Cryptocurrencies such as Dogecoin, bitcoin, and ether surged to highs this year. Significantly few investors would have predicted this situation a year ago.
The craze in nonfungible tokens led to a burst of popularity of Ethereum, which is the blockchain-based computer network. The in-house currency Ether rose to record levels after more people adopted the technology. NFTs are similar tokens as bitcoin connected to a real-world item sold as a unique digital property.
In this year, when some individual investors used social media for sending asset prices soaring, Dogecoin defined the power of memes. It is a cryptocurrency created as a joke. However, it has risen more than 15,000% in 2021.
Dogecoin’s total market value increased to more than $81 billion at its peak that reached earlier this month. It was higher from $500 million at the end of last year. DOGE received even more attention from Musk and Snoop Dogg, which turned social-media users into traders encouraging new buyers to invest. It pushed it to $1. Now, it is trading about 50 cents.
The creators of Dogecoin didn’t intend for it to give it any meaningful value. However, traders are speculating that the token can keep climbing on social-media momentum. That can make investors vulnerable to losses as prices swing once the hype fades.
Some Swings in Prices
Dogecoin’s swings are also warning signs to bitcoin investors. Bitcoin bulls point to acceptance among institutional investors as a critical driver of the rally. There are signs that institutional demand has flagged in recent months even as the price has soared. According to a crypto exchange OKEx, the number of prominent bitcoin transactions dropped slightly in the first quarter. Also, according to London-based asset-management firm CoinShares, flows into crypto exchange products declined in January from a peak.
Trading volume climbed during the pandemic as a growing number of investors gained access to crypto markets through various platforms. The value of derivatives volume overtook spot trading, with investors placing more than $300 billion in bets on digital assets this year.
The growing use of cryptocurrency derivatives is essential because some investors can use these markets to place bets with a tiny amount of money.
The total cryptocurrency market value swelled to more than $3 trillion, up from $250 billion a year ago. Dogecoin alone is worth more than 76% of the companies listed in the S&P 500.