Dogecoin has become one of the largest cryptocurrencies that exist at the moment. The insane 12,000% increase in Dogecoin’s price since January 2021 has got many investors scrambling to invest in the currency in the hopes of getting rich overnight.
But is the popular Dogecoin still worthy of your investment today? Let’s find out!
What is Dogecoin?
Dogecoin is a meme-themed cryptocurrency that was founded by a software engineer, Jackson Palmer, in a bid to make fun of other cryptocurrencies. That’s why the name and the logo of this satirical cryptocurrency are taken from the Shiba Inu dog meme that went viral years ago.
Since its release in 2013, Dogecoin, which started as a joke, has gained a lot of popularity and now has a market capitalization of about $1.3 billion. This makes it one of the largest cryptocurrencies to be listed on trading platforms like Independent Reserve.
Why You Should Buy Dogecoin
Dogecoin has the potential to be a profitable short-term investment. For example, if you bought $1000 worth of Dogecoin on 8th April and then sold it on 20th April, you would’ve made a 6x return on your investment in just two weeks.
This specific example is of only one rally that was in April 2021. There were several price hikes like this since the release of Dogecoin. In fact, in 2017 alone, Dogecoin has pumped over 2000% on three different occasions.
One major driving force behind these price hikes is the tweets of Elon Musk, the CEO of Tesla Motors. Every Dogecoin-related tweet of this man sent the price of the coin to new heights, allowing investors to make billions of dollars.
If you invest at the right time and get lucky, you can end up making a lot of money through this cryptocurrency.
Why You Shouldn’t Buy Dogecoin
One of the most troubling issues with Dogecoin is its weak fundamentals. The coin was released as a joke and was never meant to be a mode of transaction or a store of value. Although it was able to experience some gains since its release, it’s not nearly as strong as other cryptocurrencies like Bitcoin.
Even the gains that Dogecoin made are mainly artificial and were the result of celebrity endorsements and promotions by communities like Reddit.
Another fact that makes Dogecoin a risky long-term investment is that it is an inflationary coin. This means that it has an endless supply that will keep growing over time. In fact, 4 billion Dogecoin are mined and added to the supply every year.
So many tokens in circulation reduce the value of the coin. On the other hand, cryptocurrencies like Bitcoin are deflationary coins that have a fixed upper limit to supply. The combination of limited supply and high demand makes deflationary coins an awesome avenue for investment.
Just like GameStop and AMC — companies whose stock prices exploded overnight and crashed later — the phenomenal increase in Dogecoin’s price without any credible reason to warrant it signals an inflating bubble that is going to burst sooner or later.
Is Dogecoin a good investment today?
In the cryptocurrency world, the rule is simple: the more people buy, the higher the price climbs.
Dogecoin’s meteoric gains, too, are primarily because of the heavy buying by its passionate followers. However, the basic problem with Dogecoin remains — its price is not based on the underlying technology and doesn’t reflect its true value.
This is to say that Dogecoin is highly speculative at the moment and the chance that it is going to survive the high competition in the cryptocurrency market in the long run is very slim.
Having said that, you can still make a profit by investing in Dogecoin by riding through the price hikes.
Your timing to buy and sell will be the deciding factor for your trade. Price hikes are not sustainable and often end up with the price of the coin crashing badly. If you’re able to time your sell-out at the highest point of a price hike, you’ll end up making very good profits.
What should you do?
Given the risk that is involved in Dogecoin, it’s only sensible not to invest in it and look for safer alternatives instead.
However, if you still decide to buy Dogecoin to capitalize on the gains, remember not to invest any money that you aren’t prepared to lose entirely. That’s because nobody can foretell whether Dogecoin will really go to the moon or become a flop in the long run.
Finally, if you’re looking to get into crypto trading to fund your college education, here are 6 safer ways to do that.