Dogecoin is an altcoin created in 2013. It’s one of those cryptocurrencies that launched as a meme and is still recognized as one. It results from details, including its Japanese dog mascot (Shiba Inu) and being promoted as a fun version of Bitcoin at its burgeoning phase.
Altcoins are cryptocurrencies other than Bitcoin. Despite being deemed a sardonic altcoin, Dogecoin has thrived in the cryptoverse, gaining massive adoption and having an active community.
Although developed as a fun version of Bitcoin, Dogecoin has carved its use cases, making it very significant; examples are:
- Its transaction speed makes it handle transactions faster than Bitcoin—10 times faster than Bitcoin
- It also processes transactions at a cheaper fee
Like Bitcoin, Dogecoin is decentralized with no central authority influence and is also secured. The windfalls of Dogecoin are extensive, but the question is, does this make it a good investment for users?
Dogecoin Investing: Is it Safe?
The purpose of investment is for an asset to accrue value, generating returns— any asset that doesn’t do this isn’t a good investment and can lead to a loss.
When investing in cryptocurrencies, there’s a checklist to review, starting from its historical details. Let’s see if Dogecoin meets these requirements by reviewing its historical performance.
A look back at Dogecoin’s past performance
The historical performance of Dogecoin displays how remarkable its growth has been since its inception in 2013.
|Year of Investment||Price of Dogecoin in Dollars||% Change in Dogecoin|
The table above shows the different peak prices of Dogecoin (DOGE) across other years from September 2015 to 2021.
If you bought $1000 worth of Dogecoin at its peak in September 2015, when it was priced at $0.0001, you would have gained 63,400, equivalent to $634,000 as of September 8, 2022.
If you bought $1000 worth of Dogecoin at its peak in September 2020, when it was priced at $0.0027, you would have gained 2,251%, equivalent to $22,510 as of September 8, 2022.
However, if you had bought $1000 Dogecoin in September 2021, when it was at $0.1996 and gradually moving away from its all-time-high; as of September 8, 2022, you’d have been down by 68%, and your thousand dollars would be worth only $320.
Dogecoin has experienced exponential growth in its market price over the years, which came with inevitable pullbacks. Currently, Dogecoin has dropped drastically from its all-time high at $0.74.
The question remains, is Dogecoin an excellent choice for long-term investment?
Is it a Good Idea to Invest in Dogecoin?
Dogecoin soared to its highest price during the pinnacle of the Bull market in 2021 and at the point where it had the most support from distinguished personalities like Elon Musk. At the start of 2021, in January, the price of Dogecoin was at a low of $0.0046 but bolstered to $0.74 just a few months later, in May 2021.
Since then, the price of DOGE has steadily declined until this point, where its price is at $0.064, which is a 68% plunge from its peak price last September. This, however, doesn’t dictate that
Dogecoin is a bad investment; if anything, it’s the opposite.
The decline in Dogecoin’s value is that the cryptocurrency market moves in cycles. A cycle comprises the bull and bear market, similar to the stock market and other financial markets. In the cryptocurrency world,
A bull market is a period where the price of cryptos increases in value; a bear market is the opposite— a period where the prices of cryptos decrease in value.
Currently, Dogecoin is in a bear market, and the only way to know if the cryptocurrency is a good store of value will be to zoom out and look at its long-term performance. Across the board, Dogecoin has been a profitable and good investment choice for traders and investors.
Other factors must be examined to determine if Dogecoin is an asset worth investing in.
What Speaks Against Investing in Dogecoin?
Over the years, there have been varied outlooks on investing in cryptocurrencies — with people stating valid instances but construing them. One valid objection against investing in crypto assets like Dogecoin is its high volatility.
Volatility means the change in the prices of an asset. Under normal circumstances, volatility is needed in every financial market. It’s only under extreme conditions that it’s unhealthy for investors.
Extreme volatility doesn’t give investors and traders the chance to make the right choice because it causes the price of an asset to rush in a direction within a short time frame. Extreme volatility leads to loss and other negative impacts.
Firstly, extreme volatility in tokens like Dogecoin occurs less often than it’s been discussed, and just like the mainstream market, they come with signs ahead of the event. If those signs are noticed earlier, investors can easily invest in stablecoin to provide an edge against loss.
Investors who can’t spot these signs might adopt another method of building a balanced portfolio that includes other crypto assets. Stablecoins are cryptocurrencies that maintain a fixed value by pegging them to a reference asset like the US dollar.
Extreme Volatility is one of the issues that might arise from investing in Dogecoin; other dilemmas are its unlimited supply and security concerns.
What Factors Make Dogecoin an Attractive Investment?
The concept of what makes Dogecoin attractive has been controversial and subject to actual justifications. The biggest controversy of all is Dogecoin is nothing but a sardonic meme coin with no intrinsic value.
Other circumstances, such as Dogecoin being an inflationary coin with no limited supply, are also valid suspicions on why it isn’t the best choice for a long-term investment.
However, if investors had these justifications, they likely wouldn’t have profited from the long-term price hike. There are a few factors that make Dogecoin an attractive choice of investment.
- It is a Faster and cheaper Alternative to Bitcoin: Bitcoin has gained much popularity over the years and has broken the barriers of navigating through the stress of traditional intermediaries, like banks, by processing global payments instantly. Dogecoin does the same, but at a cheap fee and faster transaction rate—this gives it an edge to gain vast adoption.
- Community: This has been Dogecoin’s most significant advantage. Its community has been the sole driver for Dogecoin, which is currently ranked 11th by market capitalization. The growth of the coin has been stimulated by its community that actively promotes it. Superstar Snoop Dog and Billionaire Elon Musk are active members of the Doge community.
- It is Decentralized: Decentralization allows power to be transferred from central authorities like the government and banks and distributed to the people. This means no single entity is in control and can’t maliciously control the price or corrupts the Dogecoin network by validating wrong transactions. Validation is the process where a miner agrees upon whether a transaction made through a blockchain network is valid or not and receives a reward for doing so in the form of a token or coin.
- Dogecoin is Scalable: Since its inception, Dogecoin has proven to be a scalable Cryptocurrency. Scalability combines decentralization, transaction speed and throughput, and security, and Dogecoin has kept all three in check by processing transactions faster without jeopardizing security and decentralization. Scalability has been a big problem with many cryptocurrencies; Dogecoin takes a different approach, setting it up for broad adoption—which can further drive its price higher.
These are all excellent reasons why Dogecoin is a great choice for investment; regardless, as an investor, it’s ideal to risk wisely when electing whatever investment to take on.
Pros And Cons of Investing in Dogecoin
|It’s an affordable investment choice because of its low price per unit.||Its unlimited supply makes it inflationary and can cause the price per unit to go very low.|
|Decentralized and processed transactions faster and at a cheap fee.||In case of a mistake in the transaction, there is no way to receive a refund.|
|There’s great potential for a high return on investment.||Aggressive price volatility can cause investments to lose value.|
|Community-driven, responsible for high adoption.||Negative sentiments from the community can lead to adverse and unfavorable effects on its value.|
Different Ways Of Investing in Dogecoin
The advantage of cryptocurrency is that it leaves investors with different choices to make a profit. An investor is left with a plethora of how to make money from the market. The different ways are explained below.
Buy and Hold
Buy and Hold is the easiest way to get started as an investor, and it simply implies buying Dogecoin at a discount (low price) and holding it until you find a premium (high price) to sell at. In a previous paragraph, we showed how the price of DOGE moved from $0.0001 to $0.1996 within Six years (2015-2021). Between 2021 and 2022, the value of DOGE, however, dropped to 0.0635.
If an investor bought DOGE at a discount price — pre-2021, they’d have amassed a substantial profit; This is the advantage of being an early adopter. At the same time, investors who purchased at a premium with a long-term goal would have lost a significant fraction of their invested capital.
The good thing is that the cryptocurrency market is in a bear cycle, and prices might be at another discount.
Trading is another way to invest in Dogecoin, which can be done in different ways, including spot trading and derivatives trading. Derivative trading is also of various types. We will explore how each of these types of trading allows investors to make a profit in the market.
Spot trading clenches several similarities with the Buy-and-hold concept explained earlier. However, a notable difference is that Buy-and-hold is done for the long term, but Spot trading is usually short-term.
Spot trading can be carried out on some of the most popular exchanges. You can invest directly through exchanges, including Coinbase (NASDAQ: COIN), Binance, FTX, and eToro.
The spot market lets an investor buy and sell cryptocurrencies at real-time prices.
The golden rule is buying low and selling high. An example will be buying Dogecoin at $0.02 and selling at $0.06; this way, the investor has made a 300% profit. The pitfall of spot trading is money moving up.
Derivative trading differs from spot trading, and derivative trading is a contract between two or more parties over an underlying asset or assets. There are three kinds of derivatives for investors to trade: futures, options, and perpetual contracts—each having its peculiarity.
Futures trading means entering a contract to buy or sell Dogecoin at a specific price and date. Options trading allows traders to opt out of an agreement to buy or sell an asset at previously determined prices on the agreed day. On the other hand, a perpetual contract is a contract to buy or sell Dogecoin without an expiration date—meaning it can be held indefinitely.
An advantage of Derivative trading is that traders can make money in both ways; buying or selling. This is unlike spot trading, where profit comes from the asset moving up in price. Another advantage of derivatives is leverage—this lets traders increase their trading position.
With a 5X leverage on Dogecoin, a trader with just $20 now has $100 to trade with. With this, Traders can profit more and lose more if the trade goes against them. Using leverage requires a good level of expertise and understanding of how the market works.
How Much Should You Invest in Dogecoin?
There isn’t a fixed amount to invest into Dogecoin; it simply depends on your level of expertise. For a starter, the rule of thumb is first to understand how the market works.
With that done, you can look towards using an investment strategy such as Dollar Cost Average (DCA) to accumulate DOGE little by little on periodic bases. This process helps starters understand the market and ease their transition to trading with more significant funds.
Also, when getting started, traders should invest what they can afford to lose; this prepares them beforehand for the risk of loss that comes with trading. If possible, traders should learn technical and fundamental analysis, which reduces the risk of loss by a higher percentage.
Expert Predictions on Dogecoin
Predicting where Dogecoin is heading next has been a very contented topic in the crypto-verse. Generally, this is how the debate on every other cryptocurrency is.
Some experts anticipate a fall in the price; others forecast a gradual hike in price.
Specialists like Gavin Smith and Walker Holmes had opposing views on where the market was heading next for Dogecoin.
Gavin Smith, a general partner at Panxora Hedge Funds, is bullish on Dogecoin and expects the price to trade at $0.24 by the end of the year. Walker Homes, co-founder and VP of MetaTope, is slightly bullish, believing that Dogecoin’s price will end the year at $0.04.
Dimitrios Salampasis, the Swinburne University of Technology director, is among the experts who believe Dogecoin’s future is bleak, stating that it’s “nothing more than a non-serious coin with no value proposition or utility. One of the many to soon disappear”.
Is Dogecoin a good investment? Considering that the market is bearish, Dogecoin is only a good investment choice for short-term traders. Investing in the bear market won’t be a good choice if you’re an investor looking for a long-term yield.
However, with proper risk management, accumulating Dogecoin in a bear market in anticipation of the bull market is good. On that note, proper research and planning are required to succeed.