Dogecoin has been making the news for some time now. This cryptocurrency has seen high growth rates in the past few months, resulting in an incredible increase of 7000% in its value in the first half of 2021. This is an outstanding feat because there are numerous cryptocurrencies in the market. Dogecoin has managed to do extremely well and increase its value, which in turn, has helped to consolidate investor confidence and send a positive signal to the market.
Dogecoin is making headlines as it is outperforming most of the big names in the cryptocurrency market. For instance, Bitcoin has performed well and increased by 300% while Ethereum has gained by 1000% in recent times. However, none of this is close enough to the staggering increase shown by Dogecoin. Although the increase in value is not exclusive to Dogecoin, it has outperformed its counterparts. For someone new to the cryptocurrency market, the big question would be – is Dogecoin a good investment?
If you wish to know the answer, read on.
What Is Dogecoin?
Before we determine if it is a good investment, let us get a basic understanding of Dogecoin. It is one of the numerous cryptocurrencies in the market. It was another clone coin that derived its name from a meme featuring a Shiba Inu dog. The currency picture also draws itself from the dog meme. Developers used codes from Litecoin, a fork of the Bitcoin blockchain, to create Dogecoin.
Dogecoin has more than 130 billion tokens in supply with an additional supply of over 14,400,000 new tokens generated every day. Dogecoin miners get a benefit of 10,000 Doge with every block, making huge waves in the crypto world. It is the talk of investors, with people advocating for a token to sell for $1.00. Dogecoin has grown consistently since its creation in 2013 and has a market capitalization of around $75 billion. The token is paired with the USD fiat currency and others.
Features Of Dogecoin
Let us now look at the features that make Dogecoin appealing to people. Here are some of them:
Dogecoin enjoys an infinite supply
Unlike Bitcoin, which has a finite supply, Dogecoin comes with an infinite supply. Bitcoin thrives on several factors such as its scarcity and finite resources that contributed to its success. Conversely, Dogecoin has an infinite supply, which along with the meme culture and the theoretical approach. Furthermore, Dogecoin miners make a considerable amount of Doge with every block they mine. A miner or a group of miners working together earns up to 10,000 Doge for every block they solve.
Each blockchain network thrives in decentralization. Decentralized Finance or DeFi is a major reason for people buying into the crypto way of doing finance. The efficiency and aptness of the decentralized system made available by the blockchain system are highly appreciated. One of the reasons for the popularity of Bitcoin is the decentralized system it operates. It makes Bitcoin secure and trustworthy, leading to its popularity as a preferred cryptocurrency.
Dogecoin’s decentralization system does not measure up to that of Bitcoin because the latter has almost 10,000 nodes accessible in over 97 countries, while the former has only 1090 nodes. The lower nodes make it susceptible to attacks, which, if happens, will expose the users to the risk of losing their assets.
Dogecoin is limited to a few wallets
A small number of wallets operate Dogecoin, especially in comparison to other cryptocurrencies such as Bitcoin. A major chunk of Dogecoin’s supply is in the hands of a few people. It means that the price is under the control of a selected few that holds the supply. Currently, 0.002% of the Dogecoin wallet controls the coin’s supply up to 2/3rd. It is a highly uneven distribution when compared to cryptocurrencies like Bitcoin.
Check Out: Pros and Cons of Investing in Dogecoin
Why Is The Value Of Dogecoin Rising?
You might be confused as to why despite all the shortcomings Dogecoin’s value is increasing. Here are a few reasons:
Inflation and stimulus
Experts say that market conditions such as inflation and stimulus have put Dogecoin on the rise. The increase in US economic size from $15.4 trillion in February 2020 to around $20 trillion due to the stimulus packages has helped the coin to grow as well.
Increased access to crypto trading
Technological innovations have led to better and improved access to the crypto space. Now, anyone with a smartphone, internet connection, and the correct knowledge can trade in cryptocurrency. Accessibility has vastly improved with several retail brokerage platforms trading thereby making investing highly accessible and easily affordable for anyone within the acceptable age. Furthermore, wiping out of commission fees by most brokerage platforms also made it accessible for more people.
Availability and accessibility of finance apps also contributed to the rise of Dogecoin. Most young people use apps like Robinhood and in certain forums such as Reddit young people have turned influencers. Popular opinion on the trader and investor choices also influences the crypto sphere. Accordingly, if a coin does well it is expected to attract the interest of traders and investors.
Furthermore, news and the media also strongly influence the performance of a cryptocurrency. Any information on a particular cryptocurrency can increase or decrease the general interest in it. A good performance leads to better interest and vice versa.
The positive information on Dogecoin has helped sustain interest in it and resulted in its market performance. Even though there is information about the uneven supply distribution, infinite supply, and concerns about decentralization, Dogecoin has grown in value, thanks to the attention of investors and traders.
Also, celebrity endorsement has worked in favour of Dogecoin. For instance, when Elon Musk tweeted about Dogecoin, it helped to drive interest in the coin. Musk’s tweets have driven interest from traders, investors, and crypto enthusiasts alike. Other celebrities to endorse the token include the likes of Snoop Dogg. When celebrities endorse the token, the interest in the token increases and so does its value.
Like any other investment, Dogecoin also has its share of risk. Although it has been the talk of investors, traders, and crypto enthusiasts due to its impressive returns, you should not blindly enter into the trade. Like any other trade, you have to exercise due diligence and caution. Even if a token is doing exceptionally well at present, there is no guarantee that it will continue to do so in the future too.
Cryptocurrencies are known to be volatile. Crypto market fluctuates like any other market, and prices will rise and fall. Therefore, you must exercise caution before you start Dogecoin transactions. If a coin sells cheaper than its rivals, it automatically does not become a wise investment. For instance, currently, Dogecoin is cheaper than Bitcoin or Ethereum. Both these coins have a proven track record and hence the investors are more comfortable in investing in them.
However, although not as big as these two, Dogecoin is a significant investment due to several factors. In mid-April, when Bitcoin recorded a peak performance, it sold for $65,000 per token while Ethereum had a peak performance in mid-May when it sold for $4,000 for a token. In the corresponding period, Dogecoin recorded a high performance where it sold for $0.68. This considerable price difference meant that Dogecoin was a very affordable investment as anyone could buy some dogecoin tokens and do transactions.
However, past events have shown that cheap investments may not give substantial returns. If you buy the currency only because of its current price, you may suffer some losses because you did not consider other factors.
Investing In Dogecoin
You might be tempted to invest in Dogecoin as it is cheap. But. You must consider other factors too before investing. Do some research and understand how things stand and what is likely to happen in the future. Consider all relevant factors and make an informed decision rather than going by the price factor alone.
The Future Of Dogecoin
Any asset that doesn’t stand the test of time is not worthy of investing. The price of a token is not static in the crypto market. The rate of volatility determines the rise and fall. However, a good token will do well in the market in the long run, even if the market is bearish or bullish.
Dogecoin has seen a staggering rise in value over the last 12 months or so. The predictions also indicate that the coin is set to perform better. It means that buying and trading Dogecoin can bring you profits.
Dont Miss: Where Will Dogecoin Be In 5 Years?
The impressive market cap, market data, and predictions, all tell that Dogecoin is making huge waves in the crypto markets. Apart from the underlying technology, the cultural value of Dogecoin has several investors interested in it. You can buy your own Dogecoin and be a part of the crypto market to earn some profits. However, you must base your decision to make a long-term investment with Dogecoin on the information available to you and after considering the associated risks. As with any other investment, experts can only guide you - it is entirely your decision to make.
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