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 value drop and is now again right down to round $0.25.
Whereas the frenzy behind Dogecoin has subsided considerably, might this be a superb 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 commonly known as a meme cryptocurrency — it was really impressed by a meme that was fashionable in 2010 of a Shiba Inu, a breed of Japanese looking canine. That is why you might even see the Shiba Inu incessantly related to the cryptocurrency.
However the issue with Dogecoin is that it at present does not provide any important differentiation from different cryptocurrencies like bitcoin, the pioneer of cryptocurrencies and blockchain know-how. Sure, Dogecoin tokens will 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 numerous cryptocurrencies.
As a funds platform, Dogecoin does not actually stand out both. It will possibly course of roughly 40 transactions per second and 50,000 transactions per day. That is really quicker than the likes of bitcoin and Ether, however 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 principle might deal with tens of 1000’s transactions per second).
There are different cons to Dogecoin as nicely. 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 capability to improve video streaming.
What is the case for Dogecoin?
If there’s one massive factor Dogecoin has going, it is the enjoyable nature of the meme-inspired cryptocurrency, which has basically turned it right into a advertising 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 scale back Dogecoin charges by 90% if handed. It is laborious to disregard the impression influencers, social media buzz, and going viral can have on shares at the moment — simply have a look at GameStop. This type of buzz will 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 really equate to a precious forex,” Mike Bucella, a basic companion 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 basically strikes with bitcoin and the broader cryptocurrency market by way of buying and selling.
Whereas the bitcoin and Dogecoin charts aren’t an identical, they’ve kind of moved on an identical trajectory, which isn’t unusual for cryptocurrencies basically. However this does imply that nonetheless ineffective Dogecoin is perhaps, it might proceed to maneuver with the broader cryptocurrency market.
Purchase the dip?
Whereas Dogecoin could comply with the pattern of different cryptocurrencies, and I’m certain it should rise sooner or later from present ranges, I can’t 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 might 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” suggestion place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even one among our personal — helps us all assume critically about investing and make selections that assist us grow to be smarter, happier, and richer.