Dogecoin (CCC:DOGE-USD) now trades on Coinbase (NASDAQ:COIN), the largest cryptocurrency exchange. This could end up giving the crypto a real shot in the arm, in terms of its performance.
Just like many other cryptos, Dogecoin has come well off of its May peak prices. For example, on June 4 it was at 38.19 cents, but this was well off its peak on May 6 of 68.477 cents, according to Yahoo! Finance.
Nevertheless, Dogecoin is still up year-to-date. Dogecoin ended last year at 0.5685 cents per token. That means it is still up about 66 times year-to-date. That’s calculated by dividing 38.19 by 0.5685. That equals 67.17.
However, don’t forget that we must subtract 1 from this number since that shows its performance over the base or cost. In any case, making 66 times your investment is still a great ROI.
What to Expect With Dogecoin
Of course, we can’t look back and assume that the crypto is going to move up another 66 times. Here is the most basic reason for that. Right now Dogecoin has a market capitalization of $49.75 billion. That makes it the sixth-largest market cap in the crypto universe, according to Coinmarketcap.com. Therefore, it seems almost mathematically impossible for Dogecoin to rise another 66 times.
What is most likely to occur, is that over time, as Dogecoin gains acceptance as a method of payment, the crypto will rebound. It could eventually reach its former heights. That implies the following ROI.
Let’s say it reaches its former peak of 68.477 cents per Doge token. Based on today’s price of 38.19 cents, the gain will be 79.3% (i.e., 68.477/38.19-1=0.793). Don’t forget we have to subtract by 1.0, since we are looking to determine the return on investment.
Moreover, that would raise its market value to $89.2 billion, or 79.3% above today’s market value of $49.75. Assuming no other cryptocurrency rose as much, this would make it the third-largest crypto after Ethereum (CCC:ETH-USD).
That would make it quite prominent. As a result, I can only see that happening the acceptance of Dogecoin as a payment method really catches on. Indeed, that could be a good way off from happening.
Dogecoin’s Standout Features
Dogecoin has a crypto supply feature that is inflationary, not deflationary like Bitcoin (CCC:BTC-USD). There are now about 129.895 billion Dogecoins in circulation. The rate of increase in the number of Dogecoins is no more than 5 billion per year.
As the total number of Dogecoins prior to the 5 billion allowed was 128 billion, this brings its total cap this year to 134 billion. That means that its supply is not at 96.94% of its total cap. This supply constraint will help move the price of DOGE tokens up this year.
But the uses for Dogecoin are not plentiful. Coingecko says that the only major use so far for Dogecoin is as a tipping system on Reddit and Twitter (NYSE:TWTR). Users tip each other for creating or sharing good content. That may not seem like a huge catalyst to push Dogecoin higher.
The Musk Effect
Elon Musk has taken a liking to Dogecoin. This probably explains a huge portion of the reason why the DOGE tokens have risen so far so fast this year.
He seems to have taken Dogecoin under his wing. Decrypt.co tells the story of how he has supported a small group of software developers who work on Dogecoin as a crypto. It does not have a foundation promoting it, nor have its founders stayed with the currency. But it does have Elon Musk
He has called on developers to come up with upgrade ideas for the crypto. Musk wants to make Dogecoin “the world’s most used cryptocurrency,” according to the article. He wants it to rival Ethereum, in terms of its efficiency as a payment mechanism, according to Forbes magazine.
Some of this enthusiasm is starting to rub off on other companies that are beginning to accept Dogecoin as payment. For example, Forbes reported recently about an electric vehicle company Daymak that will accept Dogecoin as payment. In addition, the EV can use its electric battery to mine for Dogecoin tokens in it downtime. This is probably in response to Musk’s requests online for developers to come up with ideas on using Dogecoin.
What To Do With Dogecoin
Don’t take Musk’s support of Dogecoin too seriously. After all, he called it a “hustle” on Saturday Night Live several weeks ago. Moreover, just like he seems to be abandoning Bitcoin, he could easily do the same with Dogecoin.
However, I think he likes its “underdog” status as a crypto asset that could gain wide acceptance, without the support of any major group. Just keep in mind that its trajectory could become very volatile over the near term, especially now that it trades on Coinbase.
On the date of publication, Mark R. Hake held a long position in Dogecoin, Bitcoin, and Ethereum. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
