Tesla Motors (TSLA) - Why Dogecoin Is Up 20%

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Meme cryptocurrency Dogecoin (CRYPTO: DOGE) is seeing major upwards movement in line with a rise in Bitcoin and as Tesla Inc (NASDAQ:TSLA) Elon Musk has again chimed in.

Dogecoin has seen its price rise this weekend as Bitcoin (CRYPTO: BTC) again approached all-time-high levels and Musk suggested that it would be “going to the moon very soon” in a recent tweet.

… going to moon very soon — Elon Musk (@elonmusk) April 10, 2021

Dogecoin reached a high of $0.078 after a 20% increase from its 24-hour low of $0.0625. The coin is currently priced at $0.071, up 1,379% from this year’s low of $0.0048 reported in January.

Like any other altcoin, Dogecoin is operating on the tracks set by Bitcoin and its movement.

As Benzinga reported earlier today, the world’s first cryptocurrency approached its all-time high price of over $60,000 amid talk of a supply shortage.

Inflation and Influencers: How Investors Can Send Dogecoin to $10

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So much wow. When Billy Markus created Dogecoin (CCC:DOGE-USD) in 2013, he did so as a joke. DOGE’s mining reward system was so ludicrously structured that no one could possibly have taken it seriously; at the start, miners could earn anywhere from zero to 1 billion coins for completing a single block.

Dogecoin Cryptocurrency

Source: Orpheus FX / Shutterstock.com

But Dogecoin holders have had the last laugh. Today, the cryptocurrency is worth almost $10 billion and has one of the most dedicated followings of any tradable security. Lucky investors could have turned a $1,000 initial stake into nearly $1 million.

Core to this success was a 2014 technical change that developers quietly made, although celebrity endorsements helped. At block 145,000 – the coin switched from its random mining reward to a consistent payout; miners now earn just 10,000 DOGE per reward. That move capped today’s inflation at 5.256 billion coins per year and removes the joke that initially made the cryptocurrency unusable.

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Renewed interest in Dogecoin’s development could spark even more changes. If its inflation trajectory changes again, DOGE at $10 might become a reality.

Why Are DOGE Prices Stuck Around 6 Cents?

Cryptocurrencies typically fall into three groups:

Inflationary: a supply that goes up indefinitely (i.e., Dogecoin)

Deflationary: a limited supply (i.e., Bitcoin)

Pegged: a supply that changes to match USD or another underlying asset (i.e., Tether)

Today, Dogecoin lives life as an inflationary coin. Much like fiat currencies, more gets minted every day. And just like its government-backed counterparts, Doge’s upside remains limited because buyers know they can always acquire more later. (For a real-world example, consider that the EUR/USD exchange rate of 1.2 is virtually the same as in 1999). In other words, when your currency adds 4% supply every year, it will eventually find a price equilibrium with other 4% growth currencies.

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Meanwhile, Bitcoin (CCC:BTC-USD) and fellow limited-supply coins can often see their value rise astronomically. Much like Picassos, vintage wines and 1868-collectible stamps, their limited availability means each minted piece becomes more valuable with each passing day.

DOGE Price to $1? Or $10?

Even without inflationary changes, the price could still hit $1. The cryptocurrency has 130 billion coins outstanding; a $1 price-per-coin will still leave it 55% the size of Ethereum (CCC:ETH-USD), the world’s second-largest crypto. And because only the marginal trade matters in asset pricing, even a few major account owners could theoretically send values soaring.

With some luck, the coin might even stay at $1. With renewed interest in the Shiba-Inu-fronted coin, developers have since jumped back into its code repository, proposing crucial usability and speed improvements. Developers have pushed major changes before – DigiByte and Litecoin (CCC:LTC-USD) snippets features prominently in Dogecoin’s source code. More may be on the way.

Inflation will also become a minor issue over time – the outcome of a flat reward divided by a growing capital base. By 2040, Dogecoin’s inflation rate would have dropped to just 2.4%, or roughly the same as U.S. dollars today. By 2060, it would be 1.6%, making it deflationary relative to dollars.

dogecoin supply and inflation

Source: Author Calculations

However, sending Dogecoin to $10 will require an even more significant change: a switch to a deflationary system sooner than 2060.

Dogecoin’s 10,000 Rule

Currently, miners earn 10,000 DOGE per block, which happens about once per minute. That puts a $10 price target firmly out of reach; no matter how many people buy Dogecoin, its ever-growing supply makes price gains an uphill battle. A $10 price means Dogecoin needs to surpass Bitcoin in market capitalization and stay there.

But in open-source cryptocurrencies, no rule is permanent. With enough core contributors voting for change, even projects as large as Ethereum can alter its fundamental building blocks to keep up with newer coins.

Today, Dogecoin finds itself at the same crossroads. Its codebase is rapidly aging, and newer coins like Cardano (CCC:ADA-USD) and Polkadot (CCC:DOT-USD) are nipping at its heels. Even Bitcoin looks vulnerable to third-generation coins that can perform transactions far faster and cheaper.

So far, Dogecoin’s grassroots-based approach has helped the cryptocurrency avoid obsolescence; people buy the coin for fun and profits, not usability. But unless larger stakeholders also step up, these efforts can only go so far.

The Dogecoin Whale

Ordinarily, prominent crypto stakeholders will help fund code and business development. The Cardano Network, for instance, has three official organizations to manage standardization, technology and developer support. Together, they share around billions in funding. Ripple Labs has a similarly large budget for promoting XRP (CCC:XRP-USD).

Meanwhile, DOGE relies on 200 part-time coders and a legion of online fans for support. Many look like core contributor Ross Nicoll – working for free to maintain an ever-growing system. It’s why much of its code gets lifted from other coins: there are simply not enough resources to develop proprietary code. Others are like the thousands of social media followers on Dogecoin; many constantly hound the developers to cap the currency’s supply.

If investors want to send Dogecoin prices to $10, far more is needed than buying the coin and posting tweets. It needs a benefactor to help fund improvements.

Already, the coin has some big-name backers. On Thursday, Elon Musk promised to literally send the coin to the moon on a SpaceX rocket. He could make an even bigger impact by starting a “Dogecoin Foundation” to fund development and promote adoption among startups and enterprises. So far he’s avoided that, blaming the “Dogecoin Whale“. Regular investors can help by contributing, rather than hounding developers.

Dogecoin to $10 is more than a dream – it’s a possibility that’s just around the corner if the community one day bands together.

On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing.

Polkadot, Dogecoin, Chiliz Price Analysis: 11 April

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Polkadot broke below an ascending channel and headed towards the $39.9 support. Dogecoin made yet another peak above $0.067 and there was a chance of a breakout over the coming sessions. Lastly, Chiliz showed rangebound movement and was expected to remain within a fixed channel over the short term.

Polkadot [DOT]

After forming two peaks above the $46 mark, Polkadot’s price moved south on the 4-hour timeframe and found support at $38.7. From that point, DOT formed higher highs and higher lows as an ascending channel appeared on the charts. In fact, a breakdown was witnessed at the time of writing on low volumes. Support levels reside at $39.9 and $38.7, but there was a threat of an extended sell-off.

The MACD showed a bearish crossover below the half-mark, while the RSI pointed lower from 43. If the bulls fail to hold on to another defensive line at $37.38 – a region that coincides with the 200-SMA (green), then DOT might see a sharp reversal over the short-mid term.

Dogecoin [DOGE]

In the last 10 days, Dogecoin formed its third peak above $0.067 but failure to break above this level flashed red signals in the market. If the price is unable to close above its overhead resistance, then another breakdown was possible. Such a case would highlight support lines at $0.058 and $0.055. Both these areas have shown buying after recent dips but a move below these lines could be damaging for DOGE’s short-term trajectory.

While the Awesome Oscillator did register consecutive green bars, more momentum needed to gather for a break above the upper ceiling. The OBV ticked up as buying volumes outmatched selling volume. The next target for the bulls resided at $0.075-resistance in case of an upwards breakout.

Chiliz [CHZ]

The ADX pointed south from 22 and showed a weakening trend in the Chiliz market. Even the 4-hour chart showed rangebound movement over the past few weeks as CHZ traded between $0.564 and $0.467. Since the price settled after seeing record levels during mid-March, it was possible that the cryptocurrency was in an accumulation phase.

The Bollinger Bands remained compressed and showed low volatility over the last three weeks. Even in a bearish outcome, the bulls are expected to maintain the price above $0.367 support.

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