The late summer cryptocurrencies “bull market mode” seems to have missed Dogecoin (CCC:DOGE-USD). Sure, this cryptocurrency, made famous by Elon Musk’s touting of it earlier this year, initially bounced back into July like its more serious peers. Yet unlike Bitcoin (CCC:BTC-USD) or Ethereum (CCC:ETH-USD), which continued to move higher into September, this low-utility crypto reached a near-term top (around 34 cents) more than a month ago.
Since then, it’s seen another extended slide in price, and trades for around 21 cents today. Said slide is picking up, as market uncertainties put pressure on cryptocurrency prices at-large.
If high-utility coins are in trouble, that’s especially the case for this name. The only thing holding it up now is what remains of its past hype. And if an overall correction in financial markets drives many to cash out in droves? Another epic drop in price could be in the cards.
What if you have a more optimistic view of where crypto is headed next? Still skip out on this token. Even if you believe recent fears are overblown, there are much better crypto gambles out there to waste your time here.
Enthusiasm for Dogecoin Has Fallen in a Big Way
As seen from its short-lived partial rebound between July and August, excitement for DOGE failed to make a move back to the sky-high levels it was at last spring. A big factor? The rising popularity of other “memecoins,” like Shiba Inu (CCC:SHIB-USD), its unofficial spinoff.
Up until a few days ago, SHIB was trading just like Dogecoin. It too seemingly hit a near-term top in mid-August. However, on Sep 17, that ceased to be the case. As our own Brenden Rearick reported, that day saw a big jump in the price of Shiba, thanks to listings on both Coinbase (NASDAQ:COIN) and Binance. News of possible upgrades also helped to give it a boost.
Sure, it’s since pulled back. Largely due to the across-the-board pressure cryptos are feeling today. Yet there’s one clear takeaway from the Shiba surge. Crypto gamblers have moved their chips off of Dogecoin, and are now spreading them across its many copycats. This makes sense, given Doge already had its “to the moon” moment months ago. It may have a long-shot chance of bouncing back 100%, 200% or even 300%.
But if you’re in the market for crypto “lotto tickets,” why set your sights so low? The smaller plays, like Shiba, or even smaller ones, like the ones benefiting the most from Elon Musk’s more recent crypto trolling, could (in theory) gain by 10x, 100x, or even greater. With the hype surrounding it fading, this dog-inspired token that sparked a bizarre trading phenomenon, holding onto as crypto markets possibly get more rocky could be a very risky move.
Massive Risk if Markets Correct
Given its underwhelming performance during the crypto comeback, will Dogecoin prove more resilient in a possible upcoming downturn? Not so fast. If established coins like Bitcoin are in trouble, then it’s especially tough times ahead for cryptos with little to fall back on, like this one.
Cryptocurrencies may have been sold as an alternative asset, uncorrelated with stocks and other financial instruments. Yet as it becomes mainstream, this asset class is becoming more correlated with the overall market. That’s bad news, if factors like changes in U.S. Federal Reserve policy, as well as China’s Evergrande crisis, continue to push investors from a “risk on” to a “risk off” mindset.
Such a shift will likely cause BTC, ETH, and the other major names to dip back toward prior price levels. In the case of Dogecoin? More volatile than the serious coins, it’ll likely see a more dramatic drop.
Doge’s derivatives have the same level of big downside risk as well. But at least with them, the chance they make four-digit or even five-digit percentage moves higher makes up for that. With this former “memecoin” favorite? Unfortunately, that’s not the case.
Even if Bullish on Crypto, Avoid DOGE-USD
Admittedly, correction fears, along with fears of increased crypto regulation, could prove to be overblown in hindsight. But even if that’s the case, that’s still hardly a reason to go long this crypto.
Either as a crypto gamble, since “lotto tickets” like Shiba may offer greater upside relative to risk. Or, as a more serious bet on its proposed upgrades getting implemented. Why take a chance that DOGE-USD finally grows up. Instead, you can buy altcoins that have already successfully gone live with upgrades, like Cardano (CCC:ADA-USD), that still have substantial room to run.
Whether bullish or bearish on the crypto market’s next direction, one thing’s certain: stay away from Dogecoin.
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.