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Dogecoin, a type of cryptocurrency has been all the hype recently. It was trading at less than a cent at $0.0046 at the end of December 2020 and on 29 January 2021 it reached a peak of almost $0.076 representing an increase of almost over 1500%. Many predict it will reach $1 but what is driving this frenzy and what could cause it to get there? We explain all.
After Reddit users pumped up the price of GameStop by betting against hedge funds an online community of investors started targeted the increase of Dogecoin in order to get it to $1. As is the case with any exchange, getting crypto prices to increase is demand driven, if many investors increase the demand then price will go up and if they start to disinvest ie reduce demand then the price will drop.
Social media has a huge influence over increasing demand and the fact that online communities such as StoshiSteetBets, subreddit and the crypto version of WallStreetBets are promoting the increase means that there is a possibility of getting it to $1. Not only that but even Elon Musk has been promoting the currency by tweeting, “One word: Doge”.
Another online community “WSB Chairman” further increased the price by promoting the currency. Although WSG Chairman claims to be independent of Reddit it quickly racked up 400k followers. All of this points to investor demand increasing and the value going to $1.
However one thing to be aware of is that price goes up when supply is restricted so a can sometimes help. At the moment there isn’t a strict hard cap on the supply limit of dogecoin although when it first started there was a cap of 100 billion coins, but in Feb 2014 dogecoin founder Jackson Palmer removed the cap to allow for reduction in inflation rate. The 100 billionth Dogecoin was mined by mid-2015 and there have been additional coins mined since, currently 127 billion coins are thought to be in circulation.
Robinhood chose to restrict trading in crypto currency due to unprecedented demand although settled funds could have been used to buy crypto. This only resulted in further gains after the Tesla founder Elon Musk switched his twitter to #Bitcoin which led to a surge on Friday morning jumping nearly $5k to over $37k.
As the appetite for Dogecurrency increases so does the demand for other cryptocurrencies. What happens next waits to be seen. There was some pullback in currency however if the power of online communities continues then it is very likely the $1 mark can be hit.
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