As I write this, Bitcoin (CCC:BTC-USD) is sitting at $62,500 level, teasing the very real possibility of a breakout above its all-time high. Yet having seen this game play out many times before, I’m not about to pour money into BTC. Personally, I think it’s wiser to trim your position. If anything, the wildness of cryptocurrencies now offers a better proposition for Dogecoin (CCC:DOGE-USD).
Yeah, I said it, Dogecoin. The alternative of alternative cryptos, DOGE-USD is the epitome of the meme trade. If you want due diligence with this canine-inspired speculation, forget any real analyses. Go to your local social media thread and you’ll find plenty of JPEG files promoting a free ride to the moon.
Soviet propagandists never stood a snowball’s chance in perdition of competing against modern-day freelance marketers.
But why talk up Dogecoin when Bitcoin is clearly the go-to crypto coin? It has the credibility, the global awareness, increasing mainstream integration and the resilience to drive higher amid a sea of economic worries. DOGE? That’s just reckless gambling, as I’ve pointed out before.
I’m going to address the gambling point, which is at the heart of why Dogecoin is probably a superior bet right now. But the idea of the mainstreaming of Bitcoin as an indication of its stability and reliability may be a weak argument.
For instance, the real story of tulip mania suggests that the speculative drive that eventually led to the implosion of the Dutch tulip market was caused in part by its mainstream acceptance. Even if that thesis is proven wrong, at the very least, greater acceptance brings greater scrutiny.
It’s the latter outcome that could cause (institutional) participants to ask: just what the heck are we buying here?
Millennial Math Supports Dogecoin
Over in the real world, I was shocked to see the rapid rise in valuations of, well, everything. After all, prior to the novel coronavirus pandemic, the mainstream media was inundating us with messages about how millennials handled their money poorly or mediocrely.
For instance, millennials are not investing in stocks. Indeed, they’re scared of equities. Here are some reasons why millennials aren’t investing. Additionally, millennials aren’t buying homes because they’re too expensive. Millennials might even be afraid of buying homes. Apparently, millennials were in their own demographic housing crisis before Covid-19 imposed a national one.
Out of freaking nowhere, millennials on average have $51,300 in personal savings and retirement accounts of $63,300. It’s amazing because just a couple years ago, most millennials only had less than $1,000 in savings.
My God! Why did the world turn on China when we should be thanking it – and particularly the Wuhan Institute of Virology – for dramatically improving our economies.
Anyways, assuming that millennials really do have $51,300 in savings, they could spend it all on one bitcoin (plus borrow the other 19%) in the hopes that it reaches $100,000, a common upside target. Or, they could buy Dogecoin and hope that it reaches its all-time high (around 68 cents).
In the former case, the average millennial must risk 119% of their savings for the possibility of earning a gross (without interest) profit of $39,000. In the latter case, the same person only has to put $13,000 at risk to earn the same profit since the time of writing price of Dogecoin and its all-time high is roughly a 3x difference.
Both scenarios are absolutely crazy and dangerous trades. But at least with Dogecoin, the average millennial is only putting about a quarter of his/her savings at risk.
Let’s Think About This
Of course, Bitcoin proponents will jump on me and say that it’s far more probable – due to the various mainstream integration arguments – that BTC will hit six figures than Dogecoin reaching its prior high. Maybe but how do we calculate that scenario reliably?
Both coins are tied to decentralized blockchain networks. Both feature a rabid fan base. And both offer theoretical benefits to general society, though have yet to be fully implemented to find out for sure. True, Bitcoin has a greater scale of credibility but that is also reflected in the exponentially higher price tag of Dogecoin.
I guess the real question that people should be asking is whether Bitcoin is really worth 254,167x one Dogecoin. Let’s face it. If enough people decide to join the DOGE bandwagon over Bitcoin, then the former risks fading into irrelevance.
Remember, nobody can force (or even gently persuade) you to use Bitcoin. On the other hand, the U.S. government can easily impose the hegemony of the dollar through military action and economic sanctions.
And that’s another risk to Bitcoin. Decentralization is only fun when you’re benefiting from it. But it can also bite you in the rear. The same is true for Dogecoin but its bite radius is far more survivable against a nominal-basis comparison.
On the date of publication, Josh Enomoto held a LONG position in BTC and DOGE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
