- Dogecoin (DOGE-USD) has been pushed down along with the entire cryptocurrency market, having fallen 51% so far this year.
- The original meme coin is now facing a critical support level, and, if it fails, the selloff in DOGE could accelerate.
- Investors should remember that Dogecoin was created as a joke and has no practical purpose.
Down 53% year to date, the price of DOGE is currently sitting at 8.5 cents. At its current level, the meme token that was started by cryptocurrency developers simply as a joke and serves no practical purpose is down 88% from its 52-week high of 68.5 cents.
Fans of Dogecoin seem to have given up on the goal of trying to push it to $1, and reports of the cryptocurrency’s adoption have become few and far between as the broader market for digital assets deflates.
Given the carnage that is roiling cryptocurrency markets around the world right now, the big question pertaining to Dogecoin should be this: Why hasn’t it fallen further in recent months?
Analyst are watching DOGE closely as it nears a key resistance level of 8 cents. Should it break below that level, it will put 5 cents in play and may hasten the current decline. However, if Dogecoin can hold at its current level, then the digital token could move back as high as 15 cents, triggering a meaningful recovery.
Much depends on the direction of the stock market as cryptocurrencies have mirrored the decline in equities this year, kicking to the curb the notion that digital coins and tokens are a hedge against inflation and a safe haven for investors.
Indeed, the meltdown in the entire cryptocurrency market was accelerated by the plunge of Terra (LUNA-USD), a digital token closely associated with stablecoin TerraUSD (UST-USD), to fractions of a penny in mid-May.
UST, which was supposed to be pegged one-to-one with the U.S. dollar, unraveled in spectacular fashion and Luna, which had been one of the 10 largest cryptos, ended up losing all of its value. That event prompted a widespread risk-off in cryptocurrencies as naysayers lined up to criticize the speculative assets.
Year to date, the price of Bitcoin (BTC-USD), the biggest and most widely used cryptocurrency, is down 39% to under $30,000. Ethereum (ETH-USD), the second largest crypto, has seen its price fall 48% so far in 2022 to under $2,000 per token.
Dogecoin Is Still a Joke
As the cryptocurrency market corrects sharply, it is important for investors to remember that Dogecoin was started by two software engineers back in 2013 merely as a joke. DOGE features a cartoon image of a Shiba Inu dog, and that’s it. The token has no practical function or underlying utility. It cannot be used in decentralized finance (DeFi) as many other cryptocurrencies and is not a store of value.
The only significant catalyst for Dogecoin over the last few years have been tweets and other references to it by mercurial billionaire Elon Musk.
While a few companies accept DOGE as a legitimate form of payment, these are mostly fellow meme names such as AMC Theaters (NYSE:AMC) and notorious video game retailer GameStop (NYSE:GME), as well as Elon Musk’s electric vehicle company Tesla (NASDAQ:TSLA) and the Dallas Mavericks, the Mark Cuban-owned basketball team. By and large, Dogecoin is not viewed as an acceptable form of payment.
Do Not Buy Dogecoin
Investors contemplating buying Dogecoin need to ask themselves what exactly they would be purchasing. The digital token was never meant to be taken seriously by the people who created it. That some investors have attached value to it is illogical and extremely risky.
And the risks associated with all cryptocurrencies are coming into sharp focus as the entire sector suffers steep losses amid the current market rout. In Terra, we’ve already seen an example of one digital asset whose value fell to zero.
Which cryptocurrency will be next? As the market continues to separate the wheat from the chaff, a highly speculative investment such as Dogecoin could end-up going kaput. DOGE is not a buy.
On the date of publication, Joel Baglole 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.