This week, IntoTheBlock takes a look at the on-chain activity for Dogecoin — how much of the hype is real?
Every week, IntoTheBlock brings you on-chain analysis of top news stories in the crypto space. Leveraging blockchain’s public nature, IntoTheBlock’s machine learning algorithms extract key data that provide a deeper dive into the major developments in the industry.
DOGE-Mania Continues
Dogecoin has outperformed beyond comprehension. The meme token reached a market cap as high as $88 billion on Wednesday, over 70% of Coinbase’s market cap and behind only Bitcoin, Ethereum and BNB in crypto markets.
The most recent run-up has been linked by many to the anticipation of Elon Musk’s Saturday Night Live show on May 8. The Tesla founder teased his show by referring to himself as the Dogefather.
As of May 5, 2021 via Twitter
Since Elon’s tweet, DOGE has increased as much as 150% within less than two weeks. Typically things like these are preceded with a “correlation does not imply causation” type of disclaimer — but who are we kidding?
It has become apparent time and again that Elon Musk, and to some extent Mark Cuban, has enough of a following to cause ripples throughout markets, with Bloomberg’s Matt Levine even dubbing it the Elon Markets Hypothesis, parodically referencing the efficient market hypothesis framework.
Beyond the most recent rally, DOGE has vastly outperformed in 2021. The meme token has managed to appreciate a whopping 13,700% within five months 🤯
The massive rally has even caught the eye of traditional media outlets like CNBC, The New York Times and CNN. Much viral, indeed.
Linked to these stories typically are stories of people making fortunes or simulations of how much money people could have made. While these anecdotes highlight the outlier scenarios, on-chain data provides a more accurate picture of how Dogecoin holders have benefited from the parabolic run-up.
By dividing a token’s market cap over the total number of addresses holding a token, IntoTheBlock obtains the average balance for a holder. In DOGE’s case, the average balance of a holder is currently $21,000, up from $217 at the beginning of 2021.
This increase in average balance is certainly remarkable (~97x), though not as high as its price appreciation (~136x).
The retail-driven mania comes as TikTok influencers have been predicting $1 DOGE over the last few months. While many hope this will occur — and it still might — activity on the blockchain has decreased relative to prior periods of hype.
As can be seen in the graph above, daily active addresses for DOGE hit a lower high despite prices extending to new highs. This points to the recent price action being driven by less players, potentially signalling decreasing momentum.
Overall, crypto markets have been taken by surprise on the meteoric rise of DOGE. Although it is impossible to predict if it will reach the coveted dollar mark, the hype around it has become evident throughout its price run-up and extensive media coverage. Ultimately, though it may not be the most popular thing to say, investors should stay cautious as many anticipate Elon’s SNL debut, but the market may be setting the bar too high.
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