The favorite meme coin of many crypto investors, Dogecoin (DOGE -1.17%)boasts another impressive performance today. This dog-inspired cryptocurrency is now up 7.7% over the past 24 hours, as of 12:45 p.m. ET, extending its impressive winning streak over the past few days and lifting the asset’s one-month return digital at over 185.% at the time of writing.
Of course, most of Dogecoin’s recent moves are tied to former President Donald Trump’s re-election. This token saw surges in a single day of more than 20% after the elections, and almost tripled in just one month. It’s clear that Elon Musk’s proposed “Department of Government Efficiency,” a nod to Dogecoin given the acronym DOGE, has helped. And where there are discussions among investors in the crypto community, there is usually disproportionate enthusiasm among investors. coin investors. It’s true.
That said, there appear to be other key factors driving Dogecoin’s current move. Let’s take a look at what’s propelling this token higher today.
Elon Musk’s participation
While the story around Dogecoin appears to remain primarily the age-old narrative focused on coin hype (this time with an election-related catalyst), there is another key catalyst that investors are watching when it comes to Dogecoin: Musk’s potential stake in Dogecoin.
An intriguing (but unsubstantiated) recording of Musk discussing a personal stake in Dogecoin, as well as a corporate stake in Bitcoin owned by SpaceX, appears to be a key driver of the current evolution of the meme coin. The recording certainly sounds like Musk and would make sense, given his continued nods to dog-inspired crypto.
Again, it is unclear how large this stake is and whether Musk is still buying Dogecoin. But for members of the Dogecoin community, having Musk as a cheerleader for this project is clearly a good thing, and speculators are following suit with great buying activity.
Beware of this rally
Like other coin projects, Dogecoin is an inflationary token with no supply cap. This means that in theory an unlimited number of Dogecoins can be minted, although the project burns tokens from time to time in an effort to keep the supply increasing at around 5 billion coins per year.
This simply means that for the price of Dogecoin to increase in line with its valuation, investors will need to purchase more than the annual token issuance over time. As the price of Dogecoin approaches the $0.50 level, this could mean as much as $2.5 billion in capital flowing into this project every year, simply to keep its price stable. On this basis alone, I am wary of this project’s potential to reach new, unprecedented heights. But it’s clear that anything is possible during hype cycles like this.
Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool posts and recommends Bitcoin. The Mad Motley has a disclosure policy.