The rise of Dogecoin and Shiba Inu. What sparked new investor interest

Posted 16 August, 2022

Over the past week, Dogecoin and Shiba Inu tokens have shown significant growth: DOGE has risen in price by 12% and, with a capitalization of more than $10.4 billion, has entered the top ten leading cryptocurrencies. The coin outperformed the Polkadot (DOT) cryptocurrency, widening the gap with its “meme” competitor.

The SHIB token ranks 12th among cryptocurrencies by market capitalization - $9.2 billion. Since the beginning of August, it has grown by $2 billion, and the coin has risen in price by 28% in a week.

Interest in “meme” tokens is partly fueled by the news, such as mentions of these cryptocurrencies by Elon Musk, Mark Cuban, and other celebrities. But the development of these projects and new partnerships with an increasing number of companies affect the value of the coins.

In early August, developers Shiba Inu announced the creation of a mobile game called Shiba Eternity, and Binance added SHIB to the list of currencies that can be used for payments with the Binance Visa Card debit card. In July, the Elon Musk Loop tunnel network in Las Vegas began accepting travel payments in Dogecoin.

Experts told RBC-Crypto what the growth of Doge and Shiba Inu rates is connected with, whether the development of projects affects this, and what are the prospects for these cryptocurrencies.


Whale shopping


The increase in the price of meme coins was provoked by the growth of one of them - SHIB, says Roman Nekrasov, co-founder of the ENCRY Foundation. According to him, the last week there has been activity of large wallets in SHIB trading: on August 10, one of the whales bought SHIB for more than $3 billion, which gave a powerful impetus to the price of the token. After that, small retail investors joined the trades and growth accelerated to almost 30% very quickly, the expert explained.

He said that there are also positive reports about the development of the project itself, which turned 2 years old in early August - a long time for cryptocurrencies. The Visa SHIB Burn card was recently launched, paying for which users receive a reward in SHIB, the expert added. In his opinion, the main reason for the growth of SHIB is the actions of "whales", and Dogecoin followed SHIB, as is often the case in the meme coin niche.

In addition, the expert drew attention to the fact that bitcoin has not been able to show significant growth for a long time. And during periods of such calm, traders prefer to send part of the funds to speculative trading in meme-coins, which can potentially bring income quickly enough, Nekrasov explained.

The analyst also noted that despite many other meme coins, there are no prerequisites for the emergence of serious competitors for SHIB and Dogecoin in this niche. According to CoinMarketCap, significant trading volume occurs with these two tokens.


Technical factors


According to the head of the investment department of ICB Fund Aaron Chomsky, a significant increase in the most popular meme-tokens Dogecoin and Shiba Inu is due to technical factors. 

The increase in quotations of such assets serves as an indicator of sentiment among retail investors, the expert says. According to him, despite the absence of significant news, the decrease in tension in all financial markets after the publication of the inflation report in the United States on August 10 could play in favor of the growth in prices for these cryptocurrencies.

Macro stats reinforced the hope that the Fed will be restrained in the issue of tightening policy, the specialist said. He explained that this strengthened the optimism on Wall Street and deprived speculators in the digital asset market of reasons for taking profits.


Foggy prospects


At the same time, Chomsky noted that the current situation is only a short-term reaction, the future prospects of mem-tokens remain vague. Despite attempts to develop ecosystems (the game Shiba Eternity, Libdogecoin), there are no prerequisites for the return of the previous hype, which is confirmed by Google Trends, the expert explained.

In his opinion, the crypto winter remains, on-chain indicators show little activity, and there is no more free liquidity in the markets. Retail investors would rather look towards Ethereum in anticipation of the transition to Proof-of-Stake, the expert concluded.


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