After macro headwinds and industry failures throughout 2022, the cryptocurrency market has been staging a major comeback since the start of 2023. This means good news for some of the more speculative tokens out there.
Just look at Dogecoin (CRYPTO: DOGE). The dog-inspired meme token has roughly doubled in the past 2 1/2 weeks (as of March 13). Investor enthusiasm is certainly picking up.
As of this writing, Dogecoin remains 77% below its all-time high, established in May 2021. Does that mean now is the time to buy this cryptocurrency hand over fist if you have $1,000 to invest?
What’s the point?
It’s interesting to understand the history of Dogecoin, as this can help put things into perspective. Wanting to create a lighthearted alternative to Bitcoin, Dogecoin’s founders launched the meme token in 2013 as its own blockchain network. This starkly contrasted to Shiba Inu, which was built on top of the Ethereum network, adding functionality with a vast ecosystem of decentralized applications. Consequently, Dogecoin lacks much in the way of utility and adoption.
There are only a small number of businesses that accept it as a form of payment. And out of the top 100 blockchains in developer ecosystems, Dogecoin ranks 90th on the list. With so few people working on advancing Dogecoin’s network capabilities, it’s hard to be optimistic about its long-term future.
It also doesn’t help that the current token supply of 143 billion is massively abundant. Add in the fact that 10,000 new Dogecoin tokens are created every single minute, and the lack of scarcity is a worrying characteristic that could limit the crypto’s upside potential.
This is the exact opposite situation of Bitcoin. The world’s most valuable digital asset has a fixed supply cap of 21 million, a key trait that supports a rising price trajectory over time. Unfortunately, Dogecoin doesn’t have this, so demand will need to climb at a faster clip than new supply. That’s a tall order.
Long-term perspective
It’s impossible to pinpoint what exactly has been propelling Dogecoin’s price in the past few weeks. Investors might just be optimistic about the state of the economy or markets, in general, which leads to more speculative behavior. But to be clear, deciding to follow this herd behavior isn’t real investing — it’s more like gambling.
Dogecoin’s strong community of supporters can help keep its price high enough for the token to remain relevant. But this is no way to invest your hard-earned savings.
With that in mind, it’s a smart move to avoid adding Dogecoin to your portfolio. It’s hard to become successful if you’re hoping for a new hype cycle to happen due to heightened interest and discussion on the internet or because some famous person publicly mentions it.
Investors have to view their purchases with a five- or 10-year perspective. The question then centers around whether Dogecoin actually has long-term viability, but there are no compelling reasons to believe this is true. A small developer network and no valuable use cases are things to consider.
Despite Dogecoin’s recent momentum, I think buying $1,000 worth of this cryptocurrency in 2024 would be a monumental mistake. There are better places to park your capital. Bitcoin is a smart choice in the crypto space, and there are high-quality stocks to invest in, as well.
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Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
Should You Buy Dogecoin Hand Over Fist With $1,000 in 2024? was originally published by The Motley Fool