Dogecoin has been a growing giant in the crypto world. Its value has increased by over 4,500% since the start of the year and is up almost 11,000% over the previous 12 months.
Even its biggest competitors haven’t been able to get such a fast growth. For example, the price of Bitcoin has gone up “only” 300% or so over the previous year, and Ethereum is up nearly 860% in the same time frame.
However, with Dogecoin’s fast rise, it’s a very risky investment. There are two main reasons it could be doomed to fall, and one reason it could thrive.
Why Dogecoin might fall
1. It does not have real-world utility currently
For any cryptocurrency to do well over the long term, it must have good utility inside the real world.
Right now, Bitcoin is by far the most widely accepted crypto among merchants, and very few accept Dogecoin as payment. Many businesses are still undecided even about cryptocurrency itself, and those that do accept it are far more likely to use Bitcoin instead of Dogecoin.
2. There is almost no barrier to entry in cryptocurrencies
Anyone can create a new cryptocurrency, so the barrier to entry is very low. In fact, Dogecoin was created by two programmers as a joke in response to the crazy speculation inside cryptocurrencies in 2013.
Because Dogecoin is not accepted by businesses and does not have a competitive advantage, it would not take much for a new cryptocurrency to pop up and beat it.
Why Dogecoin might make it big
1. It has a large following
Despite Dogecoin having shakey fundamentals, it is managed to create quite a fan club. And although it has substantially lowered in value over the previous few weeks along with other cryptocurrencies, it is still up almost 400% over the previous three months.
Part of the reason Dogecoin has gotten such high returns is due to retail investors artificially bringing up its price. Billionaires like Elon Musk have also aided in the fueling of Dogecoin’s rise to the top by voicing their support for the new coin.
These factors could point to Dogecoin being a short-term investment, not a long-term one. However, because Dogecoin has great name recognition, it might gradually gain better acceptance — which could give it a great shot at being competitive and going much higher.
Author: Blake Ambrose