Dogecoin, a meme-inspired cryptocurrency, hit a record high on Wednesday after reaching about 69 cents.
With it’s price up over 12,000% this year, and with big names, like Elon Musk talking and tweeting about it, dogecoin has become one of the buzziest cryptocurrencies, alongside bitcoin, which itself hit a fresh record of over $63,000 last month.
Searches like “Is dogecoin the next bitcoin?” are even trending on Google.
But the two cryptocurrencies have major differences. Here are three important distinctions between dogecoin and bitcoin, according to experts.
Bitcoin has ‘built-in scarcity’
“There are many differences between dogecoin and bitcoin,” says Meltem Demirors, CoinShares chief strategy officer.
One of the “most important” is the supply of each, she says.
Dogecoin is inflationary, says Demirors, meaning “more doge is printed every minute of every day, giving doge a potentially infinite supply.”
For example, “every minute of every day, 10,000 more dogecoin are issued. That equates to nearly 15 million doge per day or over 5 billion doge per year,” she says.
An unlimited cap on supply can negatively impact value over time.
Bitcoin, on the other hand, has a finite supply of 21 million, which creates a “built-in scarcity … akin to the way that gold or diamonds are valuable because they are scarce,” James Ledbetter, editor of fintech newsletter FIN and CNBC contributor, says.
This scarcity is central to why bitcoin bulls argue for holding the cryptocurrency long-term – because it is limited, as demand increases, the price of bitcoin should as well.
Because of this difference, “I see most people trading dogecoin on a short-term basis,” with investors hoping to make a quick profit, “and choosing to hold bitcoin over a longer duration,” Demirors says.
Dogecoin was ‘created for sillies’
Another difference between dogecoin and bitcoin is the premise on which each was created.
Bitcoin launched in 2009 with an extremely detailed white paper written by Satoshi Nakamoto, the pseudonym used by bitcoin’s creator or creators. Nakamoto’s intention was for bitcoin to become a prominent decentralized digital currency. Bitcoin supporters see the cryptocurrency as digital gold and a hedge against inflation.
Trust in bitcoin has grown with institutional and retail investors during its 12-year run, which led to the cryptocurrency selling for record high prices this year.
In comparison, dogecoin was created as a joke in 2013 by software engineers Billy Markus and Jackson Palmer. Based on the “Doge” meme, which portrays a shiba inu dog, Markus and Palmer didn’t intend for dogecoin to be taken seriously.
It was “created for sillies,” Markus wrote in a recent Reddit post. “I threw it together, without any expectation or plan. It took about 3 hours to make.”
As a result, dogecoin lacks technical development and isn’t as secure as bitcoin.
Over the years, Markus was surprised to see how quickly the dogecoin community grew, as it bonded over a common love for the shiba inu dog meme, and recently, the cryptocurrency exploded after social media buzz from the likes of Musk and Mark Cuban.
“Dogecoin currently exists as a kind of inside joke,” Ledbetter says.
But “for many people, investing is becoming a form of entertainment,” Demirors says. “For dogecoin, the meme is the message. As the influence of FinTwit [financial industry twitter] grows, so will the memes and the way they move our markets.”
Nonetheless, both dogecoin and bitcoin have both been called risky investments, as cryptocurrencies are highly volatile. In fact, experts warn that investors proceed with caution before buying dogecoin, deeming its rally to be highly speculative. In turn, experts warn that people should only invest what they can afford to lose.
Bitcoin has a well-funded ecosystem
Though for many years dogecoin was developed by engineers who copied the exact code from bitcoin software, bitcoin has an extensive and well-funded ecosystem that does not exist with dogecoin.
Mike Novogratz, a crypto bull and CEO of Galaxy Digital, told CNBC’s “Squawk Box” on April 20 that bitcoin is “a well-thought-out, well-distributed store of value that’s lasted for 12 years and is growing in adoption, where dogecoin literally has two guys that own 30% of the entire supply.”
“I worry that, once the enthusiasm rolls out, there’s no developers on it, there’s no institutions coming in. But it’s got this moniker of the people’s coin right now,” Novogratz told CNBC on Wednesday.
“It’s a little bit of a middle finger to the system. I think it’s dangerous because once that enthusiasm dies, if it dies, you could have a long way down. But I don’t want to discredit.”
Coinbase Cofounder Issues Serious Crypto Price Warning As Bitcoin ‘Death Cross’ Fear Spreads
Bitcoin and cryptocurrency prices have struggled last week with the crypto market’s combined value slipping under $1.5 trillion—down from $2.5 trillion in May.
The bitcoin price, after getting an unexpected boost from Tesla billionaire Elon Musk last weekend, has resumed its decline over the last few days, falling back toward $30,000 per bitcoin.
Now, as bitcoin charts show the price 50-day moving average has fallen below the 200-day moving average—a pattern known as the “death cross”—Coinbase cofounder Fred Ehrsam has warned “most” cryptocurrencies and crypto-assets “won’t work” and “90 percent of NFTs” will have “little to no value in three to five years.”
Bitcoin’s “death cross,” despite its ominous name, appears to be a lagging price indicator. The last time the trading pattern occurred in March 2020, it heralded a huge bitcoin bull run that helped even smaller cryptocurrencies surge to all-time highs.
“People are going to try all sorts of things,” Ehrsam, who has gone on to found the blockchain investment firm Paradigm since leaving Coinbase in 2017, told Bloomberg this week, warning many of those smaller cryptocurrencies won’t survive. “There’ll be millions and millions of cryptocurrencies and crypto-assets, just like there were millions and millions of websites. Most of them won’t work.”
Coinbase, the San Francisco-based bitcoin and cryptocurrency exchange, went public this year at a huge $100 billion valuation but has since seen its market cap plummet, falling by a third amid waning interest among retail traders and global regulatory pressure.
Since bitcoin was created in 2009, thousands of cryptocurrencies have been created with crypto data provider CoinMarketCap currently counting just over 10,000 different coins.
Some, such as ethereum, the second-largest cryptocurrency after bitcoin with a market capitalization of $250 billion compared to bitcoin’s $660 billion, have established themselves as cryptocurrency mainstays—while others including EOS and, more recently internet computer, have made splashy debuts only to fade away over time.
Internet computer’s ICP token is down over 90 percent from its all-time high price set shortly after its launch in May, while EOS, which made headlines when it raised $4.1 billion ahead of its launch in 2018, is trading 80 percent lower.
Ehrsam also warned against investors betting on NFTs (non-fungible tokens). The popularity of NFTs, that use cryptocurrency technology to allow all manner of digital real estate from artwork to tweets, memes and YouTube videos, to be tokenized and sold via a blockchain, has exploded over the last few months—though data suggests the market is already significantly down on its early-May peak.
Banking Giant BBVA Opens Bitcoin Trading and Custody Service in Switzerland
Spanish banking giant BBVA’s swiss entity, BBVA Switzerland, has started offering bitcoin trading and custody services.
Announcing the news on Friday, BBVA Switzerland said the services will be available to all of its private banking clients from Monday, June 21. The launch comes six months after the bank began trialing the services in Switzerland.
“This gradual roll-out has allowed BBVA Switzerland to test the service’s operations, strengthen security and, above all, detect that there is a significant desire among investors for crypto-assets or digital assets as a way of diversifying their portfolios, despite their volatility and high risk,” said Alfonso Gomez, CEO of BBVA Switzerland.
While the bank currently only supports bitcoin, it said the aim is to also offer other cryptocurrencies in the future. As for the launch of the services in other countries, BBVA Switzerland said that would depend on maturity, demand, and regulation in those markets.
BBVA said its bitcoin services are novel as clients can manage their investments alongside traditional assets in the same portfolio. Customers willing to convert their bitcoin into fiat and vice versa can do so “without delays and without the illiquidity that affects other digital wallets or independent brokers,” said BBVA. That’s because the bank operates with several sources for converting cryptocurrencies, it said, without disclosing those sources.
BBVA’s services come as more mega-banks open up to the crypto space. In recent weeks, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, and other financial institutions have moved to provide crypto services to their clients.
Goldman Sachs Partners Crypto Management Firm Galaxy Digital, Offers Bitcoin Futures
Galaxy Digital’s co-president Damien Vanderwilt announced today that his firm has partnered with Goldman Sachs to help provide bitcoin futures products. The partnership marks one of the first occasions where an American multinational investment bank has partnered with a crypto asset service provider.
Galaxy Digital is a financial services and investment management innovator founded by the company’s CEO Mike Novogratz. Vanderwilt explains that Goldman Sachs, the bank with $2.1 trillion assets under management (AUM), may entice other financial incumbents to follow its lead.
“There’s a whole dynamic with the major banks that I’ve seen time and time again: safety in numbers,” Vanderwilt explained during his discussion about the subject. “Once one bank is out there doing this, the other banks will have [fear of missing out] and they’ll get on-boarded because their clients have been asking for it.”
According to Vanderwilt, Goldman depends on Galaxy because regulatory policy stops the multinational investment bank from handling the leading crypto asset directly. Max Minton, head of digital assets for Goldman’s Asia-Pacific region said during the announcement that the bank procures clientele with the assets they demand.
“Our goal is to equip our clients with best-execution pricing and secure access to the assets they want to trade,” Minton remarked. “In 2021, this now includes crypto, and we are pleased to have found a partner with a broad range of liquidity venues and differentiated derivatives capabilities spanning the cryptocurrency ecosystem.”
The statements from Minton and Vanderwilt follow the report that said Goldman was prepping to offer ether futures and options swaps. At the time, Goldman said “institutional adoption will continue” in the crypto space.
In mid-April Galaxy Digital revealed it had entered the bitcoin exchange-traded fund (ETF) fray when it submitted its Form S-1 registration with the U.S. Securities Exchange Commission (SEC).
Vanderwilt also said that when more institutional players join the crypto ecosystem volatility will grow less and less.
“You’re moving the market participants from being north of 90% retail, a huge chunk of which have access to ridiculous amounts of leverage, into an institutional community, who have proper, tried-and-tested rules and regulations about leverage, asset-liability mismatch, and risk,” Vanderwilt concluded.
“The more activity that moves into the institutional community, the less volatility there will be.”
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