SINGAPORE (Nov 1): A parabolic surge in meme cryptocurrency Dogecoin over the past week is encouraging speculation that other so-called alternative tokens could also catch a speculative tailwind.
The coin represented by an image of a Shiba Inu has climbed to almost 15 US cents (71 sen) from roughly six US cents over the period, an advance that in percentage terms far outstrips the performance of top token bitcoin.
The proximal cause is the US$44 billion purchase of Twitter Inc by Elon Musk, a long-time supporter of the coin. Kunal Goel, a research analyst at Messari, said that some traders believe Musk will integrate the token into the platform.
Musk on Tuesday tweeted a picture of a Shiba Inu in a Twitter T-shirt, catalysing the latest leg-up in the Dogecoin price. His move also evoked memories of how past posts by the billionaire sparked frenzied rallies in the token — although that was mainly during the height of the pandemic when liquidity was flush, unlike today.
“Historically, a strong rally in [Dogecoin] has marked the beginning of an ‘alt szn’ — a time period characterised by aggressive risk-taking behaviour where capital flows to crypto assets other than bitcoin,” Priyansh Patel, an analyst at Delphi Digital, wrote in a note.
Patel said the second-largest token, ether, has posted notable gains in Dogecoin’s slipstream but added the rider that it remains to be seen if these surges are “merely generating exit liquidity before we hit new lows”.
The big event risk for global markets is the US Federal Reserve policy meeting on Wednesday, when another steep interest-rate hike is expected. But any sign of a possible pivot to a slower pace of increases could fuel optimism after a painful year for investors due to aggressive monetary tightening.
It remains very unclear what, if anything, Musk would do around Dogecoin and Twitter. He has long expressed support for the coin, quipping about his status as “The Dogefather” and earlier announcing that he owned some of it along with bitcoin and ether. He has also previously tweeted that it can be used to buy Tesla Inc merchandise.
A token like Shiba Inu could “see some inflow from speculative capital following the massive rally” in Dogecoin, Fundstrat Head of Digital Asset Strategy Sean Farrell wrote in a note.
Dogecoin — originally created as a joke in 2013 — is now the eighth biggest token after its market value scaled US$20 billion, according to CoinGecko.
The bigger coins were calmer on Tuesday, with bitcoin edging up to US$20,600 and ether adding about 2% to knock on the door of US$1,600 as of 2.38pm in Singapore.
As ever, it is very much buyer beware in the notoriously capricious crypto sector, which is still nursing the wounds of a US$2 trillion wipeout from a November 2021 peak.
What goes up in a straight line “tends to revert to the mean quicker than the average retail investor can pull their money”, Antoni Trenchev, co-founder and managing partner of Nexo, warned earlier this week.
