Dogecoin was something of an outlier when it first started to gain traction in the market. It changed the way the crypto market sees and perceives the value of an asset despite what utility it may or may not have. The digital asset was only propelled forward by memes and community love. But in less than a year, the asset became one of the most valuable cryptocurrencies in the market.
Dogecoin’s developers have since tried to introduce use cases for the crypto. Its use as a payment method has given it a somewhat compelling utility in the space. However, this still does not change the fact that at its core, Dogecoin was not created to do anything besides be a joke, and this, says Changpeng Zhao, CEO of Binance, demonstrates the power of decentralization.
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People Determine The Value
Changpeng Zhao participated in a Q&A with Associated Press where he shared his thoughts on the most popular meme coin in the market. For Zhao, he does not understand Dogecoin or how it works really but explains that what he thinks of the digital asset does not matter in the grand scheme of things. This is one of the advantages of a decentralized ecosystem.
Dogecoin has fluctuated wildly in the past. However, the meme coin had grown to a point where it was no longer as volatile as it used to be. Also, it has persevered in the market. Through market crashes and dips, Dogecoin has held out. Its success has led to the creation of other successful meme coins like Shiba Inu and Folk Inu. Why are they valuable? Because their value is determined by people.
Doge trading at $0.23 | Source: DOGEUSD on TradingView.com
“If a large enough number of people in the community values it because it’s cute because they like the meme, then it has value,” Zhao pointed out. The CEO added that an asset only needs one other person who is willing to buy it to be valuable and since people are willing to purchase meme coins, then they are valuable.
“For something to have liquidity, you need a large number of people to want to buy it or sell it. Once you have liquidity, a thing has value, according to the neutral market. So it’s not up to me to judge it.”
Is Dogecoin A Bubble?
When asked if the properties listed above for the meme coin qualified it as a bubble, Zhao answered, “To some extent, yes. But it’s not a black and white thing.” Dogecoin has been described as a bubble since it had first started climbing in value earlier in the year. However, the altcoin has maintained value through all of that time to now, albeit at a lesser value.
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The Binance CEO explained that trying to define what a bubble is can be tricky. Assets that have dropped more than 80% like Bitcoin are usually referred to as bubbles, but Bitcoin had recovered to even higher values after the drop. Zhao also pointed to Amazon’s 90% drop in the early 2000s but that it is now one of the most valuable companies in the world. Most would say it went through a bubble, but CEO Jeff Bezos would disagree, says Zhao.
As for Dogecoin, Zhao pointed out that as long as people understood the risks associated with investing with the digital asset, then it’s all good.
Featured image from Coingape, chart from TradingView.com
