Dogecoin Is Soaring While Bitcoin Lags. Thank Elon Musk Again, of Course.

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The “meme” cryptocurrency

Dogecoin
was a standout in the digital asset space on Tuesday, running higher to start the week as Bitcoin and other tokens lagged after falling by the most since the bankruptcy of FTX rocked the market more than two months ago.

As usual, Dogecoin die-hards can thank Elon Musk for the price spike.

The price of Dogecoin ripped some 9% higher between Monday and Tuesday, while

Bitcoin
 led the pack of cryptos downward, tumbling by as much as 5% on Monday—the most since FTX’s Nov. 11 bankruptcy—before rebounding slightly on Tuesday. Crypto traders at large are bracing for the next interest-rate decision from the Federal Reserve on Wednesday, paring gains after one of the best starts to a year on record.

Dogecoin is a so-called memecoin, named so because it was originally designed as more of an internet joke than a serious blockchain project, referencing the “doge” meme involving a Shiba Inu dog. Now the ninth-largest crypto, it has inspired dozens of spinoffs, including a token called Shiba Inu that is the 14th-largest digital asset.

Shiba Inu
was buoyed alongside Dogecoin on Tuesday, trading in the green amid a sea of red across the crypto landscape.

A spike in the price of Dogecoin coincided with a report from the Financial Times that Elon Musk—the

Tesla

(ticker: TSLA) CEO and owner of Twitter—is exploring more ways to expand payments on the social media platform he bought last year. 

Musk is considering allowing Twitter users to reward creators, buy items through the platform, and pay one another, according to the FT report, which cited multiple anonymous sources familiar with the matter. While Musk wants a payment system to be fiat first and foremost—supporting the dollar and other currencies—it should be built for crypto functionality to potentially be added later, according to the report.

While Dogecoin tends to trade in step with other cryptos, it has established a history of rallying on news linked to one person—Musk, who has dubbed himself “Dogefather” and been associated with the ‘jokey’ crypto for years. Musk has hyped Dogecoin through tweets and toyed with its price through references on TV comedy show Saturday Night Live.

But those rallies have become a bit more material over the past year, since Musk made a bid for Twitter in early 2022. The takeover of Twitter by Musk—an outspoken proponent of cryptocurrencies—inspired hope that cryptos, and especially Dogecoin, may be put to legitimate use on the platform, spurring adoption and supporting prices.

So far, any price spikes on speculation and optimism have mostly been met by a later fall back. Dogecoin remains down by almost 90% from its May 2021 record high, and has lost more than one third of its value since November alone.

The latest jump may prove to be more of the same, especially as cryptos look vulnerable to a retrace after their eye-popping start to the year. But at some point, perhaps, Musk may just prove the Dogecoin die-hards right.

Write to Jack Denton at jack.denton@barrons.com