on the crypto
Bitcoin and Ethereum are updating their networks as adoption grows, while trading volume appears to be shifting from Dogecoin to other cryptocurrencies.
What happened
The famous cryptocurrencies Bitcoin and Ethereum (discover their quotation) are about to close a good week. As of this writing, cryptocurrencies have been up since last Friday afternoon, according to data from S&P Global Market Intelligence.
But not all popular cryptocurrencies are on the rise. For its part, Dogecoin is down by 6,5% in this time frame. And perhaps these divergent trends are best explained by why these cryptocurrencies are popular. It is not the same anyway.
So
Cryptocurrencies are speculative investments, but Dogecoin is perhaps more speculative than most. It was initially created as a joke and went largely unnoticed for years. Then, in 2020, the tokens began to rise in value as people on social media theorized what would happen if it ever reached $ 1 per coin - the coins were well below a cent at the time.
The buzz continued to get louder and eventually reached the ears of Tesla founder Elon Musk, who used his social media influence to further draw attention to Dogecoin. During this time, Dogecoin was not necessarily being adopted into commerce, but rather people were speculating on its value.
This is not to say that Dogecoin has no use, on the contrary, it can be used for things. For example, AMC Entertainment will soon be accepting Dogecoin as a payment option. But I think it's fair to say that people are investing in Dogecoin more than using them, hoping that the value will increase.
The problem here is that it appears that social media attention has shifted from Dogecoin to Shiba Inu coin, itself a parody of Dogecoin. In fact, it looks like Musk has found a new love, sharing Shiba Inu memes over the past few weeks. And now that Coinbase supports trading for Shiba Inu, it's easier than ever for speculative trading to go to Shiba Inu. As evidence of this change, consider that the trading volume for the Shiba Inu coin was more than double that of Dogecoin today, according to CoinMarketCap, even though neither was making headlines.
What happens now?
Dogecoin appears to be losing steam as other speculative cryptocurrency investments such as Shiba Inu gain prominence. That doesn't mean that utility won't increase for Dogecoin over time - it could. And that doesn't mean traders won't return to Dogecoin - they could. It is only in contrast to cryptocurrencies like Bitcoin and Ethereum, where utility is growing and serves as a catalyst for sending tokens higher.
For example, Ethereum is currently transitioning to what some are calling Ethereum 2.0. This update completely changes how the blockchain works and should make it faster and less energy-intensive. This is happening because coins are being used more than ever. The update, officially known as EIP-1559, should not only make it more useful, it could also send the value of the cryptocurrency to higher levels.
And as for Bitcoin, like Ethereum, it is carrying out an update commonly called Taproot. Again, the reason for the upgrade is utility - it needs to be able to process transactions faster and cheaper while requiring less energy. This is because its adoption is growing. El Salvador has adopted it as legal tender and Brazil has signaled that it could do the same.
Speculation is not the only guide
This does not mean that speculation does not drive the prices of Ethereum and Bitcoin. For example, Dallas Mavericks owner Mark Cuban recently upped Ethereum by suggesting it is the best cryptocurrency to buy. And that doesn't mean everyone will adopt these cryptocurrencies. For example, the president of Mexico recently said that the country will not use Bitcoin like El Salvador.
So Dogecoin can be used. And even Bitcoin and Ethereum can be pushed higher by speculation. But there appear to be predominant trends at play with each of them. It appears that Dogecoin is losing some of its luster with traders, as Bitcoin and Ethereum continue to gain long-term adopters. I believe this explains the divergent prices this week.
Finally, what happened last week doesn't really tell us what will happen in the weeks to come. The cryptocurrency space is young and still prone to rapid change. What happened this week could turn around next week.
