Meme coins get remembered, but Dogecoin never dies.
Or so it would seem looking at the doggy-faced token's extraordinary market cap.
Despite wild fluctuations and increasing competition from other canine-themed coins such as Shiba Inu and Dogelon Mars, Dogecoin has held onto the top spot with its nearly $19 billion market cap and more than $800 million in daily transaction volume, according to CoinMarketCap.
In a sea of crypto boosterisms, Dogecoin also has a knack for nabbing headlines.
In its latest buzz-cycle, Tesla CEO Elon Musk, who has consistently promoted the coin on social media, urged McDonald's to start accepting Dogecoin as payment. McDonald's then fired back that it would accept Dogecoin if Tesla accepted "Grimacecoin," which didn't exist, of course, until someone later made one and it surged 285,641 percent in a few hours.
There's still no word on whether McDonald's is actually considering Musk's offer, but Dogecoin's price did shoot up 7 percent following the exchange.
The back-and-forth highlights how the fortunes of Dogecoin, and really all meme coins, are tied up in a social economy that is difficult to measure let alone predict. A stray comment from someone like Musk or a silly exchange between companies can send prices soaring, or vice versa, as Musk's infamous appearance on Saturday Night Live proved.
But two years into the crypto boom, Dogecoin has been uniquely successful at staying relevant in the Mad Max-style arena that is meme coins. Is there a secret to its success?
The Musk Factor
To circle back on Musk, it's hard to underestimate the role that the eccentric billionaire has played in boosting Dogecoin over the past two years. Even the most technical market-watchers admit that reputation is key here.
"It has to be Elon Musk," Jonathan Morgan, a technical analyst for Justanalysis, told Cheddar. "If Elon Musk was not behind most of these recent pumps, there's no reason why it would have any of these major moves."
Musk has periodically promoted Dogecoin on social media, and even seems to favor it over more established cryptocurrencies such as Bitcoin and Ethereum.
More recently, Musk has started to put his money where his mouth is.
Tesla earlier this month started accepting Dogecoin for some of its merchandise. The news spurred a 15 percent jump in price even amid a general downturn in the crypto market.
Musk also announced in May 2021 that SpaceX planned to launch a lunar satellite mission dubbed "Doge-1" that will be completely paid for in Dogecoin. He even got a partnering company to accept the meme coin as payment.
"Having officially transacted with DOGE for a deal of this magnitude, Geometric Energy Corporation and SpaceX have solidified DOGE as a unit of account for lunar business in the space sector," Samuel Reid, CEO of Geometric Energy, said in a statement.
But one man can only do so much. With Musk's support, Dogecoin has started to build up its own momentum as a viable financial asset.
"Even though it was created as a joke, there are enough people out there who trust it as a medium of exchange and source of value that it's likely to remain that way," Morgan said.
Software engineers Billy Markus and Jackson Palmer created Dogecoin to lampoon the sometimes arbitrary nature of crypto prices, but now wider adoption is giving Dogecoin actual value in the crypto community.
Morgan pointed to an increasing number of exchanges that have added Dogecoin as a cryptocurrency that can earn interest and serve as collateral for borrowing.
Crypto exchange YouHodler, for example, offers doge-backed crypto loans. SALT, another provider of blockchain-based loans, accepts Dogecoin as collateral for loans in USD, which is the second-largest stablecoin and pegged to the U.S. dollar.
All of this gives Dogecoin more liquidity and creates buy-in from a larger number of investors. It could also create new risk factors, but so far nothing has managed to tank the token.
Behind the scenes, there's something else going on, according to Morgan.
Despite multiple sell-offs, Dogecoin's price has floated around 14-16 cents for some time. Morgan explained that some of that persistence is related to passive buying that is happening in over-the-counter dark pools.
Essentially, whenever Dogecoin's price hits a certain level, a high level of "synthetic orders" in these over-the-counter pools are pushing back on selling pressure.
This prevents the kind of short squeeze that could easily decimate the price of such a relatively undercapitalized asset.
"Ever since 16 cents, there's been a strong amount of buying preventing it from having a big collapse," Morgan said.
The phenomenon isn't unique to Dogecoin, he added. Indeed it's common with a lot of the biggest cryptocurrencies, which Dogecoin arguably has become.
"It's still a bit of a joke coin, but my mind has been turned around somewhat over the last year and a half or so," Morgan said.