The meme-inspired cryptocurrency Dogecoin (CRYPTO:DOGE) has been one of many massive investing tales of the yr, rising from half a penny to greater than $0.72 at its top earlier this yr for an unbelievable acquire of 14,300%. However like most different cryptocurrencies, Dogecoin has seen its worth drop and is now again all the way down to round $0.25.
Whereas the frenzy behind Dogecoin has subsided considerably, may this be time to purchase the dip earlier than its subsequent massive run? Let’s have a look.
Not a very particular crypto
Began as a joke by two software program engineers in 2013, Dogecoin is usually referred to as a meme cryptocurrency — it was truly impressed by a meme that was widespread in 2010 of a Shiba Inu, a breed of Japanese looking canine. That is why you may even see the Shiba Inu regularly related to the cryptocurrency.
However the issue with Dogecoin is that it presently would not provide any vital differentiation from different cryptocurrencies like bitcoin, the pioneer of cryptocurrencies and blockchain expertise. Sure, Dogecoin tokens might 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 plenty of cryptocurrencies.
As a funds platform, Dogecoin would not actually stand out both. It might probably course of roughly 40 transactions per second and 50,000 transactions per day. That is truly quicker than the likes of bitcoin and Ether, nevertheless it’s nowhere close to industry-leading and doesn’t beat conventional funds firms 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 concept may deal with tens of 1000’s 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 a substitute, there are 129.5 billion tokens in circulation and counting. And apart from funds, which most cryptocurrencies provide, it would not have any distinctive real-world utility like Ethereum with its good contracts, or Theta Token with its potential to improve video streaming.
What is the case for Dogecoin?
If there may be one massive factor Dogecoin has going, it is the enjoyable nature of the meme-inspired cryptocurrency, which has primarily turned it right into a advertising and marketing machine. That Shiba Inu mascot on Dogecoin is exclusive in that it actually has used the facility of the web — and the facility 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 latest 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 affect influencers, social media buzz, and going viral can have on shares in the present day — simply take a look at GameStop. This type of buzz might be laborious to copy.
“If there turns into sufficient of a neighborhood round an asset, and that neighborhood decides to successfully create long-term worth by way of some type of declining provide cap over time, that would truly equate to a priceless forex,” Mike Bucella, a basic associate at BlockTower Capital, stated earlier this yr with regard 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 primarily strikes with bitcoin and the broader cryptocurrency market when it comes to buying and selling.
Whereas the bitcoin and Dogecoin charts aren’t an identical, they’ve roughly moved on an analogous trajectory, which isn’t unusual for cryptocurrencies normally. However this does imply that nonetheless ineffective Dogecoin is perhaps, it may proceed to maneuver with the broader cryptocurrency market.
Purchase the dip?
Whereas Dogecoin could observe the pattern of different cryptocurrencies, and I’m certain it’s going to rise sooner or later 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 some extent the place it has an actual benefit over the vast majority of different cryptocurrencies. However till there may be extra proof of this, apart 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 latest 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 one among our personal — helps us all suppose critically about investing and make choices that assist us turn into smarter, happier, and richer.