Why Dogecoin should emerge from Elon Musk’s influence in 2024

in brief

  • The disconnect between Musk’s tweets and DOGE’s price movement has been significant.
  • DOGE still holds relevance due to its origins and widespread popularity.

While Dogecoin (DOGE) holds the title of being the “original memecoin” and the largest token in this category of cryptocurrencies, its shaky fundamentals are beginning to challenge its dominance. The heavy dependence on developments associated with Elon Musk, arguably the coin’s most prominent celebrity supporter, has led to a narrow and limited vision for the coin. The absence of tangible real-world utility may deter investors from including the coin in their portfolios over the long term.

The surface-level realm of memecoins

The digital asset landscape was caught off guard by the emergence of a peculiar new class of tokens, which quickly garnered astounding attention both within and beyond the cryptocurrency community – Memecoins. As the name suggests, these tokens are characterized by their lack of seriousness.

Gracy Chen, Managing Director of cryptocurrency exchange Bitget, aptly describes them:

“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 aspect of meme coins plays a significant role in their success and adoption, fostering a sense of community.”

Originating from a popular joke on social media featuring a Shiba Inu dog, these assets ironically evolved into some of the most sought-after commodities in the crypto market in a remarkably short time. At present, memecoins boast a market capitalization exceeding $20 billion, according to CoinMarketCap, with Dogecoin leading the pack as the pioneer.

DOGE, currently the 10th largest cryptocurrency by market capitalization, has experienced an unparalleled surge in both value and popularity over the years, particularly during the historic bull market of 2020-2021. What was once considered a joke has now become a serious contender in the cryptocurrency space.

However, as Warren Buffett famously said, “You only find out who is swimming naked when the tide goes out.” This sentiment encapsulates DOGE’s current predicament amidst the ongoing crypto winter.

Shiba Inu aims to distance itself from the “memecoin” label.

As the excitement of bull runs and all-time highs subsided, developers and investors recognized the importance of robust underlying technology over memes to drive mass adoption of digital assets.

In response to this shift, Shiba Inu, a $6-billion token inspired by DOGE, began focusing on creating meaningful real-world use cases to shed its “meme coin” image. It launched Shibarium, an Ethereum layer-2 (L2) chain, after a rigorous five-month testing phase. This initiative aimed to provide crucial utility to SHIB and Bone ShibaSwap (BONE) tokens and attract decentralized finance (DeFi) apps to the ecosystem.

Shibarium saw significant traction, with over 1.35 million wallets on the L2 and over 342 million total transactions, including 526K processed on February 9th.

Additionally, Shiba Inu’s metaverse, Shib the Metaverse, is being developed on the L2 network, tapping into the growing interest in blending the real and virtual worlds.

Shiba Inu’s commitment to this forward-looking technology is evident in its publication of a comprehensive whitepaper, SHIBPaper, outlining its ecosystem vision. The ecosystem introduced the concept of the Shiba Inu state, describing it as a blend of traditional principles with cutting-edge technology.

While the future expansion of the Shiba Inu universe remains uncertain, its dedication to long-term growth is undeniable.

The excessive dependence of Dogecoin on Musk and social media

In contrast, Dogecoin (DOGE), the original memecoin, has struggled to incorporate meaningful real-world applications into its ecosystem during the bear market. Instead, it has maintained its heavy reliance on tech mogul Elon Musk and his multi-billion dollar social platform, formerly known as Twitter.

Elon Musk has closely monitored the cryptocurrency market, occasionally expressing admiration for certain aspects of cryptocurrencies. However, his endorsement of DOGE stands out among his interactions with digital assets.

The journey began with a relatively casual post about the dog-themed token approximately four years ago, leading to a significant impact on its trajectory.

Following Musk’s acknowledgment, DOGE experienced an immediate surge of over 70%, a remarkable feat given the bearish market conditions at the time. Musk has since continued to publicly endorse the memecoin, even dubbing it the “people’s crypto” due to its widespread adoption among his company’s workforce.

Elon Musk’s endorsement brought unprecedented optimism to the Dogecoin community, especially during his takeover of Twitter in fall 2022. Speculation soared about DOGE becoming the official cryptocurrency for payments, leading to a doubling of its value within a week. However, despite the initial excitement, Musk’s promotion of the memecoin ignited a frenzy of humorous memes, including one depicting him and Doge recreating a scene from the movie “Titanic.”

Feeling tired or weary?

After nearly a year since the transformation of Twitter into X and Musk’s aggressive monetization efforts, there hasn’t been any significant development for DOGE. Despite ongoing discussions, Musk reiterated that X remains a DOGE-friendly platform.

After a recent post, the reaction to DOGE’s price has been minimal, increasing by only 1.6% in the following 24 hours. This signals a notable decoupling between Musk’s posts and DOGE’s price action, particularly in bearish market conditions. Gracy Chen suggests that this trend is significant.

The “Doginals” trial

During the Bitcoin blockchain congestion in early May, the Dogecoin community took notice and decided to mimic Bitcoin’s Ordinals structure, creating their version called “Doginals” or the DRC-20 standard. This initiative significantly boosted Dogecoin’s network activity, with daily transactions skyrocketing from thousands to millions.

Dogecoin transactions and price correlation

The hype surrounding Doginals quickly fizzled out, unlike the lasting impact of BRC-20 on Bitcoin’s NFT ecosystem. Despite increased network activity, Dogecoin’s price did not respond positively and even dropped during this period. This highlights the unpredictable nature of memecoins, where celebrity endorsements often hold more sway than tangible developments. However, experts suggest that future crypto adoption will rely more on network activity than celebrity influence.

The enthusiasm of Doge enthusiasts for a trip to the moon may need to be put on hold, as the launch vehicle isn’t prepared yet. Seeking assistance from recent spacefaring nations like India and Japan might be a prudent move in the meantime.

Dogecoin has some surprises in store.

Despite the hype surrounding Dogecoin, it lacks significant development compared to competitors like Shiba Inu. However, this doesn’t signal the end for the memecoin. Initially created as a joke, Dogecoin has made significant strides to become one of the top cryptocurrencies by market capitalization.

Mining Dogecoin offers substantial benefits.

Dogecoin’s mining industry stands out as a significant asset. While many cryptocurrencies are shifting towards more environmentally friendly Poof-of-Stake (PoS) consensus mechanisms, Dogecoin’s Poof-of-Work (PoW) system offers distinct advantages, particularly in terms of security against potential attacks. Dogecoin’s mining ecosystem has experienced notable expansion, mirroring the growth seen in other cryptocurrencies like Litecoin (LTC), which also operates on the Scrypt algorithm.

Dogecoin hashrate growth over the years

Dogecoin’s mining sector experienced a surge in popularity in 2018, leading to a significant increase in computational power and a substantial rise in its hashrate, currently standing at 841.75 TH/s. Unlike most of the top 10 cryptocurrencies, Dogecoin remains mineable, thanks to its PoW mechanism, offering it a unique advantage in the market. However, the uncertain future growth of its mining sector reflects the overall lack of utility in Dogecoin, despite its enduring relevance.

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.”

The well-known connection between Doge and X

In addition to mining, Elon Musk’s interest in Dogecoin could significantly impact the memecoin’s relevance. Last year, Musk’s X platform indicated that it wasn’t planning to introduce its own token soon, which led to speculation about the potential integration of Dogecoin for payments. Furthermore, X recently launched its official X Payments handle, akin to PayPal, which notably boosted DOGE’s price. If Dogecoin were to be integrated with X, it could revolutionize its future by serving as a payment system for one of the largest social media platforms, altering the perception of the crypto as merely a memecoin. However, the actual outcome depends on whether X decides to integrate DOGE, and nothing is certain at this point.

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 cherished keepsake

Even if circumstances don’t favor Dogecoin, it holds an inherent advantage as it was inspired by one of the most iconic memes. Unlike NFTs, which are purely collectible items with no intrinsic purpose, DOGE could evolve into a valuable asset for holders due to its association with the beloved meme. Its enduring presence among the top cryptocurrencies by market capitalization over the years suggests that dismissing DOGE solely based on its lack of utility and unlimited supply might be premature.

As globalization progresses and social media usage surges, the enduring popularity of meme culture seems assured. Despite minimal development activity and a few unsuccessful projects, Dogecoin, the largest meme coin by market cap, still has the potential to assert its relevance and emerge as a leading cryptocurrency in the future. The emergence of new meme coins like PEPE and BONK has reignited investor interest in this space, suggesting that DOGE will likely maintain its relevance in the upcoming bullish market anticipated in 2024.

However, given the unpredictable nature of the crypto market, the trajectory of Dogecoin in the coming months remains a captivating topic to watch.

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