Dogecoin (CRYPT: DOGE) has taken its possessors on a wild ride. Although its price has risen a staggering 40,600% in the last decade (as of March 3), it is currently trading 88% below its peak. This level of extreme volatility is nothing new.
Now that Dogecoin has crashed, there may be some market participants who are looking for risks and want to take action. I am not one of these people. Here are three reasons why I don’t buy this meme cryptocurrency.
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The first reason I stay away from Dogecoin is because it doesn’t solve any problems. The digital token was actually created as a joke competitor to bitcoin. That’s all. There was no other objective than that. And its two founders are no longer involved.
Over the years, it’s clear that the market has viewed Bitcoin much more favorably, given that its $1.4 trillion market cap is 92 times more valuable than Dogecoin’s $15.2 billion. The first has the brand recognition, network effect, regulatory acceptance and increasing integration within financial services that support its use case as a novel monetary asset.
Dogecoin, on the other hand, falls short in these key areas. That doesn’t bode well for your future.
Nonetheless, it’s still impressive that Dogecoin has remained relevant for so long. Its market cap right now is higher than well-known consumer-facing companies like roku, dutch brothersand Etsy. That’s a surprising statistic.
I think it all comes down to the Dogecoin fan community. For some reason they still believe in the project. However, for what it’s worth, the strength of the community appears to be weakening, as the Dogecoin price has shown no signs of sustainably returning to its record price in May 2021.
In the short term, the price may benefit from several hype cycles, arising from public mentions of Dogecoin or market speculation about its adoption. These outbursts do not last long and it is impossible to time them correctly.
There are currently 169 billion Dogecoin tokens in circulation. That number increases by 10,000 per minute and about 5 billion per year. There is no strict supply limit. Therefore, investors completely miss that scarcity is a valuable attribute.