The Same Old Arguments Against Dogecoin Hold True

Dogecoin (CCC:DOGE-USD), self-described as the “open source peer-to-peer digital currency, favored by Shiba Inus worldwide,” has been on the decline of late. Specifically, DOGE has declined over 50% since late October and about 80% from its highs in May. 

Dogecoin Cryptocurrency
Source: Orpheus FX /

That decline provokes an obvious question: has Dogecoin found a new, lower price level? Or, could it possibly reverse course and reach $1? In my opinion, the former case is more likely.

I’m not a believer in Dogecoin in general. But to the point of whether it can reach $1, let’s revisit an old argument. 

Dogecoin and Its Valuation

Currently, there is a circulating supply of about 132.7 billion DOGE. That means that right now, at nearly $0.14, its market capitalization sits at $18.2 billion. If Dogecoin were to rise to $1, its market cap would then be $132.7 billion. 

The basic argument is whether you, as an individual, believe that Dogecoin’s valuation makes sense relative to similarly valued companies. I believe there is no realistic case for arguing that the market should or could value Dogecoin at $1. A $132 billion market cap is near the 100th largest firm in the world. Volkswagen (OTCMKTS:VWAGY) has a similar market cap, give or take a few billion. 

Here’s a comparison to consider: Volkswagen posted record low sales figures in 2021, with 8.9 million vehicles sold. Even so, can anyone realistically assert that what Dogecoin does is that valuable? I’d say there’s no chance. 

To be sure, it’s also reasonable to question whether DOGE deserves its current market cap. Is Dogecoin truly comparable to consumer packaged goods firm Kellogg (NYSE:K), which has a current value of $22 billion? Again, you could easily make the argument that it isn’t. Give me the business prospects of Frosted Flakes and Corn Flakes alone. I’d take that investment over an investment in DOGE. 

Yes, the market cap argument has been made a thousand times, but it bears repeating. Yet, at the same time, Dogecoin does have some very influential backers. 

Influence and Utility 

Another one of the more common arguments around cryptocurrency is utility. Essentially, the conundrum is that if a given crypto should rise over time, it must have use. Users have to be able to do something with it. If crypto is to truly supplant fiat currency in the future, that implies it will be accepted in as many places as cash. 

In the case of Dogecoin, its use cases — real or imagined — have one massive and influential proponent in Elon Musk. Tweets from the Tesla (NASDAQ:TSLA) CEO affect the crypto world — and, in particular, Dogecoin. 

Most recently, a tweet that Tesla merchandise can now be purchased with DOGE sent prices upward. That was a relatively concrete use case. Of course, there won’t be millions of dollars of Tesla merchandise bought with DOGE, but it is something. 

Earlier Twitter (NYSE:TWTR) comments from Musk have also moved Dogecoin’s price. These include a simple meme tweet, which sent it upward back in April. The general trend? Musk can make this crypto move. 

I don’t see a future where Dogecoin supplants the USD. But the point I’m really trying to get at is that DOGE can now be used to buy Tesla merch and that is an extremely limited use case. Should you really care? My opinion is that it’s inconsequential. Dogecoin remains far from useful.

What to Do with Dogecoin

If pragmatism is your thing, Dogecoin likely doesn’t interest you. Most investments boil down to use, adoption and returns. I don’t see Dogecoin having much of any of those things and can’t see a reason to invest in it other than to gamble for fun.

But even that looks less and less appealing as time goes on. And Tesla merch purchases aren’t much of anything to get excited about either. 

On the date of publication, Alex Sirois did not hold (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 Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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