When Dogecoin (DOGE) first hit the scene, most people, including its founder, took it as a joke. Then all of a sudden even Elon Musk backed the coin and its value skyrocketed. However, now the price has dropped and some are wondering if Dogecoin is just a joke. You may be asking yourself: should I invest in Dogecoin, or have I already missed the mark?
Like any cryptocurrency, buying dogecoin does not guarantee huge returns for investors, and no single trade will be one on which you can retire. The path to profitable trading is a long one and it took me it’s time to realize what I had to do to get there.
However, the success of both the DOGE coin and the Shiba Inu wannabe proves that we never know what to expect from the crypto market. In other words, we cannot rule out the return of DOGE. To determine if it could be a good investment, let’s do a little research first – I’ll cover its history and how it works before moving on to a few factors that can make it valuable.
What is dogecoin?
You’ve seen the meme and probably heard about its unexpected rise to fame. But what is Dogecoin used for and where did it come from?
DOGE appeared in 2014, which makes it even older than Ethereum, which launched in 2015. But unlike most cryptocurrencies, its team never had high hopes that it would become the next major currency or change the world. Don’t be discouraged if you ever thought this was a “stupid idea” because that’s why founder Billy Marcus created it in the first place.
The crypto protocol was created by copying and pasting the Bitcoin source code. Marcus claims that it only took him three hours to launch Dogecoin and that he did it as a joke. Even Markus sold all his assets in 2015; he should be kicking himself now.
How is Dogecoin used?
When evaluating most cryptocurrencies and digital tokens, I would take a deep dive into the infrastructure and technology behind the protocol, but this is not applicable to Dogecoin given its lack of unique features. Since it is based on Bitcoin, DOGE could theoretically be classified as an alternative currency. Also, Elon Musk has recently started accepting Dogecoin as a payment method for Tesla goods, which is similar to the use case he envisions.
However, if any cryptocurrency deserves the accusation of being nothing more than a speculative asset, Dogecoin should get that title. This has now inspired the creation of an entirely new category of cryptocurrencies: meme coins. You may already know about the Shiba Inu coin (SHIB). However, there are now a range of nearly identical cryptocurrencies, including Dogelon Mars (ELON) and Woof Coin (WOOF), but whether you can buy them on your chosen exchange is another matter entirely!
However, depending on your point of view, all this stupidity may not necessarily be such a terrible thing. More on this soon.
Dogecoin exchange rate history
Even though Dogecoin has been around since 2014, it went largely unnoticed for the first six years of its existence. When Dogecoin was launched, its price was $0.0002 and did not change significantly until 2021. In February 2021, the coin experienced what seemed like a big jump to $0.079 at the time.
Few knew that this was only the beginning. It hit an all-time high of $0.67 in May, which equates to a 334,900% return. Why do you ask? The entire crypto market boomed during this period (as the NFT is currently seeing) and many cryptocurrencies benefited from it, so that was undoubtedly a factor.
On May 4, Dogecoin reached a market capitalization of $75 billion. At this moment, the association of Elon Musk with the coin began. The Tesla founder tweeted about Dogecoin and gave supporters another reason to hope for its future.
Since then, however, things have gone downhill. Cryptocurrency as a whole collapsed by the summer of 2021, and with it, DOGE. In July, its value fell to just $0.17. Although there have been a few short spikes since then, the price has never come close to its previous all-time high.
But some believe that the situation may be about to change.
[source: coinmarketcap] https://coinmarketcap.com/currencies/dogecoin/
Should you invest in Dogecoin?
Finally, we come to the million dollar question: is it worth giving your money to the dogecoin project?
Let’s start on a pessimistic note. Let’s say you’re looking for the right way to increase your investment. In this case, other cryptocurrencies arguably have higher intrinsic value and therefore should be less risky, not to mention the relative safety of underlying investments such as stocks. Since Dogecoin was only created as a joke and fluctuated a lot in price, it’s probably not something you want to throw your legacy on.
But if you’re committed to this risky but admittedly compelling coin, here are a few things to consider.
cultural capital
If you’re feeling an illogical craving for Dogecoin that you can’t get rid of, you’re not alone. Some might say it’s just a joke. However, DOGE gained momentum by taking inspiration from the meme and using it to give the middle finger to the financial system and cryptocurrencies that take themselves way too seriously. After all, if you can theoretically use a coin based on a Shiba Inu dog to do the same thing that you can do with bitcoin or US dollars, that begs the question.
It turned out to be a message that people liked to keep up and the value of it is not something that no one should ignore. Founder Marcus says, “The crypto community can be quite elitist and not very inclusive, and we wanted to make the community more fun, light-hearted, and inclusive.”
Dogecoin gives many people a sense of camaraderie; one could even say that it has cultural capital because of the way it has impacted society and brought people together.
Could this be the reason for the success? We also saw how people rallied around Gamestop and caused the cryptocurrency intended for Squid Games to skyrocket in price (although this turned out to be a scam). Don’t underestimate the power of cultural capital.
Profit from market irrationality
You can see Dogecoin as a 100% rational move for people, or it’s a perfect example of how irrational the markets are. If it’s the latter, this could potentially be a way to make money. How?
The markets are always doing crazy things, and once you accept that fact, you can profit from it. I’m not talking about reading some fancy chart patterns. I’m just talking about watching mania begin to take over the world and recognizing that this is the type of mania that can drive prices up.
However, you will need a good knowledge of how to predict the behavior of investors and people (and the humility to understand that you are not a god if and when you do it right), so it’s not really for everyone.
Elon Musk
The romance between Dogecoin and Elon Musk is not over yet. On Jan. 14, the Tesla entrepreneur’s company began accepting Dogecoin as a payment method for purchasing its merchandise, including fashion items such as the Tesla factory-shaped commemorative belt. Exactly what you’ve always wanted (but before you get carried away, be aware that you can’t get a refund if you pay DOGE).
This led to the fact that the price of DOGE almost immediately jumped by 15%.
Admittedly, buying a limited number of goods for Tesla does not necessarily mean widespread use of Dogecoin. However, this is a sign that the currency has some potential.
energy efficiency
The issue of energy inefficiency in the blockchain world has been getting a lot of publicity over the last year or so. Protocols like bitcoin can only function through mining, which requires humans to solve cryptographic puzzles using increasingly powerful computers. Unfortunately, this waste of computer power has drawn criticism.
However, studies have shown that Dogecoin is more energy efficient than most known cryptocurrencies. While Bitcoin consumes 707 kilowatt-hours per transaction, Dogecoin consumes only 0.12. The fact is that Dogecoin has some small differences from the Bitcoin code, and one of them is the transition from Bitcoin’s SHA-256 mining algorithm to the AUXPoW protocol, which has lower hash rates.
In addition, Musk is allegedly working with the Dogecoin team to make the protocol even greener. If you need more credibility to invest in Dogecoin, this is it.
DOGE or not DOGE?
Whether this tour of Dodgeville inspired your first steps in crypto investing or left you more puzzled than ever about why it was successful in the first place, I hope you learned something today.
Whatever you ultimately decide, we can all agree that the rise of Dogecoin is nothing short of spectacular. However, it will probably be better if you don’t stake your entire net worth on Dogecoin. This article originally appeared on Wealth of Geeks.