Here are five reasons why Elon Musk may be correct about Dogecoin being “money.”

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Dogecoin was a surprising factor in the cryptocurrency space in recent times. Within a few months, the “meme-coin” rose to the eighth position on CoinMarketCap. With a valuation increase of over 6500 percent over the last year, it was undoubtedly the most any coin has gained year-to-date during this time.

According to the latest data compiled by Coinbase and published by MarketInsider, the joke-coin’s trading volumes shot up 1,250%, close to $1 billion in the second quarter of this year. Moreover, from just $74 million a day in Q1, the average trading volume for dogecoin shot up to $995 million per day in the April to June period.

It began the year at around $0.004 and has since risen more than 15,000 percent to $0.70 in May. While the price had dropped significantly since then, it was still trading at $0.199 at the time of writing. Along with the coin’s enthusiastic community, “dogefather” Elon Musk can be credited with the majority of these gains.

On Twitter, the Tesla CEO has repeatedly rallied behind the coin, reversing its price trajectory whenever it entered a downtrend. Earlier today, Musk sent out another tweet to his followers, this time depicting his oft-stated belief that Doge is “real money.”

This tweet came on the heels of the digital asset’s larger price recovery over the previous week. During this time, it increased by nearly 10%. This was fueled further by Musk himself, who revealed at the recent “B-Word” event that he held Doge in his personal portfolio while also making generally positive remarks about the coin.

The price trajectory of Doge over the week revealed that the coin’s southbound movement bottomed near $0.160 on the day of the event. On the 21st of July, it completely reversed and shot up to $0.200. While it immediately corrected to $0.181 from that high, the movement since then has been mostly sideways.

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It wasn’t just the price that rose during this period; according to Santiment data, even its social sentiments followed a similar pattern. As shown in the chart below, the Average Sentiment for Doge has remained mostly low since its massive peak in May.

 

Source: Sanbase

However, the coin has reached new highs in the last week. Initially, it was because Elon Musk changed his Twitter profile picture in support of Doge, and then it was because of the aforementioned event. While these spikes were quickly followed by drops, they clearly show Musk’s influence on larger social sentiments regarding the meme coin.

Source: bitinfocharts

Even if Musk’s constant pumping temporarily improves sentiment and price movements, it cannot ignore the network’s many problems. Many of these support Musk’s claim that Doge is money, because a large amount of Doge is concentrated in a few addresses, just as fiat is concentrated in the hands of the wealthy. According to the attached table, a single address held over 36.7 billion Doge, or 28.14 percent of all Doge. Similarly, 93.4 percent of the total 130 billion+ coins in circulation were held by 0.79 percent of the total addresses.

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Source: Sanbase

More troubling is the coin’s lack of development activity over time. When Musk called for developers to work on the project during its peak popularity in May, the development activity on the attached chart increased dramatically. It did, however, clearly fall soon after the hype died down. These larger concerns demonstrate that Dogecoin is more akin to fiat than a decentralised network.

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