Since its launch in 2013, Dogecoin (DOGE -3.11%) mostly flew under the radar for several years. Then the meme-stock craze of early 2021, which lifted struggling enterprises like GameStop and AMC Entertainment to new heights, also propelled the dog-inspired crypto. The price of Doge skyrocketed 12,000% through early May last year, making some lucky and bold people rich fast.
However, Doge has come crashing down over the past 12 months. It currently has a market cap of $18.3 billion (as of April 28), good for 11th place in the crypto rankings. And the price of one Doge token is now just under $0.14. While speculators might be hoping for another trip to the moon, I think it’s best to temper expectations going forward.
Here’s why Dogecoin reaching $1 per token is an unlikely scenario.
Dogecoin lacks a competitive edge
Dogecoin was created as a fun competitor to Bitcoin. It was meant to simply be a peer-to-peer payments system, with no other real use-cases. The issue, though, is that Doge today is only accepted at 2,058 merchants worldwide. Bitcoin, on the other hand, can be used at almost 8,000 different merchants. Let’s also not ignore Bitcoin’s growing appeal as a store of value for investment portfolios, as well as its increasing set of financial infrastructure and tools that boost its utility.
In addition to lagging Bitcoin in mainstream adoption, Dogecoin also has poor economics that significantly decrease the possibility of hitting $1 per token. It’s widely known that there will ever only be 21 million Bitcoin in circulation, and this supply cap helps support a higher price with growing demand. There are 10,000 new Doge mined every minute, with 133 billion in circulation today. The inherent inflationary pressure limits price appreciation.
What’s more, speculators who are interested in gambling on crypto asset prices now have a slew of various dog-themed tokens to choose from. There’s Shiba Inu, Floki Inu, and Baby DogeCoin, to name a few.
Even Dogecoin’s original founders, Jackson Palmer and Billy Markus, left the project in 2015. Originally, they had no expectation for it to take off. So, despite being a cryptocurrency that is mainly viewed as a tool for financial speculation, there is probably no legitimate reason to own it.
It’s probably best to stay away from Dogecoin
One place where Dogecoin certainly succeeded was building a loyal following from a large number of crypto enthusiasts. This sentiment was bolstered by the likes of Tesla CEO Elon Musk, who never hesitates to publicly display his love of Doge.
Furthermore, billionaire Dallas Mavericks owner and Shark Tank investor Mark Cuban has also shown his support for Dogecoin. Fans can buy Mavericks tickets and merchandise with Doge. But this can be seen as more of a publicity stunt than anything else.
Let me make one thing clear: Betting on another meme-stock craze to happen or another billionaire endorsement to lift Doge’s price is not a worthwhile investment strategy. It’s not only extremely unpredictable, but it doesn’t offer you any peace of mind. And as is evident by taking a quick glance at Dogecoin’s price chart over the past year, enthusiasm has continued to fall. Buying Dogecoin with the hope of making a quick profit appears to be a losing game.
There are better cryptocurrencies out there to invest in, like Bitcoin and Ethereum. I highly recommend staying away from Dogecoin and instead directing your hard-earned savings to more promising crypto assets.