Rockets aren’t the only endeavors that Elon Musk is elevating into the stratosphere.

After experiencing a three-year slump, dogecoin is on the rise again, experiencing a 250% increase since Donald Trump’s election – symbolizing a broader wave of positivity in the sector, linked to Trump’s outreach to cryptocurrency supporters during his campaign.

Trump’s informal appointment of Musk to what he refers to as the Department of Government Efficiency – shortened to D.O.G.E – has further fueled the excitement surrounding the dog-themed meme coin.

This is not the first time Musk, who likes to call himself the “Dogefather,” has ignited interest in dogecoin.

In May 2021, its value surged in anticipation of Musk’s guest spot on “Saturday Night Live.” In one sketch, Musk played a financial analyst responding to a Weekend Update host’s persistent question, “What is dogecoin?” After much avoidance, Musk’s character ultimately confessed it was a hustle. Following this, the coin’s price plummeted sharply. Just over a year later, it had lost more than 90% of its peak value.

The steep losses hit small investors hard. In 2022, one investor filed a class action lawsuit against Musk for alleged market manipulation and insider trading, although the case was dismissed in August 2024.

What drives the volatility of dogecoin – a meme coin that was never meant to be taken as a serious investment?

We’re all in this together

Launched in 2013 as a satire of bitcoin and other cryptocurrencies striving to disrupt traditional finance, dogecoin originated from two individuals from different parts of the world who connected online, adapted the code of an existing coin, and branded it using the popular Doge internet meme featuring a Shiba Inu dog and humorously phrased captions: “wow much coin.”

While their original goal was to create an inconsequential and unappealing coin, it has transformed into one of the most popular and durable cryptocurrencies out there.

After the initial surge of dogecoin in 2021, I explored how its enthusiastic community of influencers and everyday investors worked together to garner significant attention and funding for this humorous currency.

To understand the appeal of such absurd investments, one must consider the time and effort that users invest in these networks, along with the rewards, both financial and social, they reap in return.

Meme coins operate as collaborative undertakings. Participants in these online communities have a financial motivation to act as passionate promoters: the higher the value of dogecoin rises, the greater their investment grows. Moreover, they gain social affirmation from fellow meme coin supporters by advocating for the coin.

Essentially, behind every meme coin is a collective of individuals united in a common purpose to generate increased wealth.

Dogecoin and its peers are advertised by their supporters as crypto movements, shared journeys, and community-driven projects. Successful crypto ventures are characterized by complex networks of trust, whether it’s trust in the technology, belief in its future growth potential, or assurance that influential individuals within the networks won’t take advantage of others.

This loyalty is interwoven throughout a global network of users who tirelessly work to promote their coin and showcase their unwavering dedication to its success.

During price upswings, the collective buzzes with enthusiasm.

When prices tumble, community members encourage each other’s – and their own – convictions that this is merely a temporary dip and that their combined efforts will eventually produce substantial rewards. Even in the harshest of crypto winters, such ritualistic behaviors enable these speculative communities to survive. Community becomes a substitute for financial loss.

Investment tactics in these communities – and the confidence behind their success – hinge on repeating and resharing discussions from others, akin to any traditional internet meme.

Trolling traditional valuation

Grasping the true value of meme coins diverges from evaluating traditional assets, such as stocks and tangible goods. These assets are grounded in fundamental principles based on a company’s financial performance or public demand for essential products, spanning from coffee to oil.

In contrast, the fundamentals of meme coins are reflected in their network engagement, such as daily active users, alongside more abstract metrics like social sentiment and mindshare – the level of public awareness a coin has attained compared to its competitors.

It’s crucial to recognize that traditional asset valuations are also influenced by social dynamics. The key distinction lies in the fact that meme coins offer minimal productive activity and contribute nothing to the economy. Occasionally, attempts by their proponents to create financial services around them are often regarded as mere afterthoughts, primarily intended to generate additional speculative excitement.

Meme coins challenge conventional valuation standards and poke fun at the doctrines followed by mainstream investors.

That’s precisely the intent.

Participating in meme coin communities – or any crypto community, for that matter – involves embracing an alternative economic experience. They function as speculative playgrounds, allowing participants to step beyond established investment norms.

Who let the Doge out?

Musk embodies the meme coin influencer.

Recognized as the world’s wealthiest person, many view him as a paragon of savvy investing. His extensive follower network extends far beyond dogecoin’s social realm. His promotional approach is light-hearted – so much so that the judge in his class-action lawsuit dismissed his dogecoin tweets as simple “puffery,” arguing that “no reasonable investor could rely upon them.”

Dogecoin peaked in memetic popularity during Musk’s “Saturday Night Live” appearance. Now, instead of sitting at the Weekend Update desk delivering humor, he finds himself in Trump’s office advising the president-elect. Essentially, dogecoin’s influence has shifted from pop culture to political significance, reaching an even wider audience.

While dogecoin has gained particular benefits from Musk’s ties with Trump, the larger cryptocurrency landscape is abuzz with optimism for a crypto-friendly administration. During a keynote speech at the Bitcoin 2024 conference in July, the GOP candidate pledged to make the United States “the crypto capital of the world.” After funneling $131 million into the election cycle, the crypto sector can now boast 274 pro-crypto members in the U.S. House of Representatives and 20 pro-crypto U.S. senators.

With Musk aligning himself with Trump and a shifting regulatory environment, the dog can once more roam free.

Maximilian Brichta, Doctoral Student of Communication, University of Southern California

This article is republished from The Conversation under a Creative Commons license. Read the original article.