The Rise of Dogecoin: Exploring the Factors Behind this Joke-Driven Craze

Rockets aren’t the only thing Elon Musk is propelling into the higher realms.

After enduring a three-year decline, dogecoin is soaring once more, surging 250% since Donald Trump’s election – a reflection of a wider wave of optimism in the sector, attributed to Trump’s engagement with cryptocurrency advocates during his campaign.

Trump’s informal designation of Musk to what he dubs the Department of Government Efficiency – abbreviated as D.O.G.E – has also contributed to the hype surrounding the dog-themed meme coin.

This isn’t the first instance where Musk, who deems himself the “Dogefather,” has spurred interest in dogecoin.

In May 2021, its value skyrocketed ahead of Musk’s guest appearance on “Saturday Night Live.” In one skit, Musk portrayed a financial analyst responding to a Weekend Update host repeatedly inquiring, “What is dogecoin?” After much evasion, Musk’s character eventually admitted it was a hustle. The coin’s price subsequently went into a sharp decline. Just over a year later, it had lost over 90% of its peak price.

The losses severely affected small investors. In 2022, one of them filed a class action lawsuit against Musk for alleged market manipulation and insider trading, although the case was dismissed in August 2024.

What accounts for dogecoin’s volatility – a meme coin that was never intended to be a serious investment?

We’re all in this together

Launched in 2013 as a parody of bitcoin and other cryptocurrencies that were seeking to disrupt traditional finance, dogecoin’s origins can be traced back to two individuals from different parts of the world who met online, copied the code of an existing coin, and branded it using the widely recognized Doge internet meme featuring a Shiba Inu dog and amusingly formatted phrases: “wow much coin.”

Though their primary intention was to create an irrelevant and undesirable coin, it has become one of the most popular and resilient cryptocurrencies available.

Following dogecoin’s earlier surge in 2021, I examined how its enthusiastic network of influencers and everyday investors collaborated to attract significant attention and funding to this joke currency.

To comprehend the allure of such absurd investments, one must consider the time and effort that users pour into these networks, along with the rewards, both fiscal and social, they receive in return.

Meme coins function as collaborative ventures. Members of these online communities have a financial incentive to act as enthusiastic promoters: the greater the value of dogecoin increases, the larger their investments grow. Additionally, they gain social validation from fellow meme coin enthusiasts by championing the coin.

In essence, behind every meme coin is a collective of strangers united in a shared mission to generate more wealth.

Dogecoin and its counterparts are promoted by their proponents as crypto movements, shared journeys, and community-driven projects. Successful crypto endeavors are characterized by intricate webs of trust, whether it’s trust in the technology, faith in its potential for future growth, or confidence that those with influence in the networks won’t exploit others.

This allegiance is woven through a global network of users who tirelessly collaborate to promote their coin and exhibit their steadfast dedication to its success.

During periods of price increases, the collective buzzes with excitement.

When prices drop, community members bolster each other’s – and their own – convictions that this is merely a temporary setback and that their collective efforts will eventually yield substantial rewards. Even amid the harshest of crypto winters, such ritualistic behavior allows these speculative communities to persist. Community becomes a substitute for financial loss.

Investment strategies in these communities – and the conviction behind their success – involve repeating and resharing what has been discussed by others, similar to any traditional internet meme.

Trolling traditional valuation

Understanding the real value of meme coins differs from the valuation of traditional assets, such as stocks and tangible goods. These assets have fundamentals based on a company’s financial performance or public demand for essential items, ranging from coffee to oil.

In contrast, the fundamentals of meme coins are manifest in their network engagement, such as daily active users, and more abstract metrics like social sentiment and mindshare – the level of public awareness a coin has achieved compared to its competitors.

It’s important to note that traditional asset valuations are likewise influenced by social factors. The key difference is that meme coins offer little in terms of productive activity and contribute nothing to the economy. Occasional attempts by their leaders to establish financial services around them are often considered afterthoughts, mainly to generate further speculative excitement.

Meme coins challenge traditional valuation standards and mock the doctrines adhered to by mainstream investors.

That’s precisely the intent.

Engaging with meme coin communities – or any crypto community, for that matter – involves adopting an alternative economic experience. They serve as speculative playgrounds for stepping outside established investment rules.

Who let the Doge out?

Musk epitomizes the meme coin influencer.

Regarded as the world’s richest individual, he is seen by many as a model of astute investing. His vast follower base extends well beyond dogecoin’s social circle. His promotional style is lighthearted – so much so that the judge in his class-action lawsuit dismissed his dogecoin tweets as mere “puffery,” asserting that “no reasonable investor could rely upon them.”

Dogecoin previously reached the zenith of its memetic popularity during Musk’s appearance on “Saturday Night Live.” Now, rather than sitting at the Weekend Update desk delivering jokes, he finds himself in Trump’s office advising the president-elect. In essence, dogecoin’s memetic influence has evolved from pop culture to political relevance, capturing an even larger segment of public consciousness.

While dogecoin has derived specific advantages from Musk’s association with Trump, the broader cryptocurrency landscape is thriving with optimism for a crypto-friendly administration. During a speech at the Bitcoin 2024 conference in July, the GOP candidate promised to make the United States “the crypto capital of the world.” After investing $131 million into this election cycle, the crypto sector can now boast 274 pro-crypto members in the U.S. House of Representatives and 20 pro-crypto U.S. senators.

With Musk aligning himself with Trump and a changing regulatory landscape, the dog can once again roam freely.

Maximilian Brichta, Doctoral Student of Communication, University of Southern California

This article is republished from The Conversation under a Creative Commons license. Read the original article.