Elon Musk and Dogecoin had no relationship until recently. The Tesla/Paypal/SpaceX mogul tweeted about this lesser-known cryptocurrency coin, which caused values to skyrocket overnight. This testifies to how volatile cryptocurrency is in general. This could be evidence for people who don’t trust virtual coins as a safe investment opportunity.
However, it could also produce overnight millionaires. Read on to learn about what happened with Elon Musk and Dogecoin. You may be able to predict the next spike in value if you pay attention.
What is Dogecoin?
Dogecoin is a lesser-known cryptocurrency. It’s open-source and decentralized, meaning no authority or program controls its value. It trends with its own market as people trade from peer to peer on its network.
As of 2019, Coinbase, the largest crypto trading platform online, announced its support of Dogecoin on its network. This put the currency on the map, for many traders, for the first time. Elon Musk’s involvement has only led the coin to superstardom in the trading world. Many people have taken this as a reason to invest in the coin, however, it also suggests how volatile open-source crypto markets can be. For many investors, these events call for more caution, not less.
Elon Musk and Dogecoin
For many people, the Dogecoin was just a novelty (it’s based on a Shiba Inu meme). On Twitter, Elon Musk began a back-and-forth Tweet session late into the night with Michael Saylor, the CEO of Microstrategy, who had recently sunk a quarter of a billion into Bitcoin.
At one point, Musk tweeted about his favorite coins and offhandedly, probably as a joke, tweeted, “One word: Doge.” Thus, the value of the coin shot up 40%, leading many people to spiral into purchasing mode, telling their friends to do the same.
It was essentially a prank, but one that impacted the currency immediately and strongly. It’s unclear whether anyone made big on the temporary surge in value, but if nothing else it shows the influence of Musk and other celebrity billionaires on the value of such a volatile market.
Dogecoin is built for inflation – it introduces thousands of new coins into the market every minute. That more than anything makes it a novelty currency. However, with the value spiking so high, that supply turned into a get-rich-quick scheme for a lot of people. From Twitter, it spread everywhere.
The Takeaway for Crypto Traders
Elon Musk and Dogecoin tell us one important thing: some coins can be unreliable. Dogecoin shot up because of the novelty of its over-supply mechanism that flushes the market with new currency every few minutes. Word of mouth caused an above-average value increase, but the coin itself floods with price drops and raises.
Musk either has no idea how influential he can be or he knows it very well. Was he trolling Dogecoin or just chatting late at night with a fellow billionaire, unaware of his power? We may never know. What is certain is that you can’t always be certain with crypto, which is why many investors swear by a diverse portfolio. That way, you’ll be ready when the next Dogecoin happens.