Dogecoin (DOGE-USD) fell as much as 11% on Thursday morning, before paring back some of its losses, as investors cashed in on their recent gains.
The cryptocurrency, which started as a joke in 2013, has rallied this week as internet users tried to push the value of the coin to $1 (£0.72). It is currently 6.85% down on the day at $0.61.
On Wednesday, dogecoin's market cap soared to over $70bn to become the fourth-most valued coin, according to Coinmarket. This was bigger than the market cap of COVID vaccine producer Moderna (MRNA), as well as Ford Motor Company (F) and oil giant BP (BP.L).
The meme-inspired crypto, which ended 2020 at less than half a penny per DOGE, rose as much as 55% to $0.68 on Wednesday. It has surged more than 14,000% since the start of the year.
However, as the dogecoin frenzy lost steam on Thursday, other cryptocurrencies gained pace, with bitcoin (BTC-USD), which has been struggling to drive back to record highs, up 3.7% to $57,013.
Ethereum (ETH-USD), the second most popular cryptocurrency, was 3.04% higher to $3,449 on Wednesday.
Ethereum has been rallying in recent weeks as the EIB, the lending arm of the European Union, used its technology to issue €100m in two-year digital notes bonds, working in collaboration with Goldman Sachs (GS), Santander (SAN) and Societe Generale (GLE.PA).
Elsewhere, Ripple (XRP-USD) was also up, rocketing 13% to trade at $1.65.
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Last year, a number of financial institutions and well known investors threw their weight behind cryptocurrencies and blockchain technologies. On Wednesday, popular exchange Gemini announced support for dogecoin, after eToro added it to its online trading app on Tuesday.
Musk in particular is known to regularly tweet about dogecoin, sending prices spiking. On Saturday he is set to host Saturday Night Live, which some expect will raise the profile of Dogecoin further.
“Dogecoin is surging because many cryptocurrency traders do not want to miss out on any buzz that stems from Elon Musk’s hosting of Saturday Night Live,” said Edward Moya, senior market analyst at Oanda.
“Also known as the 'Dogefather', Musk will undoubtedly have a sketch on cryptocurrencies that will probably go viral for days and further motivate his army of followers to try to send Dogecoin to the moon.”
Despite their rise to fame, Dogecoin and other cryptocurrencies, still remain very volatile and experts continue to remain sceptical about using it as an investment.
Watch: What are the risks of investing in cryptocurrency?