If you had bought $1,000 worth of Dogecoin (DOGE 3.78%) on Jan. 1, you would have had $93,127 when the cryptocurrency peaked on April 16. Even though the rally has faded since then, you would still be up about 4,500% at Monday's prices.

There's no satisfying explanation for Dogecoin's stratospheric rise. Snowballing interest on social media, widespread Dogecoin memes, the GameStop mania in January, two rounds of stimulus checks, and endorsements by celebrities like Tesla CEO Elon Musk were all factors. Dogecoin's very meme-able Shiba Inu mascot helped popularize the coin on social media platforms, and speculative traders have pumped it up, calling for it to reach $1 (from less than a penny at the beginning of the year).

Dogecoin may be a bubble -- and indeed, the coin has already lost more than 40% of its value from its peak just a week ago. But the clearest lesson from its parabolic rise is that the cryptocurrency market is still rife with speculation. And that holds relevance for all the other crypto tokens, as well.

The Bitcoin symbol.

Image source: Getty Images.

Bitcoin vs. Dogecoin

There are number of important differences between Dogecoin and Bitcoin, the world's most valuable cryptocurrency. Dogecoin was started as a something of a joke by two software engineers. Bitcoin is based on a 2008 white paper by Satoshi Nakamoto, an anonymous person or group of people. That anonymity has helped create a cult-like following for Bitcoin, imbuing Nakamoto with prophet-like status.

The number of Bitcoins that can be created is capped at 21 million, and there are currently 18.7 million in circulation. Dogecoin, on the other hand, is not artificially limited, and there are now nearly 130 billion Dogecoin tokens in existence. Bitcoin's artificial scarcity is a core component of the bull thesis behind the currency, as Bitcoin backers argue that the limit makes it a good hedge on inflation, or even a digital version of gold.

In terms of practical uses as a currency, Dogecoin has some key advantages over Bitcoin. It takes only one minute to confirm transactions with Dogecoin, while Bitcoin takes 10 minutes, and the transaction fees to use Dogecoin are much lower than those for Bitcoin. Bitcoin is more widely accepted than Dogecoin right now, but that could easily change, especially as cryptocurrencies gain more attention. The other aspects of the tokens, like confirmation time and transaction fees, are more fixed.

What the two cryptocurrencies do have in common is that they've been highly volatile, and are often the subjects of speculation and viral memes.

Rows of gold bars

Image source: Getty Images.

More like Dogecoin than gold

Statistically, trading volume offers the clearest indication that an asset is popular with day traders or speculators. In recent weeks, about half of Dogecoin tokens have changed hands every day, indicating that the token is highly speculative. During that time, the average Dogecoin owner held the coins for just two days. Bitcoin isn't traded as actively as Dogecoin, but is still exchanged about every 15 days, or twice a month.

While that might make Bitcoin sound relatively stable, compare that to some of the largest stocks on the market. Apple's shares trade on average just about twice a year, showing that its ownership is made up largely of buy-and-hold, long-term investors. Same with Amazon.

Taking gold as a proxy, one of the easiest ways to buy and sell gold is through the ETF SPDR Gold Shares, but shares of the ETF change hands only about six times a year -- and the ETF accounts for only a small fraction of the roughly $9 trillion worth of gold in the world, most of which is never traded. Most of the world's gold is stored in government vaults around the world, and the nature of the precious metal and its relative lack of fungibility make it a much different asset than Bitcoin. Governments own gold because it's the opposite of a speculative asset. Through millennia, it has proven itself as a store of value, and a more stable one than most alternative assets.

Could that change in the digital era? Absolutely. But at the moment, the comparisons between Bitcoin and gold seem mostly self-serving as a way of pumping the total market value of Bitcoin, which is currently about $1 trillion -- or roughly one-ninth of all of the gold in the world.

Bitcoin may eventually gain credence as a digital alternative to gold, but its trading volume, volatility, and the memes show that it is much more similar to Dogecoin at the moment. The driver behind its monster gains over the last decade is mostly speculation, not a practical use as currency or a store of value meant for safekeeping. Bitcoin's trading volume shows that it's traded for short-term gains, rather than held for long-term stability or hedging purposes.

Keep an eye on Bitcoin's trading volume going forward. As long as it's elevated, the popular cryptocurrency is likely to remain volatile, and the comparisons to gold will ring hollow.