capitalisation of more than $18.3 billion as of Saturday, data from CoinMarketCap shows, which is a third of the entire memecoin market value of nearly $54.7 billion.

That also actually makes it the ninth-biggest cryptocurrency overall, trailing only the likes of heavyweights Ripple, Binance Coin ,Tether, Ethereum and, of course, market leader Bitcoin.

As a result of Mr Musk's "endorsements", the crypto market could "remain hopeful of [his] renewed support and potential plans to integrate Doge into X’s payment system", Mr Salhab said.

But, he cautions that while Mr Musk’s comments indeed affect Dogecoin, "his intervention or lack thereof remain a source of risk for the market".

How much would your $100 be today if you had invested after Musk's first tweet about Dogecoin?

When Mr Musk first tweeted about Dogecoin, it was only valued at a very humble $0.003. On Saturday, it was at $0.13, which is about a 4,233 per cent surge.

So, if you had invested $100 then, you would have $4,233 now.

That still pales compared to the other historic highs of Dogecoin, Mr John said.

That leaves the door open for further potential and, of course, gains.

"Over history, Dogecoin has experienced two meteoric rises of 6,000 per cent and 30,000 per cent in another. Both rallies occurred eight to nine months after Bitcoin's halving," he said.

Such strong performances could be highly unlikely over the short term, especially given current trends when the market is barely recovering from its previous drough, Mr Salhab added.

"Dogecoin remains well below its high of $0.76 in 2021 when cryptocurrencies were surging. Reaching the previous peak could be a major undertaking, let alone moving beyond that over the short term."

So what does 90 million wallets mean?

Smaller cryptocurrencies like Dogecoin still play a significant role in the overall market, although at a smaller scale than bigger counterparts.

Dogecoin’s high volatility and speculative trading can influence investor sentiment and cause marketwide effects, Mr Salhab said.

"When Dogecoin’s price rises, often due to social media trends and large holders transactions, it can increase interest in the entire crypto market."

However, fundamentals are the biggest consideration when it comes to investing in unpredictable assets like cryptocurrencies.

While all cryptos are built on blockchain, the biggest difference between "serious" cryptocurrencies and Dogecoin is their purpose, Mr John said.

"Bitcoin for instance was created to be used as a currency or store of value, whereas Ethereum was created to sell the processing power of the decentralised network and Dogecoin on the other hand was created as a spoof on the rising popularity" of cryptos and the shiba inu meme, he said.

"Hence upon investing in cryptocurrencies, it is advised that investors invest in coins that have a fundamental purpose."