Dogecoin (CRYPTO: DOGE) has gone through some wild swings over the past three years. The cryptocurrency was launched in 2013 as a parody of Bitcoin (CRYPTO: BTC) named after the Shiba Inu dog meme. At the start of 2021, it was worth just $0.01, but by May 8 of that year it had risen to an all-time high of $0.73.
That rally was driven by two strong tailwinds. First, a mix of social media buzz, low interest rates, and stimulus in 2021 led to a buying frenzy in cryptocurrencies, meme stocks, and other speculative investments. Secondly, celebrities like Elon Musk, Mark Cuban and Snoop Dogg jumped on the bandwagon. and promoted Dogecoin to their social media followers.
But today, Dogecoin is only worth about $0.16. Rising interest rates drove investors away from speculative investments like cryptocurrencies, and many of the market’s smaller altcoins collapsed as a new crypto winter began.
Faced with these challenges, many investors may think it’s smarter to stick with blue chip cryptocurrencies like Bitcoin and Ether. Nevertheless, some investors believe that Dogecoin could still rebound in the near future.
Altcoin Sherpa, the alias for a closely followed crypto analyst with nearly 217,000 followers on investors could do right now. Let’s see if that outlook makes sense – and whether investors should be more optimistic about this volatile meme coin.
What is the bullish case for Dogecoin?
Altcoin Sherpa’s bullish case for Dogecoin is based on the belief that retail investors will buy it again, that it has great liquidity and low downside compared to other meme coins, and that it is more attractive than many of the smaller altcoins .
He also believes it will only take one tweet from Elon Musk to “blow it up.” In the past, several tweets from Musk about Dogecoin appeared, along with TeslaThe acceptance of Dogecoin payments and a temporary change of the Twitter logo to a Shiba Inu last year (before the rebrand to X) have all increased the price of the meme coin.
But Dogecoin still has fewer catalysts than other cryptocurrencies
Dogecoin may be more stable than other smaller altcoins, but it also has fewer long-term catalysts than Bitcoin and Ether. It is now accepted as a payment method at a few companies, but its volatile price still makes it more of a publicity stunt than a realistic payment option for most customers.
The regulators don’t seem too impressed with Dogecoin either. Last September, the New York State Department of Financial Services excluded Dogecoin from its “green list” of eight regulated cryptocurrencies – including Bitcoin, Ether and six stablecoins from PayPal And Twin. That exclusion suggests it is still a highly speculative investment.
Dogecoin’s blockchain platform also cannot be used natively to develop decentralized applications. That’s because it originally came from Bitcoin’s blockchain, which doesn’t support app development, and uses the same energy-intensive proof of work (PoW) method to mine its tokens.
For comparison: Ethereum, SolanaAnd Cardano they all use the more energy-efficient proof of stake (PoS) method, which is widely adopted for the development of decentralized apps and smaller tokens. Dogecoin’s backers then launched Dogechain, a separate blockchain network to support Dogecoin-based apps, but it is not as widely used as other decentralized platforms.
There is also evidence that investors are simply losing interest in Musk’s views on Dogecoin. In April, he randomly tweeted about its growing popularity, but the price barely budged. That waning interest refutes Altcoin Sherpa’s view that “all it would take” to defund Dogecoin would be another bullish tweet from Musk.
Investors should be skeptical about the future of Dogecoin
Dogecoin may have a better future than many of the smaller altcoins on the market, but I can’t say for sure that it will rise 150% in the near future. Interest rates are still high, and the new Bitcoin ETFs and emerging Ether ETFs could draw many investors away from smaller altcoins and meme coins even when the crypto winter is over.
So instead of following pseudonymous crypto analysts with large audiences on social media, investors should do their own due diligence and understand that Dogecoin could easily experience a 50% drop in value before doubling or tripling in this challenging market.
Should you invest $1,000 in Dogecoin now?
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Bitcoin, Cardano, Ethereum, PayPal, Solana, and Tesla. The Motley Fool recommends the following options: June 2024 short calls of $67.50 on PayPal. The Motley Fool has a disclosure policy.
1 Top Cryptocurrency to Buy Before It Surges 150%, According to a Popular Analyst, originally published by The Motley Fool
