After correcting last month, cryptocurrencies in general have been bouncing back in a big way. But in the case of Dogecoin (DOGE-USD)? It’s moving higher, just not to the extent seen with both established coins like Bitcoin (BTC-USD) and Ethereum (ETH-USD), as well as other “pupcoins” like Shiba Inu (SHIB-USD).
In the seven days ending Feb. 10, BTC and ETH were up 22.7% and 25.4%, respectively. Shiba Inu, thanks to hype surrounding its metaverse plans, was up more than 64.2%. Doge, on the other hand? While a 17.2% jump in a matter of days is nothing to sneeze at, there may be cause for concern as to why this “old dog” is lagging behind the serious and not-so-serious competition.
Namely, when it comes to either its bark (hype surrounding it) or its bite (fundamentals), the original “memecoin” is seriously lacking. The coin may have a fan base that numbers in the million. It may still be more popular than Shiba on social media.
Yet this isn’t convincing the crypto trading public to send it back above 20 cents per coin (it’s at around 16 cents per coin today). Much less, on a path back to past highs. Add in its lackluster progress upgrading its functionality to the level of “Ethereum killer” altcoins, and it remains difficult to build a bull case for it.
Dogecoin Shows Lots of Talk, Little Action
In past coverage of DOGE-USD, I’ve discussed a key issue with this crypto that started off as a joke. That would be its lack of utility. Despite all the talk last year of Elon Musk helping to drive it as an advanced crypto, so far his talk and Tweets haven’t resulted in little action.
Sure, Dogecoin has made some progress becoming a higher-utility coin. Its developers have launched some projects that could increase the number of merchants who accept it as payment, as well as help increase developer activity on its blockchain. Even so, it’s nowhere near being on the way to join the ranks of Cardano (ADA-USD), Solana (SOL-USD), or any of the other top “Ethereum killers.”
Now, Doge doesn’t necessarily need to become smart contract-enabled or widely used in decentralized finance (DeFi) to see its coin price perk back up. As mentioned above, Shiba Inu has seen a big spike lately, due to its move into the metaverse world. As my InvestorPlace colleague Josh Enomoto recently discussed, Shiba’s coin-burning plans have helped to send it higher as well.
While there’s more hype than substance to both developments, Shiba doesn’t have bite, but it sure has a loud bark. DOGE-USD right now, unfortunately, is lacking in both.
What About That Big Fanbase?
Admittedly, some reading this may find it ridiculous that Dogecoin is lacking in its bark, due mainly to the coin’s still-massive fanbase. Right after Bitcoin, it’s the second most-talked about crypto on social media. Its official Twitter (NASDAQ:TWTR) page has 3 million followers, topping Shiba’s 2.7 million followers.
However, the fact a lot of DOGE-USD “HODLers” remain in its corner doesn’t signal that it has the potential to see another big surge in price. Much like what we’ve seen with meme stocks like GameStop (NYSE:GME), this fanbase may be enough to keep it steady.
But without either high levels of hype (like seen with Shiba) or news of improved functionality, new speculators are going to jump in. Without new speculators, it’ll have a tough time getting back to higher prices. Not only that, I wouldn’t view its existing fanbase as something that’s “sticky.”
If it continues to move the needle, its more fair weather fans will likely throw in the towel. Over time, this could cause it to gradually slide to lower prices. Atop all this, there’s a risk to all “memecoins” that’s still on the table.
Crypto may be recovering now, after its big drop last month on news of the Federal Reserve’s rate hikes. Today, the sentiment is that the Fed’s interest rate increases are “priced-in. In turn, making it safe to jump back into “risk-on” plays.
Yet if inflation, the reason behind the rate hikes, persists? The Fed may have to take more drastic action. A greater-than-expected rise in interest rates may spark another “risk-off” pivot. One that makes the December/January move to “risk-off” seem tame by comparison.
Big Move Needs Bigger Action
Unfortunately, the factors making Doge fall behind its peers are largely something its developers could do something about. That is, if they announced major improvements to its functionality, it would likely be enough to spark a rebound.
If it decided to go the Shiba route, and chase the metaverse trend? The same thing could play out.
But until its developers take action, don’t expect Dogecoin to make a big move.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. 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.