The Relationship Between Dogecoin Rallies and Reddit Activity
Is there a relationship between meme cryptocurrency, Dogecoin's price pumps, and Reddit - as well as other social platforms - user activity? Recent bullish moves in the dog themed digital asset's price gains have been linked to certain Reddit groups dedicated to the joke token
In late January of this year, a digital asset based on a meme of a Japanese Shiba Inu dog known as Dogecoin (Doge) made waves when its price jumped nearly 400%. The so-called meme token (at the time) leaped to a new high of $0.0469 according to a CNN Edition report. What is most interesting is that the article attributed the digital asset’s price growth to a Reddit group known as SatoshiStreetBets.
The group, loosely named after famed Equities Short Stop trading group, Wall Street Bets is known for regularly organizing pump-and-dump operations, small-value, or low market capitalization digital assets. The group’s chat is reported to have been packed with user’s posts, praising the coin and forecasting a $1/Dogecoin price, as well as images of Shiba Inu dogs, in the days and hours prior to the digital asset’s price rally.
Dogecoin price jumps and Elon Musk
Tech billionaire, Elon Musk has also been known to contribute to Dogecoin’s price jumps. He has been claimed to have an influence on the price moves of the digital currency, an influence he exercises through Dogecoin-favoring posts (or Tweets) on popular social networking platform, Twitter.
Such was the frenzy created by his tweets in the second and third quarters of 2020, that he was joined by celebrities, Snoop Dogg, and rockstar, Gene Simmons. The trio managed to generate such enthusiasm around the digital asset back in may that Dogecoin reached an all-time high above $0.60 before the June-July crypto market dump.
The aforementioned Dogecoin rally also coincided with the addition of the asset to the global trading platform, eToro, which exposed the meme crypto-asset to a wide, new audience. An audience which, seemingly, was chomping at the bit to get in on the asset.
The Pump & Dump
The pump and dump operation is an age-old scheme. Almost as old as the stock market itself, where certain market operators collude to artificially raise the value of an asset. Only to sell out and leave a lot of unsuspecting investors holding an asset that will rapidly retrace all of its gains.
The practice is normally illegal, but with crypto currently unregulated, the practice has found a new home. Pump-and-dump operations occur pretty regularly in crypto. Reddit, Telegram, and Discord have been flagged as popular platforms for the organization of the operation.
The Data of Dogecoin of Wall Street
A University of Rome Study, by Massimo La Morgia, Alessandro Mei, Franco Sassi, and Julinda Stefa named The Doge of Wall Street: Analysis and Detection of Pump and Dump Cryptocurrency Manipulations performed a deep analysis of the pump-and-dump ecosystem. La Morgia and the team found a high prevalence of pump-and-dump fraud activity being organized on Social Media platforms; Telegram and Discord in particular.
Using an AI system the research team discovered over 900 pump-and-dump schemes on a single exchange platform, between mid-2017 to January of 2021. So, are Reddit users responsible for Dogecoin’s price rallies? Likely so.
