The narrative surrounding Dogecoin (CCC:DOGE-USD) seems to be becoming clearer and clearer: It is simply a gamble.
For individuals willing to risk it, there’s a case to be made that the peer-to-peer digital currency is worth it.
My thesis though is that Dogecoin is becoming the old guard of the cryptocurrency world, but first let’s look at a hypothetical case regarding the money to be made in Dogecoin.
Just take a look at a price chart and there’s plenty of evidence that one can get in and out of Doge quickly, making a lot of money in the process.
Let’s do a quick thought exercise to prove that point.
On June 22 at 9:59 am Dogecoin briefly dropped to 16.99 cents. There were certainly traders who established positions at that brief moment in time.
Those who were fortunate enough to sell a few days later, at 10:59 pm on June 24, received 28.59 cents for each Dogecoin they sold.
You can’t argue with the math: The hypothetical trader I just described made 68.28% returns over a period of a day and a half. Individuals like this do exist.
The Dogecoin Story
Their stories are alluring, and because of these stories and the potential gains Dogecoin will hang around.
The coin’s year-to-date returns are staggering at over 5,000%. However, this recent downturn has established a new low base price of around 20 cents.
Even if Dogecoin hits $1 those who jump in now would make 400% returns at a 20 cent price. That is very unlikely in any case.
But there are many fewer pundits today who suggest that Dogecoin can reach $1, or even its all-time high of 74 cents than there were a few months ago.
Part of the Old Guard?
It seems pretty clear: Dogecoin is part of an old guard of cryptocurrency. Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD) led the cryptocurrency charge as the asset class emerged over the past few years.
After all of the headlines they’ve grabbed, investors understand them much more now than before. Moving forward they will face much more scrutiny and prices won’t be as volatile.
Neither Bitcoin nor Ethereum are going to fade away, but they have cooled. They’re basically the old guard and Dogecoin is part of that as well.
Bitcoin and Ethereum paved the way for Dogecoin to take off, and take off it did. But unlike them, Dogecoin lacks utility. Their places are safe, but Dogecoin’s place is far from it.
Risk Without Utility
In my mind Dogecoin simply remains a risky method by which to make quick trading gains.
It won’t be anything until developers figure out how to derive some real world utility from it.
Recently there have been headlines regarding potential use cases that can be built around with Dogecoin. A few weeks ago I wrote about DogeLabs which is a company garnering attention because it may build use cases around DOGE.
You can read my thoughts here, but to summarize, the proposed projects were simply loose ideas without much substance.
Throw around Vitalik Buterin’s name and the idea of a bridge between ETH and DOGE and sure, interest will spike. But crypto investors are getting wiser and hopium becomes less potent the more times you smoke it.
Again, this all points to the bigger idea that DOGE is slowing.
If I can provide any advice here regarding Dogecoin it would be to simply summarize what I’ve said above.
It remains useful as a high-risk trading method that can and does provide quick returns. But it is part of an old guard in my opinion and there are lots of newer names with more appeal right now.
Of course the most important thing moving forward is that DOGE has little chance of moving forward until its developers make it useful and give it real world utility.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.