Is It Worth Investing In Dogecoin?
For a highly volatile and inflationary asset like Dogecoin, deciding whether to invest or not can be a nagging dilemma. While DOGE has recorded significant growth since the start of the year, it still gives a lot of mixed signals, and many people don’t know whether to start investing or take a pause.
Dogecoin started as a joke but has grown to be one of the best-performing assets in the crypto market. The coin is up more than 4269.38% year to date and is expected to achieve more milestones this year.
Dogecoin had grown to almost $0.70 around mid-May but it's currently trading at $0.22. This came even after massive support from Elon Musk, who announced that he would be proposing some drastic network upgrades to make Dogecoin a much better option than Bitcoin.
So, while the coin is expected to have a rebound, the recent crash has left many wondering whether Dogecoin is much riskier than it seems. Will Dogecoin recover? Should you go ahead and invest?
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- What is Dogecoin?
- How Does Dogecoin Work?
- Dogecoin Price History
- Dogecoin Price Predictions in 2021
- Different Ways to Invest in Dogecoin
- Is Dogecoin a Good Investment?
- Why Should I Invest in Dogecoin?
- Conclusion: So, Should I Invest in Dogecoin?
What is Dogecoin?
Dogecoin is a cryptocurrency that was started as a joke by two software engineers in 2013. The coin was inspired by a meme of a Shibu Inu Japanese dog and was created to be a ‘lighthearted’ version of Bitcoin.
Dogecoin is often referred to as a joke because it is a direct copy of Bitcoin and doesn’t have a whitepaper that outlines what it is trying to achieve or what problems it wants to solve in the financial industry.
However, unlike Bitcoin, which limits its tokens to 21 million, Dogecoin is inflationary, which means it does not have a coin cap. In other words, the price does not have a real supply-and-demand dynamic.
Technically, Dogecoin is an open-source, peer-to-peer, and decentralized cryptocurrency that can be sent to anyone on the internet without using third parties like banks or financial services like PayPal.
Since DOGE is not created to solve any financial problems, its growth mostly depends on internet hype and speculation, making it one of the most volatile digital currencies.
How Does Dogecoin Work?
Dogecoin works much like Bitcoin. For instance, it also runs on blockchain technology which a distributed digital ledger where all the transactions made using Dogecoin are stored.
Additional, Dogecoin has a proof of work system, and its tokens are mined using complex mathematical equations that are run by supercomputers. Miners are rewarded every time they verify a new transaction and add it to the blockchain.
These miners can then sell their rewards on a crypto exchange or hold it for the long term.
Dogecoin is not a good store of value due to its inflationary nature but can still be used to make payments or buy stuff online from merchants that accept it. Millions of Dogecoins are mint every day and added to the circulating supply.
Dogecoins online supporters also sometimes use it to send tips or gifts to their friends and content creators. However, the fact that Dogecoin is fully based on Litecoin and, by design, Bitcoin, means that it does not bring any new technology or solution to the market.
As a result, there are few internal factors to drive its price or improve adoption. The coin, therefore, mostly depends on extrinsic factors such as community support and celebrity endorsements to grow its price and market capitalization.
But how has it survived over the years without a whitepaper and an inflationary design? Let’s quickly look at the price history.
Dogecoin Price History
Dogecoin is one of those cryptocurrencies that no one expected to gain any traction. Given that it was created as a satirical alternative to Bitcoin, most people thought that it would enjoy its meme status for some time then fizzle out (like all viral memes).
However, DOGE has remained surprisingly tenacious and it's at the top 10 most valuable cryptocurrencies by market cap.
Despite this success, Dogecoin hasn’t always been a favourite of many. When it started in 2013, its price remained underwhelming for several years before finally picking up in 2017.
This was after DOGE was swept up in the 2017/2018 market-wide bull run that saw many cryptos soaring to previously unimaginable levels. Dogecoin took this advantage to salvage its price from under the radar and quickly skyrocketed itself to stardom.
For instance, DOGE was worth $0.0000025237 per token on 20th March 2017, but by 5th July, the price had shot to $0.00335187, representing almost 133,000% growth in just five months.
As is usually the case, many analysts predicted that the coin would face a correction that would see its price drop. Instead, Dogecoin kept rising, and by January 2018, it peaked at $0.017 with a $2 billion market cap.
At this rate, DOGE was growing too quickly for relatively young crypto. It reached a time when it couldn’t accommodate its growth, so it started dropping between 2018 and 2019 and finally settled at $0.002.
Again, in March 2020, when the COVID-19 pandemic came knocking, Dogecoin dropped further and found itself at $0.00176702 in mid-March 2020. However, when the coronavirus cases dropped, and countries around the world began to open up, it started to grow again.
The coin went on to achieve an all-time high of $0.74 in May 2021. Since then, it has gone through a series of troughs and uptrends and is currently trading at slightly below $0.22.
Dogecoin Price Predictions in 2021
While many financial analysts believe that the 2017 crypto bull run was the most dramatic, we believe the post -COVID 19 bull run that started in late 2020 until around May 2021 is just as dramatic.
As a result, DOGE started 2021 on a fairly bullish note. Although it was a little late to the party, the joke cryptocurrency was able to catch up and attained some of its biggest milestones.
Dogecoin has also shown low levels of volatility until late April, when it started on a price swing that left many investors baffled.
Like we mentioned earlier, Dogecoin thrives on hype and speculation, which makes it really volatile and hard to predict price direction. However, several analysts are still giving predictions of how they think the price will fair for the remaining portion of the year.
According to Digital Coin Price, Dogecoin might finish the year at $0.35. The site updated its prediction after the correction that saw the coin drop to below $0.40 from as high as $0.70.
Wallet Investor is even less hopeful land believes that Dogecoin DOGE will be trading at $0.343 by December 2021. This seems a bit bullish, considering that the coin is currently within this price level.
Elsewhere, while Long Forecast expects the price of Dogecoin to close the year at $0.25. Long Forecast previously predicted that DOGE would finish the year at above $1 but has also updated its forecast after its price dip.
Generally, if Dogecoin recovers from the current setback, it might close 2021 at $1, as many people had predicted. For now, let’s hope that the community and high-profile supporters like Elon Musk will be able to help it bounce back and resume its previous momentum.
Read Also: Dogecoin Price Predictions
How to Buy Dogecoin
Although Dogecoin is not as widely available as bigger coins like Bitcoin or Ethereum, you can still get it from a few credible exchanges and brokerages. Our favourites include Binance, Crypto.com, Kraken, Gemini, Robinhood and Webull. Dogecoin is also now available on eToro since the beginning of May.
Here are the exact steps to take when buying Dogecoin.
Step 1: Get a Wallet
Even before you find the perfect exchange for you, you will need to get a crypto wallet first.
As is the case with most cryptocurrencies, there is a wide selection of wallets in which you can store Dogecoin. However, some wallets are just better than others and finding a good fit for your DOGE will need some shopping around.
When buying a wallet, the first thing you consider is security then, you can factor in things like budget and personal preferences. Generally, there are two common types of wallets that you can use to store Dogecoin; hot and cold wallets.
A hot wallet is internet-based and can be accessed anywhere from any device. This could be a mobile application, downloadable software, a browser extension or an exchange-based wallet. Most people use hot wallets because of their flexibility and convenience. There are also many options available, so you can’t miss out on your favourite one.
Most of these wallets are free to use and really simple to set up. However, they’re vulnerable to hacking since they are online-based.
Cold wallets, on the other hand, are not in any way connected to the internet. The only time cold wallets are connected to the internet is when you want to transfer your DOGE or use it to buy something online.
Cold wallets are more secure than hot ones, and if you don’t plan on using your crypto any time soon, either to trade or purchase stuff online, we recommend them. These types of wallets are usually expensive and not very user friendly.
Step 2: Buy Dogecoin
Once you have your wallet set up, you can now go ahead and buy some Dogecoin. You can do this in any of your favourite exchanges. We recommend buying on an exchange that you have used before to buy another crypto since you’d already been familiar with the process.
Otherwise, if this is your first time buying crypto, you don't have to worry. The process is usually straightforward, plus most exchanges have a guide on how you can do so on their platform.
The first thing you will need to do is sign in or register with an exchange, then follow their prompt on how to buy Dogecoin.
You’ll probably be using three of the most common payment options. These are:
- Credit card: The easiest and fastest way to buy Dogecoin. It is, however, a bit expensive
- Bank Transfer: Cheaper but a bit slow. The process can take up to three days.
- Cryptocurrencies: You can also buy or trade DOGE with other cryptocurrencies such as ETH or Bitcoin. Although it is much cheaper than the other options, trading pairs such as BTC/DOGE is a bit complex and might not be a good option if you are doing it for the first time.
After buying your DOGE, you can now transfer it to your wallet using the procedure outlined on the exchange you used.
After transferring, you can choose one of the two investment methods we discuss below.
Different Ways to Invest in Dogecoin
Being the ‘joke’, it is, Dogecoin doesn’t offer many options when it comes to investments. So, there are only two viable ways in which you can invest in it. These are trading and long-term investment or hodling.
We will be going through how to utilize each of these ways. But first, before you can invest, you will need to buy the tokens first. Lucky for your, some of the most popular and credible exchanges like Binance, Kraken and eToro support it.
Method 1: Holding DOGE
Deflationary cryptos like Bitcoin are perfect for hodling for a long time, spanning several years. However, since Dogecoin is inflationary, holding it for a long time might not be a good idea.
If you have to go this route, therefore, we recommend holding for only a short period of time; say several months or a year. This way, you won’t be a victim of inflation and wild price swings that might render your investment worthless in the long run.
Method 2: Trading DOGE
According to most experts, trading is the best way to invest in Dogecoin due to its high volatility levels. When it comes to trading, you can do it in two ways:
- Take advantage of short-term price uptrends to make small but frequent profits
- Predict price direction by placing a short or long call. This allows you to make a profit despite the price direction.
As alluring as it is, Dogecoin trading can be complex, and we only recommend it if you have some experience trading cryptos. Otherwise, if you are doing it for the first time but believe that this is the best option for you, you can work with an expert and trade as you learn.
You can also outsource the entire trading process to a third party whereby you buy the crypto yourself then send them to the trader, who will then sent the profit back to you. In this case, make sure that you are working with a credible person or company, so you don’t lose your investment to scammers.
Is Dogecoin a Good Investment?
The first thing you should know before investing in Dogecoin is that it is an inflationary cryptocurrency. This means that it has an endless supply that keeps rising each day, with about 5 billion coins added to the overall supply each year.
As a result, Dogecoin is unstable and not a good long term investment. With time, there will be more coins than demand and the price will drop and have a hard time going back up again.
However, Dogecoin has shown that it is capable of attaining higher prices than most people expected. For instance, some analysts have predicted that the coin would never reach $0.1 since it doesn’t have a coin cap. Right now, it is on a rally to $1 by the end of the year and is showing good signs of attaining that goal.
Dogecoin has proved to be a massively profitable investment, especially for people who invested while the price was still very low. For instance, if you bought DOGE worth $1000 at the start of the year 2021, you’d have enjoyed enviable gains around May when the price reached its current all-time high.
Let’s do the math.
According to data from CoinDesk, DOGE was trading at $0.004741 on January 1st 2021. For $1,000, you would have gotten around 210,926 DOGE. Now, if you sold your stash in May when the price was as high as 69 cents, you would have made a profit of more than $144,000 in just four months.
This is proof that Dogecoin is a good investment, depending on how the price plays out. For the moment, the gains might not be as high since the price growth has slowed down. However, you can still make good money if you invest diligently.
Like any other investment, make sure you do your research and understand the market before making a decision to invest. As we discussed above, there are several ways to invest, and one of them might just work for you.
Why Should I Invest in Dogecoin?
If we were talking about Ethereum or IOTA, we would have easily outlined a plethora of reasons why you should start investing. This is a bit hard for Dogecoin.
You see, Dogecoin is the visionless cousin to Bitcoin and Litecoin. As we have mentioned several times, it does not have a whitepaper. This means that it is not even trying to achieve or solve any problem.
So basically, as is expected of a joke crypto, Dogecoin doesn’t give you any reasons to invest. So why do so many people invest, and why is the price rising? Why should you invest?
Well, according to Adam Morris, the co-founder of the cryptocurrency information website Crypto Head, most people invest in Dogecoin because they can make bigger profits in a short period of time.
That’s the beauty of Dogecoin and also why we emphasize that you don’t go the long-term route. If the price growth is favourable, you can make good money in a short time, as we have illustrated in the section above.
However, keep in mind that Dogecoin does not have any unique features that attract investors. It is not unique and is not even trying to be. Its price is mostly moved by speculations and social media hype.
This makes it a highly volatile asset, and the price can change direction without warning. Only invest if you are willing to take risks and understand that you can lose all your money as fast as you can double it.
Conclusion: So, Should I Invest in Dogecoin?
In the traditional sense of investing, Dogecoin doesn’t have any characteristics of a good investment; it is inflationary, highly volatile and is not trying to solve any problem. Interestingly, the coin has attracted a lot of success and is now among the most valuable cryptocurrencies by market cap.
So, should you go ahead and buy Dogecoin despite all the red flags?
While Dogecoin does not have any unique features as a cryptocurrency, its massive following and investor base makes it a hot cake for short-term investments. So, yes, you can buy Dogecoin but don’t put it away for too long.
However, keep in mind Dogecoin is a risky investment, and you could lose all your money. You should, therefore, do some research and be sure that you are willing to take on massive price swings and possible loss.
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Here are some common questions we get asked about Dogecoin and DOGE investment.
Will the price of Dogecoin go up in 2021?
There is a positive outlook concerning the price of Dogecoin in 2021. According to most price forecasts, the price of DOGE may rise and but probably won't close the year at $1.
Will Dogecoin reach $1?
If Dogecoin recovers from its correction and resumes its earlier momentum, DOGE might reach $1 sooner than we expect. Most price analysts agree that the $1 target by the end of this year or early next year is very feasible.
Will Dogecoin reach $5?
While it might take several years, Dogecoin has the potential to reach $5. According to price analysts, this could possibly happen between 2026 and 2030, depending on how fast the DOGE asset grows.