What is going to move Dogecoin (CCC:DOGE-USD) back in the right direction? So far, news of upgrades, along with Elon Musk’s tweets, has resulted in short-lived boosts. But overall, the popular “meme coin” continues to drift lower.
As of this writing, it changes hands for less than 20 cents. That’s more than 72% below its all-time high and around 39% below where it traded just a month ago.
Admittedly, much of this has to do with the overall state of the cryptocurrency market. Cryptos are still trying to recover after May’s meltdown.
It’s questionable whether a return to “bull market” mode really send DOGE-USD back “to the moon” once again, due mostly to the issues with its utility. The above-mentioned upgrades could help it move beyond its current “jokecoin” status, but it’ll still be far behind when it comes to functionality compared to other altcoins.
In short, a rising tide (aka a crypto rebound) may not be enough to raise its boat. Comparing its rebound potential compared to other altcoins, this remains one of the less optimal plays in the crypto space.
Dogecoin, Upgrades and Diminishing Returns
Most of the news around Dogecoin still revolves around Elon Musk, but it’s the efforts of one of the coin’s developers (Patrick Lodder) that may deserve the most attention.
That is, proposed upgrades from Lodder may be what takes this “meme coin” to the next level. Namely, upgrades that will lower transaction fees and improve its scalability. That’s not to say it’s in the running to become an “Ethereum killer” anytime soon.
Yet, it’s still a promising sign, as it puts more in its favor than just Musk’s tweeting about it. Especially as the Tesla (NASDAQ:TSLA) and SpaceX impresario’s ability to move Dogecoin, or Bitcoin (CCC:BTC-USD) prices with his tweets is starting to diminish.
The overall crypto bubble played a role. However, Musk’s touting of DOGE-USD is what mostly fueled its epic run between January and May.
But now? After losing much of his crypto clout, Musk’s tweets are helping to drive short-lived boosts at best. Soon, his tweets could have a near-zero effect on its price at all.
This may be bad news for those still “HODLing” DOGE, hoping that it fully rebounds back to its all-time high. In turn, this may result in a further sell-off, sending the coin back to its pre-bubble prices.
Granted, if cryptos overall recover later this year, or if we see further development/upgrade progress, downside may be less severe. Yet, why bother with this name, with so many more promising contenders out there?
Even If Cryptos Recover, DOGE Is a Bad Bet
Despite Dogecoin holding the line near 20 cents, we could see its coin price take another dive. Few investors own this crypto because of its utility.
Many people bought in largely on greater fool theory. That is, despite its real lack of intrinsic value, the mania around it would continue, and they’d be able to cash out at higher prices.
As the chances of another “wave” of speculation in it become slimmer, more people are going to get impatient. With more sellers than buyers, prices will likely continue to trend lower.
A crypto recovery starting later this summer, or in the fall, could soften the blow. Yet, if a rebound is coming, buying this particular altcoin is far from being your best option.
Sure, upgrade efforts for Dogecoin are in full swing. But as I discussed last month, quoting experts like Charles Hoskinson (founder of Cardano, co-founder of Ethereum), full improvements to DOGE’s functionality will take several years to implement.
Compare that to the fact that Ethereum, Cardano, and even Bitcoin are implementing major upgrades in a matter of months. Buying these coins ahead of a possible crypto market recovery later this year makes a lot more sense.
Don’t Get Caught Holding the Bag
As I’ve discussed numerous times in my coverage of DOGE, the main issue here is that it’s not your best option out there for altcoin exposure.
Cryptos, in general, remains a high-risk asset, but at least with names like Ethereum, Cardano and many others, their respective bull cases have plenty of substance to go along with the hype.
With Dogecoin, there is some substance. Yet, it’s far from enough to soften the blow as Musk’s ability to drive speculation in it continues to decline. With the possible risk of loss greater than the chances of any sort of rebound, it’s best to stay away.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.