What lies behind the launch of Dogecoin
Investors take a huge risk. The upward trend in the field of cryptocurrencies and the… hangover.
Where you think your cryptocurrency portfolio choices work, you see Dogecoin, which you underestimated, being 80 times higher than the beginning of the year! To have launched in 5th place in terms of capitalization. Welcome to the wonderful world of crypto!
The reason was again a tweet from Elon Musk, who the day before yesterday published another sketch, saying that the now-famous dog-emblem of Dogecoin, is barking at the moon. Musk obviously has fun with tweets and how easily he can manipulate his price. This is not the first time Musk’s tweets (with 50 million followers) have boosted the value of Dogecoin, which began as a parody of cryptocurrencies seven years ago.
In our opinion, without ruling out the possibility that we did not understand something well, Dogecoin is pure gambling. A lottery. A casino. There is no technology behind it. Many may not know that its developers have long since abandoned it. The risk taken by anyone who invests in it is enormous. On the other hand, when a daring choice pays off more than anything you have invested in “logic” in the last 20 years, you can only feel drunkenness, a euphoria. However, after the intoxication, the hangover follows.
We were among those who claimed in the previous upward movement started by tik tok that the estimate that it would reach $ 1 is extremely exaggerated. That would mean it would reach multiple values from Ethereum! Its value then, of course, because today Ethereum is close to reaching $ 300 billion in capitalization.
But here we were wrong. We underestimated the dynamics of space. Indeed, some became millionaires from Dogecoin! Nothing is impossible in this industry after all. The more mainstream it becomes, the more money will flow in. We will see things we will not believe until the end of this upward cycle. Some of the cryptocurrencies will catch a price that will seem to us in the area unbelievable. As incredible as the course of Bitcoin seems to outsiders.
This is a pleasant reading of the phenomenon, but there is also the unpleasant when such a coin has such a large capitalization. When preferred over other serious projects, with human resources, capital, know-how, it ridicules the space and gives the wrong impression to those who do not know.
What do we mean it is not a serious currency? Unlike Bitcoin, Ethereum or any other notable network, Dogecoin does not have its own miners. It relies on the Litecoin network to survive. How is this done? Because in 2014, Dogecoin found itself in a difficult position. There were not enough miners to support it and there was a real risk of someone attacking and destroying it. So its developers had to do something. A collaboration. Use a special Proof of Work that allows miners to work on multiple currencies simultaneously and reuse the same work.
The disadvantage of this method is that while it protects both Litecoin and Dogecoin at the same time, it also makes it easier (and much cheaper) for an attacker to capture both networks at the same time. But then it had no serious value. It was not worth it to be attacked by anyone. But now they have every incentive.
So the manipulation may not turn out to be as innocent as we think. First of all, it is obvious that such a high capitalization can not stand for long. Therefore many, especially newcomers to the field, will lose their money. Dogecoin has indeed attracted many in the field of cryptocurrencies, but for the wrong reasons.
But there is an even worse scenario. The loss of tens of billions from hundreds of thousands of unsuspecting micro-investors will be a prime reason for regulators to intervene. On the occasion of the “protection” of investors.
To those who are not worried, who claim that the rise is normal because Musk supports it, let me remind them that Musk bought Bitcoin for Tesla. No Dogecoin.
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