Dogecoin Leads the Way in a Crypto Surge: So What’s The Explanation?

Last Updated on July 27, 2021

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Starting early morning (4:45 AM) Sunday, July 25, and for the following 24 hours, three key cryptocurrencies rallied. Dogecoin did the best, up 11%. Bitcoin was a shade behind, up 10%. Ethereum also did impressively, at 7.3%.  

There was another spike in mid-afternoon Monday. Bitcoin didn’t peak until 5 PM Monday. Dogecoin and Ethereum each hit their tops earlier. 

The surges came as bounceback after nasty weeks. ETH/SD, for example, fell from $2.3 K to below $1.8 K from July 7 to the 20th. It is, at this writing, back in the neighborhood at which that slide started.

Dogecoin Leads The Way

One surprising feature of the Sunday-to-Monday move, though, was that it was Dogecoin that led the way. The one that started as a joke and that doesn’t have the inflation-limited features that are crucial to the attractions of the rest of the Crypto family — the one that shows itself to the world as the face of a cute dog — led the charge. 

In this instance, the charge may have been set off by the idea that Amazon is preparing to accept Cryptos as payment, an idea inspired by a Help Wanted ad on Amazon’s website looking for a “digital currency and blockchain product lead.”  

But surely that is a ways down the road from an actual decision to start accepting such a mode of payment. And if Amazon were to start doing so, surely the Altcoin it would start with would be Bitcoin, the matriarch of the family. So again: why did Dogecoin lead the charge? 

Perhaps this is just an example of what the famous economist John Maynard Keynes called “animal spirits,” reincarnated as “canine spirits,” the stress-born confidence, even exuberance that can attach itself to assets beyond rational explanation.    

Why Has it Survived?

Less philosophically: why does jokey Dogecoin persist eight years after its launch, much less lead upward charges in the value of the Crypto family now and then? 

It persists largely because it is popular with miners. And it retains that popularity because it is still significantly less competitive than mining Bitcoin, and less challenging for the algorithms, so new blocks are discovered more easily.  

As with the miners of other Altcoins, the miners of Dogecoins are competing for the right to add new blocks to the blockchain ledger through the use of specialized computing equipment.  In the case of Dogecoin, new blocks are discovered once a minute. For Bitcoin, the analogous figure is: ten minutes. It is easy to understand why the former is more psychologically appealing than the latter. 

But the fact that it is easier to  obtain zirconium dioxide than diamonds, and easy to synthesize a diamond like form out of it, does not explain the market appeal of cubic zirconia as a synthesized material.  What might explain it? There are people who want it to seem like they have impressive bling, but who have to pull off the look on an unforgiving budget.

Likewise, we might suggest, there are people who want to be thought, and who want to think of themselves, as participants in the Crypto world. Some of them may want to do so on an unforgiving budget. For them, Dogecoin is not a joke, it is a fashion accessory. 

A Final Thought

It is possible that the world might come to be “of two minds” about diamonds. On the one hand, they still glitter and speak of elegance. On the other, they are often mined in the midst of violent conflicts, which they can help to finance. In such a state of public ambivalence, zirconia might do very well: it appeals to the love of glitter and frees the buyer from guilt pangs.

One might imagine a similar moment for Bitcoin. On the one hand, it is decentralized, non-fiat money and that carries attraction. On the other, it is using up a lot of computer power, requiring ever higher amounts of electricity, and inspiring carbon emissions. In a state of ambivalence, Dogecoin seems to do well.