Dogecoin Mania!
Oh My Dogecoin…
What is happening? Dogecoin, a joke currency named after the Shiba Inu “doge” meme, has become the 5th largest cryptocurrency by market cap, creating many overnight millionaires. The total value of Dogecoins in circulation is almost $50 billion, and it’s increased by more than 6000% this year. So, why is this happening? Well, we’ll first have to understand what exactly Dogecoin is.
What is Dogecoin
Dogecoin, like all cryptocurrencies, is a digital currency that can be bought/sold as an investment or it can be spent like money. While all crypto is unique, Dogecoin is very similar to many other cryptocurrencies, such as Bitcoin or Litecoin. However, unlike Bitcoin and other notable cryptocurrencies, it doesn’t have a finite supply, which undermines the future viability of the currency. Currently, it isn’t really used much in the world as a currency. Occasionally, it is used to tip online artists, but that’s pretty much it. So, why is Dogecoin the 5th largest cryptocurrency? Well…, because MEME.
The History of Dogecoin
In the past, Dogecoin prices were characterized by massive spikes rather than gradual increases. Usually, these spikes are catalyzed by memes about the currency, mainly by Elon Musk.
Throughout the history of the coin, there have been several spikes each year, leading to a >20% increase in the price of Dogecoin. But lately, these spikes have caused much more substantial movements. Near the beginning of February 2021, Dogecoin increased from $0.003 to around $0.05, which is around a 1567% increase just because of memes by celebrities such as Elon Musk and Snoop Dog. For a few months, Dogecoin consolidated around the $0.05 to $0.06 price range. But in mid-April, prices soared up to record highs of $0.48; that’s an 860% because of Elon Musk(yet again) and a Slim Jim ad(yes, the beef Jerky).
After a spike, Dogecoin usually consolidates near a new high. However, this isn’t always the case. In February 2018, Dogecoin fell back down to $0.003 after peaking at around $0.018. So that begs the question, Is this current price of around $0.29(at the time of writing) sustainable? Will the price go farther up, or will it tank to $0.05?
Is this price sustainable?
Compared to past price spikes, this most recent one isn’t necessarily the highest increase(by percent). But, compared to other spikes, it’s been getting an insane amount of attention.
Right now, more people than ever have want to know about Dogecoin. This is because it’s being brought to the limelight everywhere. Die-hard fans are even rallying to get the currency up to $1.00.
So many people are talking about Dogecoin, and they want to get in on this “investment” before it hits $1.00. But will this actually happen? For me, I think this would be absolutely crazy and probably unsustainable. If it were to hit $1.00, the market cap of Dogecoin would rise to $127 billion, which would be higher than multiple well-established blue-chip stocks. This would also make it the 3rd largest cryptocurrency behind only Bitcoin and Ethereum. In the past, price surges haven’t caused major changes in the grand scheme of the crypto world. But with a couple more massive price surges, Dogecoin’s market cap could very well pass Bitcoin. But honestly, do you really think DOGECOIN will dethrone Bitcoin? Probably not.
Right now, Dogecoin has little to no practical uses. It doesn’t have the speed of Ethereum or the dominance of Bitcoin. It doesn’t have a coin supply cap(which raises inflationary concerns), and the only real catalyst behind its growth is its name and memes, which does not make for a sound “investment”.
In a way, I kinda see Dogecoin as the Gamestop of the crypto world(except it didn’t explode based on short interest and a movement against hedge funds). It’s super speculative, and it’s more of a movement rather than an investment(albeit a near pointless yet funny meme movement). My take on this is that many “investors” are going to FOMO into Dogecoin. However, the only reason they are buying this is because they think others will buy it at a higher price; not because they actually believe in the currency.
As history has shown time and time again, buying something solely because it’s gone up hasn’t worked well in the past. Just look at the dotcom bubble; tech stock seemed to be doubling nearly every day. Those businesses were trading at astronomically high multiples which couldn’t possibly be justified by high future growth, but people kept buying them since they thought it would just keep going up. And well, 2000 hit; tech stock crashed over 50%, and these so-called “investors” were absolutely crushed.
I feel like people should see Dogecoin as something speculative, rather than an actual investment. Based on logical fundamentals, the long-term future of the currency does not look too bright, and there is not much that indicates it can sustainably grow much more. If people buy into Dogecoin, they should understand that it has a wide range of outcomes. In the near future, it might soar to $1.00, or it might fall back down to $0.05(similar to how it fell substantially in February 2018). Who knows. People should not view this as a real investment, but rather a fun gamble/speculation. Otherwise, an “investor” or even an inexperienced trader might get burned by any negative price movements, and could possibly lose a large amount of their position in Dogecoin.
Do it for the memes
Hey, I get it; who doesn’t like to have a little bit of fun. Everyone(unless you’re Warren Buffett) is scared of missing out on potentially big gains(even if they already happened). It’s just human nature. It’s why we get such a thrill when we gamble or make speculative bets; it’s just so rewarding when it goes right. Heck, even I believed in some speculative investment. A few months ago, I helped a family member buy around 1000 Dogecoin when it was trading under $0.002 a pop, and hey, they got pretty lucky when it surged to $0.05. Even Benjamin Graham, the father of value investing, says in his book The Intelligent Investor that it's human nature to speculate. All he asks of his students is that they separate their speculations from their investments and that they never confuse the two with each other.
That’s my main concern; that some people are viewing Dogecoin like it’s an investment rather than a funny meme that likely has no realistic financial future(unless something pretty major happens). Still, if you wanna buy it, go ahead! For only a couple of bucks, you can get some near-endless entertainment by just watching this crazy currency. Some compare the currency to that of a lottery ticket, and I agree; it’s a fun little way to test your luck and support the doge army. All I’m asking is that you manage your risk.
If you’ve made it this far, thank you for reading! If you have any thoughts, please comment. If you liked this article, please “clap” for it, and feel free to read some of my other content.
