The meme-inspired cryptocurrency Dogecoin (CRYPTO: DOGE), whose mascot is the Shiba Inu dog breed, took the crypto investing world by storm earlier this year, rising from half a penny to around $ 0.70 in May. Currently, Dogecoin, which has the 10th largest market capitalization of all cryptocurrencies, costs around $ 0.20. There has been a lot of debate about whether Dogecoin is a legitimate investment. Let’s look at the bull and bear cases.
The bullish mindset: potential to invest for a few dollars
Adria Cimino: Dogecoin started out as a joke. Co-founder Jackson Palmer tweeted about investing in the then-nonexistent Dogecoin to make fun of the number of cryptos popping up here and there. However, as the idea of Dogecoin gained momentum, Palmer decided to make crypto a reality.
That was in 2013. And since then, Dogecoin profits have been no joke. This year alone, the coin has risen by more than 3,500%.
Image source: Getty Images.
So why should anyone invest in such a cryptocurrency? It’s important to note that it trades well below a dollar per token. That means it is easy to invest in this crypto player for just a few dollars, and if Dogecoin eventually goes down, your losses would be extremely limited.
Now let’s talk about the potential for profit. Given the unlimited supply of Dogecoin, I don’t expect its value to reach exceptional levels. But even if it gets as high as a few dollars a share, many investors could win big.
Dogecoin doesn’t have the real benefits of bigger competitors like ether (CRYPTO: ETH) at the moment. But if it develops into the realm of smart contracts (contracts that execute themselves when certain conditions are met) it could become a major player. Through these contracts, blockchains develop decentralized applications (dApps). These dApps are changing the way business is done in finance and other industries.
Dogecoin is already the tenth largest cryptocurrency in the world by market capitalization. And that’s only because of its popularity as a meme coin and because it has grown in importance as a payment method. For example, the NBA basketball team Dallas Mavericks accepts Dogecoin. And last AMC Entertainment Holdings said it will soon be accepting Dogecoin for payment.
Of course, Dogecoin remains very risky. It shouldn’t be the backbone of your crypto investment strategy. But it could find its place as a small part of a balanced crypto portfolio.
The bearish stance: no solid fundamentals
Bram Berkowitz: I’ll admit I got into Dogecoin a bit early, but just popped in a little for entertainment purposes and already sold. I never really viewed Dogecoin as a strong long-term investment due to the lack of fundamentals.
For one, Dogecoin only seems to have the very basic capabilities as a cryptocurrency as it can help people move money on the internet without a bank account. But there are now more than 6,500 cryptocurrencies, and most of them can. There is no real benefit and no first mover advantage for Dogecoin.
The other thing is that there is no supply and demand dynamic associated with Dogecoin. Humans can mine an unlimited supply, and there are around $ 132 billion in circulation right now. One of the main reasons investors like Bitcoin (CRYPTO: BTC) is because they see it as a possible hedge against inflation, in part because the amount of tokens that can be mined is capped at 21 million, so there is a finite amount. And it was reported earlier this year that a very small number of people own most of Doge’s market cap, making the token very prone to volatility.
After all, I really think Dogecoin has benefited from the meme investment this year, which also spanned various other cryptocurrencies and stocks. Not long after Dogecoin’s impressive run, investors joined in Shiba Inu (CRYPTO: SHIB)which, due to its name, seems to be a game on Dogecoin popularity. Shiba Inu has taken another parabolic run and is not too far behind Dogecoin’s market cap. It really looks like Shiba Inu stole Dogecoin’s fire for now, and I’m sure another digital token will pop up and eventually steal Shiba’s fire. Dogecoin is a short-term fad in my opinion that is about to fade.
Conclusion
Ultimately, it’s okay to put a little money into Dogecoin for fun. It has some notoriety at this point, and there’s always the possibility that the next Elon Musk tweet about it could lead to some nice quick wins.
However, under no circumstances do we recommend devoting a very small portion of your crypto portfolio to Dogecoin. It’s likely very volatile and lacks the basics of a good cryptocurrency investment.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all reflect critically about investing and make decisions that will help us get smarter, happier, and richer.
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