Around seven years ago, in 2014, 15 year old me was intrigued by cryptocurrencies. At the time, Bitcoin was hovering around $800, and the talk of the town was no how much cryptocurrencies were worth but how increasingly harder it was to mine. The “Explain like I’m Five” rundown for crypto mining is that computers figure out blocks of mathematical equations, and for doing so, get allocated Bitcoin/crypto.
The higher a computer’s contribution, the more Bitcoin they receive. The better the computer, the higher the contribution, the more coins the computer gets.
As more and more Bitcoin get mined, the harder the mathematical equations get. Therefore, there becomes a point where a lower powered computer’s contribution will reward them with less Bitcoin than it cost to power the machine, becoming not worth mining it.
My computer wasn’t the best – so mining Bitcoin around this time was not an option as I would’ve received barely any Bitcoin (Remember, I was a 15-year-old that would have never thought Bitcoin would’ve reached the levels it’s at right now.) However, other cryptocurrencies still provide some yield for your electricity bill. The one I picked? Dogecoin.
At the time, I mined around 30,000 Dogecoin, which was worth maybe $8 U.S Dollars. It is now worth $1,500 U.S Dollars. Jackson Palmer, an Australian programmer, created the coin in 2014 and has admitted to making the coin as a joke. Now, assuming people held on to their coins, some serious money is currently circulating around. It would be normal to see people donating 50,000 – 100,000 coins to random people on the /r/dogecoin subreddit. Many people held millions in Dogecoin, which is now undoubtedly worth way more than they would have ever expected it to be worth.
I bring this up because Dogecoin, unlike Bitcoin, has an infinite number of coins that can be mined. Therefore theoretically, the value of Dogecoin shouldn’t rise to a significant amount. The reason why Dogecoin is worth around 5 cents now is due to the rise of retail traders. Sprinkle that with the recent endorsement for cryptocurrency by the wealthiest person in the world, Elon Musk, and you have yourself a recipe for the most unexpected generation of wealth.
The retail trader has seen their influence in the limelight recently, with their collective power inducing one of the most legendary short squeezes of all time with GameStop. Now, they are one of the main factors contributing to the run in Dogecoin. Are there any fundamental reasons in the run-up to Dogecoin? Not really. However, this shows what retail traders can do collectively.
Many institutions are now, if not they should be, looking at what retail traders are looking at to lower their risk, like what happened to GameStop.
What’s next, retail traders?