Crypto check: Looking Beyond the Dogecoin Hype

Crypto check: Looking Beyond the Dogecoin Hype

ET Spotlight Special

Bitcoin underwent halving in May 2020, a phenomenon that reduces the supply of new Bitcoins in circulation ending up rallying its prices.

A massive institutional adoption drove its price where companies like Greyscale, MicroStrategy, Tesla etc turned to it.

Covid to some extent also helped fire up Bitcoin investing.

It all started after the entire GameStop incident. A bunch of retail traders got together on Reddit and decided to push up its share prices. Taking a leaf from the same book, a subreddit with DOGE fans decided to also rally DOGE’s price to make it touch $1.

The pump was further amplified by influential personalities like Elon Musk, Gene Simmons, Carole Baskin etc., on Twitter.

ET Spotlight Special

After Bitcoin, crypto investors and media houses have a new favourite in town; Dogecoin. The cryptocurrency has attracted a lot of eyeballs because of its surge. It grew over 5000% in 2021, with a 400% gain in just 30 days. These sky-high gains have stirred up many investors to buy into DOGE, a result of which is evident on platforms like CoinSwitch Kuber that are experiencing boosted engagement from its users. But is this cryptocurrency really worth the hype? Let’s find out.Before Dogecoin, Bitcoin, too, rallied aggressively, touching new highs almost every other day, luring investors into the cryptocurrency space. While both of these incidents might look similar on the surface, they aren’t really similar.Bitcoin is a long-trusted and reliable cryptocurrency. It paved the way for other cryptocurrencies that we have around and was created by the best of the minds with a definite purpose to improve on paper money’s shortcomings. More importantly, it was very well thought of, keeping in mind its security, supply, and other factors.On the other hand, Dogecoin was created back in 2013 by Jackson Palmer and Billy Markus as a joke inspired by the meme dog, Shiba Inu . They intended to dig at investors who invest in assets mindlessly, which is, ironically, exactly happening right now.And since the founders didn’t really have any other intent but to have fun with the crypto, they aren’t likely too serious about it. At one point, they even tried moving away from the project.Cryptocurrencies derive much of their value from the underlying project it is attached to. Most cryptocurrencies are associated with a project on the blockchain network trying to solve real-world problems. As these projects prove their efficiency and gain popularity, it channels its value to the native token of the project, a cryptocurrency.For instance, BAT token is cryptocurrency attached to a project called Brave browser on the blockchain. The purpose of Brave browser is to price user attention correctly and compensate people for viewing ads. As the project develops and gains more traction, you will also notice the price of the cryptocurrency attached being influenced.No matter how good the idea is, a bad team will not be able to pull it off, but a good team can take projects through the roof.As much as it is important to have a robust project attached to crypto, the team working on the idea is equally important. Additionally, knowing the team allows you to get a sense of their expertise and the goodwill they may bring to the table. It also works as a background check to ensure that the project is trustworthy.For example; The founder of Tron, Justin Sun, brings a lot of credibility to the project and builds trust because of his technical expertise.Another factor that you might want to consider while evaluating a cryptocurrency is its availability. It’s pure economics here; the greater the demand for an item and the lower the supply for it, the higher the price of an item and vice versa.Think about it, one of the fundamental reasons driving Bitcoin’s price is its scarce nature. There can only ever be 21 million Bitcoins, and while the supply for it is shrinking every day as more and more people invest in it, the demand for it is increasing.While Dogecoin, on the other hand, does not have any such limit on its supply, there can be infinite DOGE coins.This is also one of the important aspects to look at in order to speculate where a cryptocurrency is heading. It helps investors to ascertain how a cryptocurrency behaves in certain situations. One might have done their research on the all above areas but studying the market behaviour could put them one step ahead.Studying the past performance of a cryptocurrency may help investors forecast its future. But one thing to be wary of while analysing the trends is that these could be sometimes influenced by pump and dump strategies, also like what we are experiencing with DOGE now.Investing in Crypto is no different than stocks; it’s the same ball game. People fail when they think of crypto as a ‘ get rich quick’ scheme because it’s not.Like how one researches a stock thoroughly before investing, they shall also research the crypto they are investing in. It’s almost all the same drivers here too. The only difference is that the market is a little more volatile.Also, crypto investments can start from a minimum amount of Rs.100 with cryptocurrency platforms like CoinSwitch Kuber . Investors could see success with cryptocurrencies if they are prepared and disciplined with their investing strategy and are not just trying to make a quick buck.The above content is non-editorial, and TIL hereby disclaims any and all warranties, express or implied, relating to the same. TIL does not guarantee, vouch for or necessarily endorse any of the above content, nor is responsible for them in any manner whatsoever. The article does not constitute investment advice. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified.

Bitcoin, Ethereum, or Dogecoin? Here’s the crypto with the largest gain this year—and it isn’t even close

Since the start of 2021, the price of Bitcoin has surged 89% to over $54,000. That’s seven times as great as the S&P 500’s return during the same period. But those staggering Bitcoin gains don’t come close to the largest return posted this year by a major cryptocurrency.

The top spot also doesn’t go to Ethereum, which is up 343% this year to just under $3,300. Nigel Green, CEO and founder of deVere Group, said earlier this week that Ethereum could reach $5,000 by the end of the week. Even if it happens, Ethereum still would be dwarfed by the gains posted so far by Dogecoin: The price of the cryptocurrency, which was launched as a joke, is up over 13,500% this year to $0.63, according to end of Tuesday prices on Coindesk.

For perspective, a $1,000 investment in Dogecoin at the start of 2021 would now be worth over $135,000.

While major cryptocurrencies are up across the board, the gains of Dogecoin in particular are off the charts. The reason? For starters, its capitalization is far smaller than some of the other major cryptocurrencies—meaning an influx of new money will create a higher percentage gain than if the same amount went into Bitcoin or Ethereum. As of the end of the day Tuesday, the market capitalization of Dogecoin stands at $86 billion, according to Coindesk. That’s compared with market caps of $375 billion and $1 trillion, respectively, for Ethereum and Bitcoin.

Like all successful crypto booms, Dogecoin is benefiting from a ton of Internet hype—including from big-name American businessmen.

On Monday, celebrity chef Guy Fieri tweeted images of himself donning Dogecoin merchandise. Billionaire entrepreneur Mark Cuban has also tweeted favorably about the crypto. “As long as more companies take Doge for products/services, then Doge can be a usable currency because it may hold its purchasing value better than [money] in your bank. If interest rates skyrocket or the amount spent falls or stagnates, so will Doge. Yes, a joke is now legit,” Cuban tweeted on May 2.

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But the biggest driver of Dogecoin’s publicity has come from [hotlink]Tesla[/hotlink] CEO Elon Musk, who frequently references the crypto in tweets. But he might not be a true Dogecoin supporter: Musk previously said his Dogecoin tweets are “just meant to be jokes.”

More must-read finance coverage from Fortune :

This story was originally featured on Fortune.com

This crypto claims to solve bitcoin’s biggest problem

New York (CNN Business) Bitcoin may be the king of cryptocurrencies, but it’s facing an environmental backlash over the energy-intensive technology underpinning it.

A new crypto called chia says it’s the eco-friendly alternative.

Like most digital currencies, chia runs on a decentralized ledger system known as blockchain. But unlike bitcoin, chia, which was founded by the inventor of BitTorrent, claims it has a much smaller carbon footprint with its mining process of verifying and recording transactions.

Chia logged its first trades this week, joining a crowded crypto scene at a time of frenzied investor interest in alternative digital assets.

What is chia?

The Chia Network created the coin in 2017 with a focus on the environmental implications of digital currency “mining” — the highly specialized, energy-intensive computing process that creates new coins by solving complex equations.

The key difference between chia and other cryptos, according to its founders, is its “proofs of space and time” method of verifying transactions that utilizes unused disk space on users' hard drives and is more energy-efficient than bitcoin’s “proof of work” model.

The Chia Network was founded by Bram Cohen, who also invented the peer-to-peer file-sharing system BitTorrent, and has already won backing from prominent investors such as Andreessen Horowitz and Naval Ravikant.

How does the process work?

Every cryptocurrency has its own method for verifying transactions, typically by using the collective computer power of miners, who are paid for their help in cryptocurrency. The chia mining process, which the Chia Network calls “farming,” relies on using empty computer storage space instead.

Chia’s “proof of space and time” process allows network participants to show that they have been physically storing data over a certain period of time, according to Coin Market Cap

This doesn’t resemble the mining process of cryptocurrencies like ethereum , for example. In its current iteration, ethereum uses proof-of-work, which requires a massive amount of computer power to harvest and mine the decentralized coin. The proposed ethereum 2.0, however, would use a proof-of-stake model, which is allegedly more energy-efficient.

Part of the appeal of cryptocurrencies is that people can send or receive money without the involvement of traditional banks or government bodies, unlike a fiat currency controlled by a central bank. All transactions are verified and recorded by huge networks of computers, using a database called blockchain. Typically that process requires a huge amount of electricity to power those computers — some estimates put bitcoin mining’s carbon dioxide output as equivalent to New Zealand’s.

Cohen told CNN Business he hopes to have chia listed on crypto exchanges soon, including Coinbase, the digital currency exchange that went public in April

Ready to ‘farm’?

Chia is meant to be accessible.

“We’ve designed our software with the intention of it being usable by anyone who can use the internet,” Cohen told CNN Business. Since “farming” doesn’t require massive amounts of power, Cohen said “it can be done in a normal apartment.”

The Chia Network has a blockchain transaction platform called Mainnet, which can be downloaded on the network’s website, chia.net . To start farming, you have to download the program to your computer and allocate a certain amount of space to the network through the user interface.

“It involves completely normal hardware rather than super custom and expensive stuff,” Cohen said. “Most people have some amount of unused storage space they can do it with already.”

And since “farming” doesn’t use a ton of energy, you can fire up your laptop and get to work. Some other cryptocurrency mining processes, however, require complex machinery and will send your electricity bill through the roof.

Bitcoin miners typically have to have their machines running 24/7 “to have the best odds of getting a return on the investment and maximize profitability,” digital currency economist Alex de Vries told CNN Business.

Will it save energy?

The chia “farming” process is a greener mining alternative, but it does still require electricity.

When it comes to cryptos, “environmentally friendly” is a “relative term,” said Nick Spanos, CEO of Blockchain Technologies Corp, a software company. Computers need power to run, and natural resources are used to build hard drives, “much in the same way that electric vehicles and windmills still require too much resources to truly be environmentally friendly.”

“Plotting,” the process of creating files that are later harvested as part of the farming process, still uses computer hard drive space and CPU power, but it requires significantly less energy than what is required for the mining process for other proof-of-work cryptocurrencies.