Dogecoin (CRYPTO: DOGE) went 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. It was only worth $0.01 at the beginning of 2021, but by May 8 of that year, it had soared to a record high of $0.73.
That rally was driven by two main tailwinds. First, a mix of social media buzz, low interest rates, and stimulus checks sparked a buying frenzy in cryptocurrencies, meme stocks, and other speculative investments in 2021. Second, 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. Soaring 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 might think it’s smarter to stick with “blue chip” cryptocurrencies like Bitcoin and Ether. Nevertheless, some investors believe that Dogecoin could still bounce back in the near future.
Altcoin Sherpa, the alias for a closely followed crypto analyst with nearly 217,000 followers on X, recently claimed that buying Dogecoin and expecting it to rally about 150% to $0.40 was one of the “safest trades” investors could make right now. Let’s see if that outlook makes any sense — and if investors should be more bullish on 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 relative to other meme coins, and that it’s more appealing than many of the smaller altcoins.
He also believes that all it takes will be one tweet from Elon Musk to “blow it up.” In the past, several of Musk’s tweets about Dogecoin — along with Tesla‘s acceptance of Dogecoin payments and a temporary change of Twitter’s logo into a Shiba Inu last year (prior to its rebranding as X) — all boosted the meme coin’s price.
But Dogecoin still has fewer catalysts than other cryptocurrencies
Dogecoin might be more stable than other smaller altcoins, but it also has fewer long-term catalysts than Bitcoin and Ether. It’s now accepted as a payment method at a few businesses, but its volatile price still makes it more of a publicity stunt than a realistic payment option for most customers.
The regulators also don’t seem too impressed with Dogecoin. Last September, the New York State Department of Financial Services excluded Dogecoin from its “green list” of eight regulated cryptocurrencies — which include Bitcoin, Ether, and six stablecoins from PayPal and Gemini. That exclusion suggests it’s still a highly speculative investment.
Dogecoin’s blockchain platform also can’t be natively used to develop decentralized applications. That’s because it was originally forked from Bitcoin’s blockchain, which doesn’t support the development of apps, and uses the same energy-intensive proof of work (PoW) method to mine its tokens.
By comparison, Ethereum, Solana, and Cardano all use the more energy-efficient proof of stake (PoS) method, which has been widely adopted for the development of decentralized apps and smaller tokens. Dogecoin’s backers subsequently launched Dogechain, a separate blockchain network to support Dogecoin-based apps, but it isn’t as widely used as other decentralized platforms.
There’s also evidence that investors are simply losing interest in Musk’s views on Dogecoin. This April, he randomly tweeted about its growing popularity, but its price barely budged. That waning interest counters Altcoin Sherpa’s opinion that “all it takes” to lift Dogecoin would be another bullish tweet from Musk.
Investors should be skeptical of Dogecoin’s future
Dogecoin might have a brighter future than many of the market’s smaller altcoins, but I can’t confidently say that it will soar 150% in the near future. Interest rates are still high, and the new Bitcoin ETFs and upcoming Ether ETFs could pull a lot of investors away from smaller altcoins and meme coins even as the crypto winter ends.
So instead of following pseudonymous crypto analysts with a large social media audience, investors should perform their own due diligence and understand that Dogecoin could easily experience a 50% decline in value before it doubles or triples in this challenging market.
Should you invest $1,000 in Dogecoin right now?
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Cardano, Ethereum, PayPal, Solana, and Tesla. The Motley Fool recommends the following options: short June 2024 $67.50 calls on PayPal. The Motley Fool has a disclosure policy.
1 Top Cryptocurrency to Buy Before It Soars 150%, According to a Popular Analyst was originally published by The Motley Fool