Dogecoin: The Comedy-Driven Craze – What’s Behind Its Rise?

Elon Musk is not just launching rockets; he’s also elevating other ventures into new heights.

After experiencing a downturn over three years, dogecoin is on the rise again, climbing 250% since Donald Trump’s election – indicative of a broader sense of optimism in the market, linked to Trump’s outreach to cryptocurrency supporters during his campaign.

Trump’s playful appointment of Musk to what he refers to as the Department of Government Efficiency – or D.O.G.E for short – has also fueled excitement around the dog-themed meme coin.

This is not the first time Musk, who calls himself the “Dogefather,” has ignited enthusiasm for dogecoin.

In May 2021, its value surged ahead of Musk’s guest feature on “Saturday Night Live.” In one sketch, Musk depicted a financial analyst answering a Weekend Update host, who kept asking, “What is dogecoin?” After evading the question, Musk’s character ultimately confessed it was a hustle. The coin’s price then experienced a sharp decline. Over a year later, it had dropped over 90% from its peak.

The declines significantly impacted small investors. In 2022, one of them filed a class-action lawsuit against Musk for alleged market manipulation and insider trading, although the case was dismissed in August 2024.

What explains the volatility of dogecoin – a meme coin that was never designed to be a serious investment?

We’re all in this together

Doge was launched in 2013 as a parody of bitcoin and other cryptocurrencies aiming to disrupt traditional finance, with its origins stemming from two individuals from different regions who connected online, using an existing coin’s code and branding it with the popular Doge internet meme featuring a Shiba Inu, often humorously captioned: “wow much coin.”

Although their initial intent was to create a coin that was irrelevant and unappealing, it has since emerged as one of the most famous and enduring cryptocurrencies available.

Following the earlier growth of dogecoin in 2021, I explored how its passionate network of influencers and everyday investors worked together to attract significant interest and funding to this humorous currency.

To understand the appeal of such absurd investments, one must consider the time and effort that users dedicate to these communities, along with the financial and social rewards they gain in return.

Meme coins act as collaborative efforts. Participants in these online networks have a financial incentive to promote the coins enthusiastically; as the value of dogecoin rises, so do their investments. Additionally, they receive social affirmation from fellow meme coin aficionados by supporting the currency.

In essence, every meme coin is backed by a collective of individuals united by a common goal to create wealth.

Proponents promote dogecoin and similar currencies as crypto movements, shared journeys, and community-driven initiatives. Successful cryptocurrency projects are characterized by intricate trust networks, whether it’s trust in technology, confidence in its potential for future growth, or belief that influential members of the networks will act ethically.

This loyalty is intertwined through a global network of users who continually collaborate to promote their coin, demonstrating unwavering commitment to its success.

During price rises, the collective buzzes with enthusiasm.

When prices fall, community members reinforce each other’s – and their own – beliefs that this is simply a momentary challenge and that their collective actions will ultimately produce substantial benefits. Even during severe crypto winters, such ritualized behavior enables these speculative communities to endure. Community becomes a balm for financial setbacks.

Investment approaches within these circles – and the conviction behind their success – involve recycling and resharing discussions from others, much like any traditional internet meme.

Trolling traditional valuation

To grasp the true value of meme coins requires a different lens than that used for traditional assets like stocks and tangible items. These assets depend on fundamentals determined by a company’s financial health or public demand for essential goods, from coffee to petroleum.

In contrast, the fundamentals for meme coins arise from their network engagement, such as daily active users, alongside more abstract factors like social sentiment and mindshare – the extent of public awareness a coin has in the competition.

It’s crucial to recognize that traditional asset evaluations are similarly impacted by social influences. The primary distinction is that meme coins offer little productive activity and do not contribute to the economy. Rare attempts by their leaders to create financial services around them are often treated as mere afterthoughts, primarily to stoke further speculative excitement.

Meme coins defy conventional valuation principles and mock the doctrines followed by mainstream investors.

That’s precisely the point.

Being part of meme coin communities – or any crypto community – involves embracing an alternate economic experience. These platforms serve as speculative arenas where conventional investment guidelines can be disregarded.

Who let the Doge out?

Musk embodies the archetype of the meme coin influencer.

Recognized as the world’s richest person, he is often viewed as an exemplary investor. His extensive follower count reaches far beyond the dogecoin community. His promotion style is playful – so much so that the judge in his class-action lawsuit dismissed his dogecoin tweets as mere “puffery,” stating that “no reasonable investor could rely on them.”

Dogecoin reached the pinnacle of its memetic appeal during Musk’s “Saturday Night Live” appearance. Now, instead of delivering jokes at the Weekend Update desk, he finds himself in Trump’s office, advising the president-elect. Essentially, dogecoin’s memetic influence has transformed from pop culture to political relevance, capturing an even broader audience’s attention.

While dogecoin has gained specific benefits from Musk’s connection with Trump, the wider cryptocurrency ecosystem is buzzing with optimism for a pro-crypto administration. During a speech at the Bitcoin 2024 conference in July, the GOP candidate vowed to establish the United States as “the crypto capital of the world.” With $131 million invested in this election cycle, the crypto industry can now point to 274 pro-crypto members in the U.S. House and 20 pro-crypto U.S. senators.

With Musk aligning with Trump and regulatory landscapes shifting, the dog is free to roam once more.

Maximilian Brichta, Doctoral Student of Communication, University of Southern California

This article is republished from The Conversation under a Creative Commons license. Read the original article.