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DOGE’s highs and lows: Is Dogecoin a good investment?

DOGE’s highs and lows: Is Dogecoin a good investment?

It goes without saying that Dogecoin (DOGE) is a popular investment. Perhaps it’s the adorable face of the Dogecoin mascot, Doge, a Japanese Shiba Inu breed dog. Perhaps it’s the ringing endorsement of billionaire Elon Musk, who appears to favour Dogecoin over Bitcoin (BTC). Whatever the reason, the sky has been the limit for the Dogecoin price, which has been known to rise by up to 1,000% in a month. 

Overall, DOGE has attained “internet meme coin” status, which means it can trade on social prowess rather than solid fundamentals. However, as DOGE’s use cases as a payment method and environmentally friendly investment expand, the cryptocurrency will increasingly begin to trade on its own merits. 

Many investors have jumped on the DOGE bandwagon without giving much thought to the value Dogecoin brings to the table. However, there will come a time when investors must ask themselves, “Is Dogecoin a good investment?” The answer is highly dependent on your risk/reward profile, but there are some generalisations we can make about the cryptocurrency that has catapulted meme coins into the stratosphere.

Dogecoin investment  

 Dogecoin is a fork of the Lucky Coin coin, which is a fork of Litecoin, which is also a fork of the Bitcoin blockchain network. While Dogecoin’s code updates are few and far between, it is well positioned to benefit from Lite coin’s improvements. The last major software update for Dogecoin occurred in 2019, though minor updates have occurred since then. 

Dogecoin, for all intents and purposes, was never intended to be a good investment. It began as a joke in 2013, and its co-founders, software engineers Jackson Palmer and Billy Markus, created the coin in a matter of days by copying Bitcoin’s source code. They changed the default font style to Comic Sans, which has since become synonymous with the brand.

Dogecoin was a good enough investment for co-founder Markus to cash in his holdings and purchase a Honda Civic in 2015. If he had kept his DOGE, it could have become a much better investment once the coin’s market cap surpassed $1 billion, which it did in 2018, eventually reaching $88 billion in May 2021. 

Palmer and Markus are no longer directly involved with the project. That alone could indicate that Dogecoin is a risky investment, but the project has taken on a life of its own thanks to the dedicated core development team and the Dogecoin community. As a result, Dogecoin has defied expectations as an investment so far. Some believe Dogecoin is a bubble waiting to burst, but this has yet to be proven.

A lot of currency, a lot of use case

Exploring the coin’s use cases is one way to determine whether a Dogecoin investment is right for you. The stronger the use-case argument, the more likely the coin will be in demand. Dogecoin’s initial use case was to reward the DOGE community for amusing comments via tipping. The use cases have grown since then, but tipping remains a feature of the project. 

Dogecoin’s use cases have grown to the point where it is now considered a medium of exchange. Dogecoin, for example, can be used to make charitable donations or to pay for NBA tickets and merchandise. If Elon Musk’s tweets are any indication, you might be able to buy a Tesla with DOGE one day. Dogecoin was also the digital currency used to fund the Jamaican bobsled team’s trip to the 2014 Winter Olympics in Sochi. 

Dogecoin employs the proof-of-work consensus algorithm, albeit in a different form than Bitcoin. On the blockchain, transactions are completed in one minute. This improves Dogecoin’s use case as a currency by allowing for quick and secure transactions.

Inflation is very high, and there is a lot of money

While Bitcoin has a limited supply of 21 million coins that can be mined, Dogecoin does not. Because the supply is infinite, Dogecoin is an inflationary cryptocurrency rather than a deflationary one like Bitcoin.

In fact, 10,000 Dogecoins are created every minute, totaling 14 million coins per day. The total number of Dogecoins that can be mined per year is limited to 5 billion. 

The fact that there is an unlimited supply of Dogecoin could hurt it as a long-term investment since it is only a matter of time before supply exceeds demand. 

That’s all there is to it. The good, the bad, and the ugly of investing in Dogecoin Is Dogecoin a good investment because of this? Only time will tell. For the time being, as with any cryptocurrency investment, conduct your own research.

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