The meme-inspired cryptocurrency Dogecoin (CRYPTO:DOGE) has been one of many huge investing tales of the yr, rising from half a penny to greater than $0.72 at its top earlier this yr for an unimaginable acquire of 14,300%. However like most different cryptocurrencies, Dogecoin has seen its worth drop and is now again right down to round $0.25.
Whereas the frenzy behind Dogecoin has subsided considerably, may this be a superb time to purchase the dip earlier than its subsequent huge run? Let’s have a look.
Not a very particular crypto
Began as a joke by two software program engineers in 2013, Dogecoin is commonly referred to as a meme cryptocurrency — it was really impressed by a meme that was common in 2010 of a Shiba Inu, a breed of Japanese searching canine. That is why you may even see the Shiba Inu continuously related to the cryptocurrency.
However the issue with Dogecoin is that it presently does not provide any vital differentiation from different cryptocurrencies like bitcoin, the pioneer of cryptocurrencies and blockchain know-how. Sure, Dogecoin tokens may be despatched instantaneously to anybody on the web with out a financial institution having to facilitate the transaction, and sure, it’s transacted on a decentralized community — however so are a number of cryptocurrencies.
As a funds platform, Dogecoin does not actually stand out both. It may possibly course of roughly 40 transactions per second and 50,000 transactions per day. That is really sooner than the likes of bitcoin and Ether, nevertheless it’s nowhere close to industry-leading and doesn’t beat conventional funds corporations both. The XRP ledger can course of 1,500 transactions per second, whereas the normal funds firm Visa can deal with 1,700 transactions per second (and in idea may deal with tens of hundreds transactions per second).
There are different cons to Dogecoin as effectively. There is not a finite quantity like bitcoin with its 21 million tokens. As an alternative, there are 129.5 billion tokens in circulation and counting. And aside from funds, which most cryptocurrencies provide, it does not have any distinctive real-world utility like Ethereum with its good contracts, or Theta Token with its skill to improve video streaming.
What is the case for Dogecoin?
If there’s one huge factor Dogecoin has going, it is the enjoyable nature of the meme-inspired cryptocurrency, which has basically turned it right into a advertising and marketing machine. That Shiba Inu mascot on Dogecoin is exclusive in that it actually has used the ability of the web — and the ability of memes — to develop and construct a neighborhood.
Celebrities like Tesla CEO Elon Musk and billionaire investor Mark Cuban have latched onto Dogecoin and pumped it wildly amongst their large social media followings. This has benefited Dogecoin — particularly the connection with Musk, who has teamed up with Dogecoin builders to make technical enhancements to the blockchain. A current improve proposal by Musk and the builders, as an illustration, would drastically cut back Dogecoin charges by 90% if handed. It is laborious to disregard the influence influencers, social media buzz, and going viral can have on shares right now — simply take a look at GameStop. This sort of buzz may be laborious to duplicate.
“If there turns into sufficient of a neighborhood round an asset, and that neighborhood decides to successfully create long-term worth by means of some type of declining provide cap over time, that would really equate to a worthwhile forex,” Mike Bucella, a common associate at BlockTower Capital, stated earlier this yr with reference to Dogecoin.
I would argue that this has already occurred in some regards. Dogecoin has gone from a joke to the sixth-largest cryptocurrency by market capitalization, and it now basically strikes with bitcoin and the broader cryptocurrency market when it comes to buying and selling.
Whereas the bitcoin and Dogecoin charts aren’t similar, they’ve roughly moved on an analogous trajectory, which isn’t unusual for cryptocurrencies usually. However this does imply that nevertheless ineffective Dogecoin is perhaps, it may proceed to maneuver with the broader cryptocurrency market.
Purchase the dip?
Whereas Dogecoin could comply with the development of different cryptocurrencies, and I’m certain it’ll rise in some unspecified time in the future from present ranges, I can not advocate shopping for the dip when there are such a lot of crypto choices on the market with higher performance and potential for future utility. This narrative may change if Dogecoin can proceed to develop and foster the neighborhood that led to its meteoric rise within the first place, or if Musk and the builders improve the blockchain to a degree the place it has an actual benefit over nearly all of different cryptocurrencies. However till there’s extra proof of this, aside from the small quantity of Dogecoin I acquired some time in the past for enjoyable, I’m going to remain on the sidelines throughout this current dip.
This text represents the opinion of the author, who could disagree with the “official” advice place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even considered one of our personal — helps us all assume critically about investing and make selections that assist us turn into smarter, happier, and richer.