DOGE's highs and lows: Is Dogecoin a good investment?
It’s no secret that Dogecoin (DOGE) is a popular investment. Maybe it’s the adorable face of the Dogecoin mascot, a Japanese Shiba Inu breed dog named Doge. Or maybe it’s the ringing endorsement of billionaire Elon Musk, who seems to prefer Dogecoin to Bitcoin (BTC). Whatever the reason, the sky has been the limit for the Dogecoin price, which has been known to climb as much as 1,000% in as quickly as a month.
Overall, DOGE has also achieved internet meme coin status, meaning that it is able to trade on its social prowess rather than solid fundamentals. But as its use cases as a payment method and environmentally friendly investment multiply, DOGE will increasingly begin to trade on its own merits.
Many investors have ridden the DOGE wave without giving too much thought to what value Dogecoin actually brings to the table. But there comes a time when investors will need to ask themselves, “Is Dogecoin a good investment?” The answer has a lot to do with your risk/return profile, but there are still some conclusions we can draw about the cryptocurrency that has catapulted meme coins into the stratosphere.
Historically, Dogecoin is a fork of a coin called Luckycoin, which itself is a fork of Litecoin, which is also a fork of the Bitcoin blockchain network. While Dogecoin’s code updates are few and far between, it is positioned to ride on the coattails of Litecoin’s upgrades. Dogecoin’s last major software update was in 2019, though minor updates have happened since then.
For all intents and purposes, Dogecoin was not meant to be a good investment. Not only did it start out as a joke in 2013, but its co-founders, software engineers Jackson Palmer and Billy Markus, created the coin in a few days by copying Bitcoin’s source code. They tweaked the default font phrases to Comic Sans, which has been associated with the brand ever since.
Dogecoin was a good enough investment for co-founder Markus to ring the register on his holdings to buy a Honda Civic in 2015. If he had held onto his DOGE, however, it could have become a much better investment for him once the coin’s market cap surpassed $1 billion, which it achieved in 2018, climbing all the way past $88 billion in May 2021.
Neither Palmer nor Markus are directly associated with the project any longer. That right there could be a sign that Dogecoin is an unstable investment, but the project took on a life of its own thanks to the dedicated core development team and the Dogecoin community. As a result, Dogecoin as an investment has defied the odds so far. Some say Dogecoin is a bubble that is waiting to burst, but they have yet to be proven right.
Very use case, much currency
One way to tell if a Dogecoin investment is right for you is to explore the use cases of the coin. The stronger the use case argument, the greater the chances that the coin will be in demand. Dogecoin’s primary use case in the early days was to reward the DOGE community for amusing comments via tipping. The use cases have expanded since then, though tipping remains one of the features of the project.
Dogecoin’s use cases have increased over the years to the point where it is considered a medium of exchange. For instance, Dogecoin can be used to make charitable donations or as a payment method for NBA tickets and merchandise. One day you might even be able to purchase a Tesla with DOGE, if Elon Musk’s tweets are any indication. Dogecoin was also the digital currency that was raised to get the Jamaican bobsled team to the Sochi Winter Olympics in 2014.
Dogecoin uses the proof-of-work consensus algorithm, though a different variation than the one that Bitcoin uses. Transactions are speedy, being completed in one minute on the blockchain. This strengthens Dogecoin’s use case as a currency, as it allows for quick and safe transactions.
Very inflation, much coin
While Bitcoin has a finite supply of 21 million coins that will ever be mined, Dogecoin has no such ceiling. The supply is indefinite and, therefore, Dogecoin qualifies as an inflationary cryptocurrency rather than a deflationary one like Bitcoin.
In fact, 10,000 Dogecoins are created every minute, which translates to 14 million coins each day. There is a limit on the number of Dogecoins that can be mined per year, which is capped at 5 billion.
The infinite nature of Dogecoin’s supply has the potential to work against Dogecoin as a long-term investment, as it is potentially only a matter of time that supply outpaces demand.
So there you have it. The good, the bad and the ugly of Dogecoin as an investment. Does that make Dogecoin a good investment? Time will tell. For now, as with any cryptocurrency investment, be sure and do your own research.