Commentary: Is Dogecoin the next investment craze after GameStop?

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The price of the “memecoin” surged more than 800 per cent on Jan 29 – a boost coinciding with that of GameStop’s share price, say finance professors.

MELBOURNE: One of the most difficult problems in finance right now is figuring out the fundamental economic value of cryptocurrencies. And the past week has complicated this further.

Launched in 2013, there are now 100 billion Dogecoin in existence, with as many as five billion new coins minted each year.But how can a currency with a seemingly unlimited supply have any value at all? And why did Dogecoin’s price suddenly surge more than 800 per cent in 24 hours on Jan 29?AdvertisementDogecoin is one of the original “altcoins”: Cryptocurrencies released in the few years after the pseudonymous Satoshi Nakamoto first released Bitcoin into the wild.

The cryptocurrency was created by software engineers Billy Markus and Jackson Palmer – although Palmer, an Australian, has since walked away from the project.They branded it with the Doge meme partly to be funny, but also to distance it from Bitcoin’s then questionable reputation as a currency for illicit transactions.

But Dogecoin is best thought of as a cultural product, rather than a financial asset. The reality is few cryptocurrency users hold it as a serious investment or to use in regular transactions. Cultural assets such as Dogecoin are hard to systematically value when compared to financial assets, a bit like how we don’t have a fundamental theorem for pricing art.

 

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