Between April and May 2021, in the middle of a cryptocurrency frenzy, Jasyn Prolifiq and Glauber Contessoto, became millionaires, at least on paper.
Due to their investments in dogecoin (DOGE). Prolifiq turned $180,000 into $1 million within 69 days. Meanwhile, Conessoto put about $250,000 in dogecoin and became a millionaire on paper in roughly the same time frame. Conessoto even had his clients pay him in DOGE as a way to keep getting more of the cryptocurrency.
Stories like this inspire many investors to take a chance, putting their money in the latest meme coin or stock, hoping to make it big. But is dogecoin a good investment? And should you use your money to invest in this cryptocurrency?
Let’s take a look at dogecoin so you can decide whether it’s a good idea for you.
What is dogecoin?
Dogecoin was developed in 2013 and is one of the oldest cryptocurrencies. It was originally developed by two software engineers, Billy Markus and Jackson Palmer, as a joke. Markus used bitcoin’s code to develop dogecoin. He also borrowed some code from litecoin to make sure the same mining bitcoin uses couldn’t be used by dogecoin. However, mining dogecoin and litecoin at the same time is possible.
The digital currency was named for the popular meme at the time, a Shiba Inu dog who was known for adding “very” or “much” as a modifier, as in “very teamwork” and “much wow.” The two set up a website and began issuing coins. Over time, a community was built around dogecoin, but it didn’t really get a boost until billionaire and Tesla CEO Elon Musk began tweeting about it.
Dogecoin remained at a fairly low price for years. However, following the GameStop short squeeze in 2021, it suddenly became popular. After seeing what could be accomplished using Reddit to marshall forces and create a buzz, a Reddit forum began pushing dogecoin. From early February until early May 2021, dogecoin generated a lot of attention.
Tweets posted by Elon Musk helped promote the cryptocurrency. In addition, Mark Cuban’s announcement that the Dallas Mavericks would accept dogecoin helped fuel its price increases. Faithful adopters announced they would HODL, an acronym for “hold on for dear life,” which is a popular investment strategy in the crypto market.
Hopes of pushing the dogecoin price up to $1 were high at this point, but it never reached that mark. Elon Musk appeared on Saturday Night Live on May 8 and made fun of the cryptocurrency. The price plummeted following his comments. In fact, it dropped from a high of 71 cents down to 47 cents in a matter of 45 minutes. By the morning of May 9, dogecoin had dropped to 40 cents and lost a value of $35 billion.
So far, dogecoin hasn’t recovered, despite Musk confirming that he planned to use dogecoin to fund a space mission. The re-establishment of the Dogecoin Foundation, which is designed to develop the dogecoin blockchain, hasn’t helped much either.
But is dogecoin a good investment?
Although dogecoin offered investors a wild ride for a few months in early 2021, it hasn’t done much since then. Faithful adopters still plan to hold the cryptocurrency in hopes that it will surge higher again. However, when you’re trying to decide how to invest money, it’s important to ask yourself whether an asset is a good fit for your portfolio.
Dogecoin’s performance in 2022 has been lackluster. As of April 2, 2022, dogecoin is priced at 14 cents. Those who bought dogecoin when it was becoming popular, between 25 cents and 45 cents, have lost large percentages of their investments.
Elon Musk stated that he owns dogecoin, along with bitcoin and ethereum. Additionally, he has a representative on the board of the Dogecoin Foundation. The “Doge Army” would like Musk to reinvigorate the cryptocurrency with support and tweets. However, it might be far from certain that the dogecoin price will ever reach last year's highs, let alone $1.
When deciding whether dogecoin is a good investment, it’s important to carefully consider whether it’s a good investment for you. Dogecoin still has a $22 billion market cap and a relatively high trading volume as of April 2022. It is also available on major crypto exchanges such as Coinbase, eToro, and Binance.US. Because of its liquidity, you’re likely to be able to buy and sell dogecoin when you need to, which isn’t always the case with less popular cryptocurrencies.
However, it’s also important to remember that dogecoin regularly experiences intense price volatility. Additionally, other than being a faster form of payment than bitcoin, there haven’t been many uses for dogecoin.
As a result, dogecoin might be considered a speculative investment in the crypto market. Even though enthusiasts are willing to hold it as a long-term investment, it might not be wise to devote too much of your portfolio to dogecoin depending on your goals.
Can dogecoin become similar to bitcoin or ethereum?
Elon Musk has publicly declared that dogecoin is “the people’s cryptocurrency.” However, it might be far from certain that it could ever be like bitcoin or ethereum, the two top cryptocurrencies.
One of the reasons bitcoin (BTC) has value as a cryptocurrency is because its circulation is limited to 21 million coins. This scarcity creates the idea that bitcoin is a digital store of value, similar to how people view gold. Additionally, bitcoin is the original cryptocurrency, which has made it accepted in more places than dogecoin.
The ethereum blockchain and its cryptocurrency, ether (ETH), have a robust use case thanks to their underlying technology. This technology supports smart contracts, which allow the automated execution of agreements between two parties. The technology also provides the ability to build games and financial apps on top of the ethereum infrastructure.
Without a use case beyond fast payments and with a blockchain that is only being developed, dogecoin has struggled to maintain real-world value. The fact that dogecoin’s supply could potentially be limitless with more than 132 billion dogecoins in circulation as of April 2022 doesn’t help either.
If you’re interested in altcoins but aren’t sure that dogecoin is the right choice, it might be worth looking into the use cases of other coins. For example, solana (SOL) offers many of the same features as ethereum, but does so at a faster rate and lower cost. Additionally, there are coins such as polkadot (DOT) that contribute to interoperability between blockchains.
When looking at cryptocurrency investing, you may find it beneficial to consider the underlying use case, rather than relying on the hype. Although it could be fun to trade meme coins and you could potentially make it big, avoiding higher risk and speculative coins could better support your portfolio.
Risk aside, how can I buy dogecoin?
If you decide you want to learn how to buy dogecoin, it’s fairly easy to do so. You can find this cryptocurrency under the moniker DOGE on several crypto exchanges, including Coinbase, Kraken, and Gemini.
For more details, check out our list of the best cryptocurrency exchanges.
Additionally, dogecoin is available through the Robinhood app. It’s also possible to buy dogecoin on decentralized exchanges like Uniswap. To buy dogecoin, sign up for an account with the exchange of your choice. You can then add funds using a bank account or a credit card and make your purchase.
Depending on the exchange, you could buy dogecoin with fiat currency or by trading other cryptocurrencies. If you want to store dogecoin in your wallet, off an exchange, direct the exchange to send your coins to your crypto wallet address.
This is the same method used to buy other digital coins, which makes learning how to buy cryptocurrency relatively easy.
Spending your dogecoin requires finding merchants that accept it. When you find a retailer that accepts dogecoin, you could use your wallet to transfer the appropriate number of coins to them. You could also use a third-party facilitator such as BitPay to purchase gift cards for major retailers like Walmart and Amazon.
Can dogecoin reach higher than $1?
It’s not possible to know for sure whether dogecoin will reach the $1 goal, or even higher. One of the goals of those who were interested in buying and holding dogecoin was to get it to $1. Although the cryptocurrency lost much of its highest value, there are enthusiasts who still think it could happen.
Ultimately, such a goal will depend on whether demand for dogecoin rises again, and whether there are more uses developed for it.
How many dogecoins are in circulation today?
There are 132.67 billion dogecoins in circulation as of April 8, 2022.
When is the best time to invest in crypto?
As with any investment, it’s impossible to perfectly time the market and get in (or out) at the right time. If you’re trying to decide when to buy cryptocurrencies, anytime could be a good time to start investing.
A good starting point is to understand the purpose of the cryptocurrencies you’d like to add to your portfolio. Using a strategy where you don’t invest more than you can afford to lose could also guide your investment plan.
Dogecoin could be a fun addition to your investment portfolio, but it’s important to understand the inherent risk that comes with buying this cryptocurrency. If dogecoin surges again as it did in 2021, there could be a potential for big gains. However, if it doesn’t, you might lose some of the money you used to buy dogecoin if it never regains popularity.
There are many other cryptocurrencies offered in the market. It might make sense for you to consider whether other cryptocurrencies might be a better fit for your long-term financial goals and portfolio strategy.
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Disclosure: The author owns DOGE, SOL, ETH, BTC, and LTC. All of which are mentioned in this article.