Why Dogecoin needs to come out of Elon Musk’s shadow in 2024
- Decoupling between Musk’s tweets and DOGE’s price action has been profound.
- DOGE can’t be written off just yet, given its origins and massive popularity.
Dogecoin [DOGE] might be the “original memecoin” and the world’s largest token in this unique segment of cryptocurrencies, but its shaky fundamentals have started to threaten its dominance.
The over-reliance on developments linked to Elon Musk, perhaps the coin’s biggest celebrity endorser, have made the coin very narrow and restricted in vision. The lack of real-world utility could be a big factor in the coin getting a miss from investors’ portfolios in the long run.
The superficial world of memecoins
The digital asset landscape was not ready for the weird new class of tokens which would become the subject of astonishing publicity, both within and outside crypto circles – Memecoins. As the name suggests, there’s hardly anything serious about them.
Gracy Chen, Managing Director of cryptocurrency exchange Bitget, describes them in the most apt way possible,
“Meme coins are a form of social tokens created by people for people. They are often created and promoted by online communities or individuals with a shared interest or sense of humor. The social element of meme coins plays a significant role in their success and adoption, as it fosters a sense of community.”
Birthed out of a popular joke on social media featuring a Shiba Inu dog, these assets, ironically, became one of the hottest commodities in the crypto-market in no time. At the time of writing, memecoins had a market cap of more than $20 billion, as per CoinMarketCap, led by the pioneer Dogecoin.
Ranked as the 10th-largest crypto-asset by market cap, DOGE has seen an unprecedented hike in value and popularity over the years. In fact, the historic 2020-21 bull market saw the memecoin scaling new heights. Now, nothing about it is a joke anymore.
However, as the great Warren Buffett once quipped, “You only find out who is swimming naked when the tide goes out.” More than anything, this sums up DOGE’s position in the ongoing crypto-winter.
Shiba Inu looks to shed “memecoin” tag
As the cacophony of bull runs and all-time highs (ATH) faded, developers and investors realized that the need of the hour is a robust underlying technology. Not memes. This was to power digital assets and bolster their argument for mass adoption.
The younger member of the family, the $6-billion Shiba Inu [SHIB] token, which was inspired by DOGE, was quick to spot these shifting dynamics. It started to work on developing meaningful real-world use cases for its native tokens to shed its nagging “meme coin” image.
The Shiba Inu ecosystem launched Shibarium, the much-awaited Ethereum [ETH] layer-2 (L2) chain, after completing a five-month-long rigorous testing phase. This launch brought crucial utility to SHIB and Bone ShibaSwap [BONE] tokens. The breakthrough project is aimed at making the ecosystem an attractive destination for decentralized finance (DeFi) apps.
According to Shibariumscan, the total number of wallets on the L2 had surged to 1.35 million, at the time of writing. The total transaction count topped 342 million, with 526K getting processed on the 9th of February.
Shibarium’s hype was also built upon the fact that the ecosystem’s own metaverse – Shib the Metaverse – would be developed on the L2 network. Metaverse, which fuses the real and the virtual seamlessly, has become a hot talking point among tech enthusiasts and gamers.
Shiba Inu’s strategy to get a headstart in this niche but forward-looking technology could prove to be a game changer.
Shiba Inu’s seriousness can be gauged by the fact that it went on to publish a full-fledged whitepaper – SHIBPaper – outlining its vision for the ecosystem. It even introduced a novel concept called the Shiba Inu state, defining it as a “harmonious blend of age-old principles with state-of-the-art technology.”
While only time will tell how far the Shiba Inu universe can expand, there is little doubt that it is leaving no stone unturned in its long-term expansion plans.
Dogecoin’s over-reliance on Musk and social media
On the contrary, the original memecoin, DOGE, has failed to add effective real-world use cases to its repertoire in the bear market. Instead, it has continued its over dependence on tech czar Elon Musk and his multi-billion dollar social platform X, formerly Twitter.
Elon Musk has been an avid watcher of the crypto-market, occasionally heaping praises on certain aspects of cryptocurrencies. However, nothing comes quite as close as his endorsement of DOGE.
It all started with a fairly candid post about the dog-themed token some four years ago. The rest, as they say, is history.
— I am Hodler 🔑 (@iamhodler) April 2, 2019
DOGE reacted instantly to Musk’s admission, appreciating by more than 70%. What was especially interesting was that this was during the peak of the bear market.
Since then, the tech entrepreneur has publicly supported the memecoin several times. In fact, he even referred to it as the “people’s crypto” on one occasion, citing its broad use among his company’s blue-collar staff.
Lots of people I talked to on the production lines at Tesla or building rockets at SpaceX own Doge. They aren’t financial experts or Silicon Valley technologists. That’s why I decided to support Doge – it felt like the people’s crypto.
— Elon Musk (@elonmusk) October 24, 2021
Aside from the momentary price inclines, an endorsement by one of the world’s wealthiest individuals resulted in a never-seen-before optimism among the Dogecoin community. And, the enthusiasm reached a crescendo during the fall of 2022 when Musk took over Twitter.
The speculations around DOGE becoming the official mode of crypto-payment started hitting the roof. The memecoin more then doubled in value in a week’s time. At the time, it looked like a new dawn for the crypto-asset. Alas, not to be!
Musk’s promotion of the memecoin actually set the meme world on fire. Rib-tickling jokes with references to pop culture started doing the rounds.
One such meme showed Elon Musk and Doge recreating the legendary scene from the movie “Titanic” featuring Kate Winslet and Leonardo DiCaprio. But unlike Kate, did Doge really manage to fly?
Fatigue setting in?
It’s been almost a year. Twitter became X, the user interface got a dark facelift, and Musk aggressively went ahead with his strategies of monetizing the platform. However, nothing significant has come out for DOGE yet. At least not until press time.
This is not to say that Musk ceased talking about the coin. In fact, he recently said that X is a DOGE-friendly place.
X is a dog & Doge friendly place!
— Elon Musk (@elonmusk) August 23, 2023
However, unlike previous instances of appreciation, the reaction has gradually tapered off. In fact, after the aforementioned post, the meme coin hiked by just 1.6% over the next 24 hours.
Arguably, the decoupling between Musk’s posts and DOGE’s price action has become profound in bearish market conditions, according to Gracy Chen. She told AMBCrypto,
“Achieving enduring growth might now necessitate support not solely from verbal statements but also depends on the liquidity situation in the crypto market and even more important, the concrete developments within the ecosystem.”
So, would it be fair to say that like the tragic ending of Titanic, Doge’s love affair with Elon Musk is also staring at a similar climax?
The ‘Doginals’ experiment
Remember the transaction jam on the Bitcoin blockchain in early May? The unprecedented traffic caused by the frenzy around Ordinals and BRC-20 tokens? Well, that caught the attention of the Dogecoin community.
Keeping up with its tradition of imitating Bitcoin, Dogecoin copied the Ordinals structure and built their very own “Doginals,” or the DRC-20 standard. The developers even created a page on X, Doge Labs, to build the hype around the project.
Notably, Doginals gave a fillip to Dogecoin’s network activity. The token whose daily transaction count was in the thousands and barely managed to top the 100,000-mark in its lifespan, suddenly exploded to millions.
However, unlike BRC-20, the hysteria didn’t last for long. Moreover, the profound impact that BRC-20 had on boosting Bitcoin’s NFT game was nowhere to be seen in the case of Doginals. As things stand, the upsurge in transactions was just an aberration, and the Doginals experiment didn’t have the required impact.
A striking feature of this phase was that despite greater network activity, the price of DOGE failed to react. To the contrary, it dropped during this phase.
This has once again revealed a lot about the eccentric world of memecoins. A world in which PR-heavy remarks from tech czars drive more value than something more tangible like network traffic.
However, industry watchers believe that mainstream crypto-adoption in the future would hinge on network activity. According to Christopher Alexander, Chief Analytics Officer at Pioneer Development Group, for instance,
“Long after the glitz and glitter of meme coins fades, the utility of a blockchain and the transactions on any given chain will drive long term value. I think Elon Musk would do better by thinking about the underlying technology of blockchain and it’s incredible utility and not just about the byproduct of blockchain, which is crypto.”
So, it appears that the popular expression among Doge fans, “DOGE to the moon and we’re not coming back,” would have to wait a little longer because the launch vehicle isn’t ready yet. Might not be a bad idea to ask for recent conquerors India and Japan to help.
Dogecoin has a few tricks up its sleeve
While hysteria around the memecoin is built up, Dogecoin did not have much development happening around it to boast about, unlike its rivals like Shiba Inu.
However, less development activity doesn’t directly mean an endgame for the world’s largest memecoin. The memecoin, which was initially launched just to mock the king of cryptos, Bitcoin, has come a long way as it climbed onto the list of the top cryptos by market capitalization.
DOGE mining is a huge asset
A major sector that can act as a pivotal advantage for Dogecoin is its mining industry. As the world becomes more conscious of energy consumption, most cryptos have started to adopt Poof-of-Stake (PoS) consensus mechanisms instead of Poof-of-Work (PoW).
Although the PoS mechanism is more environmentally friendly, PoW has its own advantages. The most notable one is security. Considering PoW’s strong security against 51% attacks, it is regarded as a safer consensus mechanism compared to PoS.
Dogecoin has a thriving mining ecosystem that has witnessed considerable growth over the last few years. Like Litecoin [LTC], Dogecoin mining also works on the Scrypt algorithm.
The memecoin’s mining gained popularity in 2018 and since then, a massive amount of computational power has been deployed in the sector. This was evidenced by the substantial hike in its hashrate. At the time of writing, Dogecoin had a mining hashrate of 841.75 TH/s.
Also, apart from Bitcoin, there are no other mineable assets among the top 10 cryptos. DOGE’s PoW mechanism can help it remain relevant in the market despite low development activity. However, as DOGE lacks utility, its mining sector’s potential future growth remains uncertain.
In fact, Ruslan Lienkha, Chief of Markets at YouHodler, a Web3 fintech platform, told AMBCrypto,
“It is not clear if the Dogecoin mining industry could grow in the future as the coin. Despite its high capitalization, it is not considered a serious payment system or investment asset but just a meme coin. So high volatility, frequent price manipulations, and theoretically unlimited supply are likely to push away capital inflow from the Dogecoin mining industry.”
Read Dogecoin’s [DOGE] Price Prediction 2024-25
Doge and X’s infamous bond
Apart from mining, Elon Musk’s inclination towards Dogecoin can also play a crucial role in keeping the memecoin relevant. Last year, Elon Musk’s X mentioned in a statement that the micro-blogging platform does not plan to launch its own token anytime soon. This sparked excitement among DOGE enthusiasts as it increased the chances of X integrating Dogecoin for payments.
Moreover, X launched its official X Payments handle, similar to payments giant PayPal, last month. Needless to say, this event too significantly lifted DOGE on the price charts.
If a utopian outcome is to be considered, the integration of DOGE with X can be a complete game changer for the memecoin’s future.
This will not only make DOGE a payment system for one of the largest social media companies, but also help change the perception that the crypto is a mere memecoin.
Nonetheless, in reality, things are usually more complex than they appear. As X is yet to confirm whether it plans to integrate DOGE, nothing can be said with utmost certainty.
Lucas Kiely, Chief Investment Officer (CIO) of digital wealth platform Yield App, said it best when he told AMBCrypto,
“However, despite various hints that Musk might allow DOGE as a form of payment for his various products and services, nothing has yet come to pass. More than likely he is finding it very difficult to pass that by shareholders and regulators.”
DOGE, a treasured collectible
Even if nothing goes in Dogecoin’s favor, it still has an advantage because it was modeled after one of the most well-known memes ever. As a point of comparison, NFTs are only collectibles and have no real purpose. As a memento of the well-liked meme, DOGE may also grow into a valuable collection for holders over time.
In fact, the coin has already proven its status as one of the top cryptos in terms of market cap for multiple years. Therefore, blindly believing that less utility and unlimited supply can make DOGE a thing of history is a long shot.
With globalization accelerating and the Internet becoming more of a necessity than a luxury, people’s presence on social media has risen substantially. Therefore, the “MEME’ culture seems far from ending anytime soon.
Despite having little to no development activity going on and a few unsuccessful projects, Dogecoin—the largest meme coin by market capitalization—still has the potential to play a significant role and become a top cryptocurrency in the years to come.
Considering the sheer popularity of the meme coin space and the inception of new meme coins like PEPE and BONK in the recent past, this has ignited newfound interest among investors.
Therefore, it is safe to say that DOGE will remain relevant during the upcoming bull rally, which we might witness in 2024.
However, considering the unpredictable nature of the crypto market, which way Dogecoin heads over the coming months will be intriguing to keep an eye on.
Article written in collaboration with Dipayan Mitra.