Be it any asset class on the earth, I’ve all the time adopted the worth investing strategy. On the earth of meme cash and meme shares, worth traders appear to be bit misplaced. I do agree that funding methods must be dynamic. Nonetheless, I’m nonetheless struggling to discover a good motive to contemplate publicity to meme cash like Dogecoin (CCC:DOGE-USD).
Dogecoin has surged by over 12,200% within the final 12 months. And these returns are at a present value of practically 31 cents. Originally of Could, Dogecoin touched a excessive of 73 cents.
Even at present ranges, Dogecoin has a market capitalization of $40 billion. Ford (NYSE:F) at present trades at a market capitalization of $59 billion. Due to this fact, when Dogecoin was buying and selling close to all-time highs, the altcoin had a market capitalization that was increased than F inventory. That is an instance of the extent of frenzy.
Dogecoin Lacks a Robust Funding Thesis
If I do ask a Dogecoin investor on the explanations for the rally, essentially the most possible reply is the backing by Elon Musk. It’s a collection of tweets over time that spurred Dogecoin to all-time highs. In fact, the CEO of Tesla (NASDAQ:TSLA) claims to be holding Dogecoin. Nonetheless, that’s not motive sufficient to contemplate publicity to a meme coin.
Dogecoin traders may also speak about the potential of wider adoption of the cryptocurrency. I might somewhat be invested in Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD) if I’m bullish on wider adoption of cryptocurrencies.
If I had to purchase an altcoin, I might somewhat be invested in Polygon (CCC:MATIC-USD) than Dogecoin. Polygon is a non-speculative altcoin that addresses the challenges associated to excessive charges and decrease transaction per second in Ethereum. With the expansion of decentralized finance, Polygon appears to have a shiny future.
My solely level is that there are probably dozens of altcoins which have robust use instances. I don’t discover a motive to be invested in Dogecoin, which appears to depend upon Musk for survival.
Cryptocurrencies are in a Zone of Uncertainty
Within the final rally, Bitcoin surged to a excessive of $64,800. A pointy correction adopted and Bitcoin briefly slipped to close $30,000. It goes with out saying that if Bitcoin and Ethereum decline, altcoins can have a sharper correction.
There have been two causes for the large correction. At the beginning, China’s clampdown on cryptocurrencies impacted sentiments. Additional, Musk opined that Bitcoin was probably not atmosphere pleasant. Contemplating the numerous electrical energy consumption.
Final month, U.S. Treasury additionally known as for stricter cryptocurrency compliance. The Treasury believes that cryptocurrencies pose tax evasion risk. It appears very doubtless that the U.S. will regulate cryptocurrencies within the foreseeable future.
With the decentralized world dealing with the danger of laws, cryptocurrencies are at present in an unsure zone. In these occasions, it won’t be a good suggestion to put money into a meme coin. I consider that additional correction may be coming for Dogecoin as a present market capitalization of $40 billion seems to be unreasonable.
Bitcoin has additionally been talked about as an inflation hedge and a retailer of worth. That’s comprehensible to some extent with the cryptocurrency having a restricted provide of 21 million.
However, Dogecoin has a circulating supply of 130 billion with no higher restricted to the quantity of coin that may be mined. Clearly, the altcoin is considerably inflationary in nature and won’t function a retailer of worth.
Total, evidently the one hope for Dogecoin are tweets from Musk. One hope for the altcoin is a doable new that Tesla will settle for Dogecoin as a fee methodology.
Due to this fact, traders can nonetheless contemplate some speculative publicity. Nonetheless, it may be too dangerous to go overboard on this cryptocurrency.
On the date of publication, Faisal Humayun didn’t have (both straight or not directly) any positions in any of the securities talked about on this article. The opinions expressed on this article are these of the author, topic to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior analysis analyst with 12 years of trade expertise within the discipline of credit score analysis, fairness analysis and monetary modelling. Faisal has authored over 1,500 inventory particular articles with concentrate on the know-how, power and commodities sector.