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- Dogecoin has rallied 14,000% year-to-date, bringing its market value to more than $85 billion.
- That surge has helped catapult dogecoin to becoming the fourth most valuable cryptocurrency.
- Dogecoin eclipsed XRP on Tuesday after the meme-inspired cryptocurrency surged about 60%.
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Dogecoin is now the fourth largest cryptocurrency by market value, according to data from CoinMarketCap.
A 14,000% year-to-date rally has pushed the meme-inspired cryptocurrency to a market value of more than $85 billion, eclipsing ripple's market value of about $71 billion.
The recent move higher in dogecoin came on Tuesday, when the cryptocurrency surged more than 60%, likely in anticipation of Elon Musk's SNL debut this weekend according to one analyst, as Musk has been a long-time proponent of the cryptocurrency and called it "the people's crypto."
Now, only 3 cryptocurrencies are bigger than dogecoin. Binance coin is worth $99 billion, Ethereum is worth $388 billion, and bitcoin is worth more than $1 trillion.
The surge higher in cryptocurrencies has accelerated in 2021, with bitcoin up more than 80% year-to-date, and Ethereum up more than 300%. Many investors bidding up the digital coins view it as an inflation hedge as the Fed prints money and Congress spends money to help stimulate an economic recovery from the COVID-19 pandemic.
But not everyone is buying that inflation hedge argument. Analysts from Bank of America argued that the only reason to buy cryptocurrencies is for price appreciation, not for diversification or as a hedge.
"Looking year by year, we find that Bitcoin has been positively correlated with CPI inflation in 5 out of the 9 past years, with the largest correlations in 2014 and 2018...However when looking at correlations with inflation surprises since 2011, we find that Bitcoin has among the lowest co-movements, lagging most asset classes such as commodities, TIPS, and EM FX in particular," BofA explained.
Investors likely aren't buying dogecoin as an inflation hedge since it doesn't have a fixed supply. Instead, it's an inflationary coin, with 5 billion new dogecoins hitting the market every year. This gives credence to the idea that investors are bidding up dogecoin moreso as a joke, or in speculation of further price appreciation.