Once mocked as a meme token, Dogecoin (CCC:DOGE-USD) finally started to get the respect it deserves in 2021’s back half. Still, respect isn’t the same as price discovery, and Dogecoin is as volatile as it’s ever been.
Wild price fluctuations are to be expected when dealing with cryptocurrency in general. This is particularly the case with low-priced tokens like DOGE.
Therefore, a small position size is recommended if you choose to get involved. That having been said, Dogecoin is a worthy buy-and-hold cryptocurrency as it has at least one famous and influential fan.
Under normal circumstances, it’s not recommended to buy an asset just because one individual likes it. However, unusual times require unusual strategies — and as we head into 2022, it’s a perfect time to give this canine-themed crypto a chance.
Analyzing the Dogecoin Price
On Oct. 28, when DOGE was flying high at 33 cents (after having traded at 23 cents a day earlier), it seemed as if nothing would slow the buyers down.
However, buying after vertical run-ups can be bad for one’s fiscal health. Remember, the formula is to buy the dips, not buy the rips.
A horrendous crash ensued in November as the Dogecoin price fell to 20 cents. By Dec. 17, the price had declined all the way down to 15 cents.
The very next day, an important tweet caused DOGE to rally immediately to 21 cents. We’ll get into the critical details in a moment.
From a technical standpoint, the takeaway is that any selling pressure can be turned around in an instant. Bet against Dogecoin, and you could lose your shirt.
DOGE was back at 17 on Dec. 21, so you may have another chance to start a position or add to an already existing one. You just never know when the next 30%, 40% or greater price spike might occur.
See How It Goes
I’m referring to eccentric gazillion-aire Elon Musk, of course. He’s tweeted about Dogecoin in the past, and his social-media postings are known to get attention and alter asset prices (in the short term, at least).
Just for that reason alone, trying to bet against DOGE is a terrible idea. A Musk tweet which probably took 30 seconds to compose, could ruin your trading account for months. So, here’s the recently posted tweet which sent the Dogecoin price higher for a day or two.
It read, “Tesla will make some merch buyable with Doge & see how it goes” (no punctuation was included in the original message). Unfortunately, we don’t have any specific details on which “merch” will be “buyable.”
A Much Higher Potential?
Still, Musk’s tweet is a clear-cut sign that Dogecoin isn’t just a token for hoarding and trading anymore. Adoption will be the key that will unlock DOGE’s long-term value. Yet, there’s more to this story
Not long ago, Musk offered up a big advantage that Dogecoin has over the world’s most famous cryptocurrency. What he said regarding this, might actually shock and appall some crypto enthusiasts.
The transaction volume of Bitcoin (CCC:BTC-USD) “is low and the cost per transaction is high,” is what Musk said. Wait, it gets even more controversial. “Fundamentally, bitcoin is not a good substitute for transactional currency,” Musk added.
Then, the Tesla CEO made a comparison; “The total transaction flow that you do with dogecoin, like transactions per day, has a much higher potential than bitcoin,” he asserted.
Now, I won’t dare to claim that this is true or false. Rather than risk having an angry mob show up at my door, I’ll just report what’s been said and let you decide for yourself.
The Bottom Line
DOGE’s transition from a joke coin to an in-demand asset has been exciting to witness. The next step will be the adoption phase. This might take a while, but Musk is influential enough to get the ball rolling.
Plus, as Musk asserted, Dogecoin might have an advantage over the mighty Bitcoin — but I’ll let the real blockchain experts debate that among themselves.
On the date of publication, David Moadel 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.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.