Dogecoin (CCC:DOGE-USD) is a tricky altcoin to analyze. It was created as a joke in 2013, the result of a few hours of coding by developers Billy Markus and Jackson Palmer. However, the coin, which uses the likeness of a popular meme featuring a cartoon Shiba Inu dog, has become a legitimate form of currency of sorts.
As of May, more than 1,300 online businesses accepted Dogecoin as payment. Just two months prior, International Business Times put the number of companies accepting Dogecoin at 48. That’s an incredible growth rate.
Despite this, I would argue that the meme coin’s lack of real-world use cases and dependence on celebrity hype means investors should proceed with caution. Even the company’s planned upgrade is likely to be a case of too little, too late.
The upcoming Dogecoin Core 1.14.5 upgrade is expected to lower transaction fees and improve performance.
According to the GitHub note, the update is a “new minor version release, including important security updates and changes to network policies” recommended for all users, including miners and operators that run Dogecoin Core on their system. The update will also reduce transaction fees by 99%.
Investors celebrated news of the update by pushing the meme coin to 30 cents on Nov. 8 0n increased trading volume. However, it has since fallen to around 22 cents.
Developers have said the update is nearing completion, but there is no definitive release date yet. While Dogecoin could experience another pop once the update is launched, it’s likely to be short-lived.
Dogecoin Lacks Real-World Catalysts
Dogecoin has distinguished itself in part by the fact that many traders know it, while thousands of other digital coins languish in relative obscurity. With a market cap of $28.8 billion, it is currently the 11th most valuable cryptocurrency. However, the lack of true fundamental catalysts is problematic.
As of Nov. 15, there were more than 132 billion Dogecoins in circulation. The cryptocurrency has no supply limit and a large block reward. Investors see their investment diluted with each new block reward.
Several prominent financial institutions accept Bitcoin as a form of payment, giving the world’s most-popular cryptocurrency legitimacy.
Meanwhile, Ethereum is charting its path with smart contracts, which will revolutionize the way we view finance. It has begun moving to proof-of-stake (PoS) from a proof-of-work (PoW) concept. And continued upgrades are likely to coincide with further runups in the cryptocurrency.
The Bottom Line on Dogecoin
Dogecoin does have one thing in common with more established digital currencies like Bitcoin, and that is the potential for high returns. However, in the case of Dogecoin, the returns are based solely on speculation and nothing else.
If you want to invest in crypto for long-term returns, it is better to look into coins with solid use cases. Those are the ones that have the potential to gain widespread acceptance.
If you still want to invest in DOGE to take advantage of the occasional celebrity bump, make sure you are investing only a tiny portion of your portfolio.
On the publication date, Faizan Farooque 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.