Dogecoin Is No Laughing Matter, But the Rise to $1 Is Not Set in Stone

On April 20, Dogecoin (CCC:DOGE-USD) traders hoped the cryptocurrency would hit $1, just one week after it was valued at 9 cents.

A close-up shot of a Dogecoin (DOGE) concept token.

Source: Shutterstock

Dogecoin fans on Reddit and Discord headed the social media campaign. Using hashtags #DogeDay and #Doge420, traders looked to propel the cryptocurrency, which has skyrocketed by more than 500% since the start of April, to a new all-time high.

Dogecoin fell 20% on Wednesday, the day after its supporters celebrated “Doge Day,” highlighting the perils of investing in the crypto space.

“Investors should be extremely cautious about getting caught up in this herd mentality because dogecoin is very much a speculative bet whose valuation has no reliable basis,” said Susannah Streeter, senior investment and markets analyst at a British financial service company Hargreaves Lansdown.

Strong words, but one can understand the sentiment.

Dogecoin started as a joke, but it has soared this year on the back of social media hype. Tesla (NASDAQ:TSLA) CEO Elon Musk and other celebrities have put their muscle behind the digital asset. Software engineers Billy Markus from IBM (NYSE:IBM) and Jackson Palmer from Adobe (NASDAQ:ADBE) created the digital asset, adopting the popular Doge meme featuring a Shiba Inu dog for laughs.

But let’s give credit where it’s due. Dogecoin has found applications in transferring small amounts of money at low trading fees. Plus, several companies now accept Dogecoin as a form of payment. Undoubtedly, this will keep demand high for this one.

However, at its heart, the digital currency remains a speculative bet that is boosted in large part due to our celebrity culture.

The Dogecoin Bubble

On April 20, fans of Dogecoin celebrated #DogeDay, hoping to propel the digital asset to an all-time high of $1.

Please make no mistake about it, Dogecoin is in an uptrend. Celebrities and major companies are backing its rise, feeding into the retail frenzy. Elon Musk, Snoop Dogg and Gene Simmons have tweeted in support of the coin, and so has billionaire entrepreneur Mark Cuban.

March was a banner month for the coin in terms of institutional interest. The Dallas Mavericks, Cuban’s NBA team, started accepting dogecoin for purchases, as did businessman Tilman Fertitta’s high-end car dealership Post-Oak Motor Cars.

That’s not all. Luxury resort company Kessler Collection and Latvian airline airBaltic also greenlighted Dogecoin as a form of payment last month.

But the most important question investors are asking is how Dogecoin compares to Bitcoin (CCC:BTC-USD), the gold standard in the crypto space.

Well, on that end, it’s a pretty straightforward debate.

Bitcoin is a digital asset with strong institutional backing. Launched in 2009, Bitcoin has had a bumpy ride as well. However, after 12 years, growth in adoption, and a hard cap of only 21 million coins in total, bitcoin has established itself as a store of value that generates at least some level of trust.

The Bitcoin ecosystem also has billions of dollars supporting it, helping manage massive capital expenditures and operating expenses. In contrast, Dogecoin has none of that. Its last upgrade was in 2019. DOGE co-founders will return to the project and develop an upgrade to the protocol this year.

However, that doesn’t automatically instill confidence amongst investors that this is a thriving ecosystem.

Plus, the institutional interest in Bitcoin is in no way comparable to that of DOGE.

Can You Bet Against DOGE?

Do not get me wrong. DOGE has some applicability. Social media users can tip content creators and protect their identities by using a secure wallet. And, as I mentioned earlier, you can transfer small amounts of money with low trading fees.

But is that enough to make a champion cryptocurrency?

Well, the answer is no. But the markets don’t always function on rationality. Indeed, that is why several prominent players are warning against shorting Dogecoin.

Galaxy Digital Holdings (OTCMKTS:BRPHF) CEO Mike Novogratz says Dogecoin does not have the security and appeal of Bitcoin. However, retail interest is so high that it becomes a danger when you decide to short the asset.

Meanwhile, Wallet Investor, an AI-powered price predictor, forecasts the price will trade nearby 30 cents for the rest of the year, ending December 2021 at 33 cents. At the end of 2022, 2023 and 2025, the price will reach 38 cents, 42 cents and 51 cents, respectively.

Sam Onigbanjo, the founding partner at the Capital Markets Academy, is more bullish. He believes DOGE can reach the elusive $1 target before the end of July,

Where Do We Go From Here?

No one is arguing that Dogecoin is not a speculative bet at this stage. However, events like “Doge Day” reaffirm that we live in the age of the retail trader, where social media is as valuable a tool as analyst reports when making an investment decision.

However, one has to draw a line in the sand. Dogecoin lacks when you compare it to several altcoins, both in terms of functionality and wider use. That does not mean it won’t rise, though. But, instead of looking into news releases, you need to keep checking the message boards of social media sites to remain ahead of the curve with this one.

Charting it with regular technical analysis will only get you so far. Hence, in such an environment, I will recommend playing with only the money you can lose.

On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Faizan Farooque is a contributing author for and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

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