The meme-inspired cryptocurrency Dogecoin (CRYPTO:DOGE) has been one of many large 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 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 large 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 widespread 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 the moment would not supply any vital differentiation from different cryptocurrencies like bitcoin, the pioneer of cryptocurrencies and blockchain expertise. Sure, Dogecoin tokens could be despatched instantaneously to anybody on the web and not using a financial institution having to facilitate the transaction, and sure, it’s transacted on a decentralized community — however so are numerous cryptocurrencies.
Picture supply: Getty Photos.
As a funds platform, Dogecoin would not actually stand out both. It could actually course of roughly 40 transactions per second and 50,000 transactions per day. That is really quicker than the likes of bitcoin and Ether, but it surely’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 standard 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 properly. 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 aside from funds, which most cryptocurrencies supply, it would not have any distinctive real-world utility like Ethereum with its sensible contracts, or Theta Token with its skill to enhance video streaming.
What is the case for Dogecoin?
If there’s one large 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 group.
Celebrities like Tesla CEO Elon Musk and billionaire investor Mark Cuban have latched onto Dogecoin and pumped it wildly amongst their huge 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 example, would drastically cut back Dogecoin charges by 90% if handed. It is arduous to disregard the influence influencers, social media buzz, and going viral can have on shares right this moment — simply have a look at GameStop. This type of buzz could be arduous to duplicate.
“If there turns into sufficient of a group round an asset, and that group decides to successfully create long-term worth by way of some type of declining provide cap over time, that might really equate to a priceless foreign money,” Mike Bucella, a basic associate at BlockTower Capital, mentioned 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.
Picture supply: Coindesk.
Picture supply: Coindesk
Whereas the bitcoin and Dogecoin charts aren’t similar, they’ve kind of moved on the same trajectory, which isn’t unusual for cryptocurrencies basically. However this does imply that nonetheless ineffective Dogecoin is likely to be, 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’ll rise in some unspecified time in the future from present ranges, I can not suggest 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 group 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 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 in every of our personal — helps us all assume critically about investing and make selections that assist us grow to be smarter, happier, and richer.
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