Dogecoin, a cryptocurrency that started as a gag based on an internet meme about Shiba Inus, made headlines this weekend when its market capitalization briefly spiked to $2 billion. That’s up from just $24 million at the beginning of 2017. Again, this is for a currency that was created as a joke which, according to its creator, hasn’t been updated in two years.
Although the bubble seems to have been punctured for now — the market cap has fallen to $1.6 billion as of this writing — fear and uncertainty has spread throughout the Dogecoin community, which primarily lives on a subreddit where all posts appear in Comic Sans.
“I don't make price predictions, but I hope anyone buying into Dogecoin at these prices is aware that the vast majority of its value comes from market manipulators and speculation, not actual use as a currency,” said Ben Doernberg, a former board member of the Dogecoin Foundation, in an email.
Dogecoin co-founder Jackson Palmer, who started the project in 2013 as a riff on the media frenzy about cryptocurrencies like Bitcoin, also expressed misgivings about the currency’s rising value. It is “totally possible that price manipulation is taking place, as the markets are unregulated and anyone can tap into an exchange API and wreak havoc,” he told The Outline. For example, bad actors could write a script to trade back and forth with themselves on an exchange with zero or no transaction fees and drive up the price.
If the price of Dogecoin is being manipulated by a bad actor, it wouldn’t be the first time. In its early years, Dogecoin was whimsical and powered by goodwill: You’d use it to send micro tips to people you liked on Twitter, for example. It attracted an unusually positive online community that used the cryptocurrency to raise funds for odd-yet-wholesome causes including around $30,000 to help bring Jamaica’s two-man bobsled team to the Sochi Winter Olympics in 2014.
But in 2014, shortly after the bobsled fundraiser, an investigation found that a pseudonymous hedge fund manager was likely making large trades with himself in order to drive up the currency’s price before selling off his holdings at a profit — a move that rankled longtime fans.
“The problem is, as the value goes up, we're going to attract people ... who don't care about the personality and culture.”
Cryptocurrency markets are relatively small, which makes it easier for bad actors to influence. Even in Bitcoin, the de facto cryptocurrency, just 1,000 people reportedly own 40 percent of the market. When these “whales” move or liquidate funds, it can send the entire market into a spin — and in the little-regulated world of digital currency, it’s often legal for them to coordinate large trades. It’s not clear how many people own Dogecoin, but with just 100,000 subscribers on Reddit, the pool is likely even shallower than Bitcoin.
In 2015, a cryptocurrency exchange funded by the community evaporated, along with its founder and what was then worth between $2 million and $4 million in Dogecoin. Most community investors didn’t lose a fortune, but many felt burned by the act of bad faith. It was a betrayal of the scene’s cozy aesthetic, and a sign that no space is safe from the greedy temptations of the financial world. “Because the Dogecoin community was based so wholly on generosity, we were like sheep to the slaughter,” a pseudonymous user said of the incident.
“Bitcoin has this well-earned paranoia about strangers on the internet, but Doge, the meme, is this hopeful, optimistic worldview,” Doernberg told Motherboard in 2015. “It turns out, that's very attractive to predators.”
After those scrapes, Dogecoin largely fell out of the headlines until its price started to spike recently — though there are still some stores that accept it, and it does have a few volunteer developers who keep abreast of security issues. But now, with an overall value that’s edged out many serious crypto contenders, the community is reckoning with what that influx of value and attention means for its future. The Dogecoin subreddit is still brimming with positive memes, but in one popular thread this week, community members gathered to discuss ways to keep the scene clean and friendly. “The problem is, as the value goes up, we're going to attract people into this sub who don't care about the personality and culture,” wrote one user.
“I have a lot of faith in the Dogecoin Core development team to keep the software stable and secure,” Palmer told CoinDesk, “but I think it says a lot about the state of the cryptocurrency space in general that a currency with a dog on it which hasn't released a software update in over 2 years has a [billion dollar] market cap.”