Meme-inspired cryptocurrency Dogecoin (CCC:DOGE-USD) has been one of the most talked-about investments in the past few months. The DOGE token was priced at half a penny on Dec. 31 but reached a high of 73.7 cents earlier this year, representing a massive gain of nearly 15,000%. Unfortunately, the frenzy behind the “people’s crypto” appears to have subsided as it continues to nosedive. It has no practical use, and with many utility altcoins out there, it’s tough to invest in DOGE.
The crypto, which started off as a joke, was rising to meteoric highs at a rollicking start to the year. The fun nature of the cryptocurrency effectively turned into a marketing machine. Celebrity entrepreneurs such as Elon Musk and Mark Cuban have frequently tweeted in support of the currency. However, it appears that Dogecoin witnessed its peak last month, just before Musk’s highly anticipated SNL performance. Unfortunately, his perfunctory tone towards the digital asset resulted in a near-instant 30% drop in price. It’s unlikely that the price will get back to where it was before the event.
No Real-Word Utility
The crypto market caught fire last year, and virtually every cryptocurrency benefited from the broader-market rally. However, with the volatility in the market this year and key developments in the industry, it appears that the market is maturing. Cryptocurrencies that offer real-world utility and long-term value for their investors will effectively weather any crisis that comes their way. However, meme-inspired currencies such as Dogecoin offers zero utility. This limits Dogecoin’s long-term growth runway.
There is very little that separates DOGE from other crypto giants. Naturally, it is transacted on a decentralized network and can be sent instantaneously to anyone online without a bank. It doesn’t offer anything unique as a payments platform, either. It can effectively process 40 transactions per second, and though that’s faster than Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD), it is far from being industry-leading. For instance, the Ripple (CCC:XRP-USD) ledger can process up to 1,500 transactions in a second.
One problematic difference with Dogecoin is that there aren’t a finite amount of DOGE tokens like Bitcoin. There are more than 120 billion tokens in circulation and counting. Additionally, with the expansion of decentralized finance, the crypto offers virtually nothing to its users to effectively work as a smart contract platform.
The Outlook for Dogecoin
The outlook for Dogecoin is dreary at this point. With an array of crypto options out there with much better functionality and decentralization, it’s tough to get excited about DOGE. Moreover, it has extremely limited real-world use. A few thousand obscure businesses currently accept DOGE as a form of payment at this time. If more companies can join in, it could lift its price in the short term. However, for a major push, it needs key players such as PayPal (NASDAQ:PYPL) and other major payment platforms.
Dogecoin’s price is heavily dependent upon social media hype, and it needs new buzz to keep the ball rolling. Elon Musk has by far been the most instrumental person in Dogecoin’s ascent. His tweets have shown to sway the digital assets price in both directions. Additionally, he has endorsed an upgrade that would reduce Dogecoin’s transaction fees by roughly 99%. However, to bet on an altcoin that can tank based on a tweet is risky, to say the very least.
Bottom Line On Dogecoin
Dogecoin has been among the top cryptocurrencies in terms of generating buzz in the past year. However, it has gone down like a lead balloon along with several other cryptocurrencies. DOGE offers no real value to its owners with little acceptance from mainstream businesses. In addition, it’s an incredibly volatile cryptocurrency that is linked to the social media buzz surrounding it. Hence, it’s best to avoid DOGE and invest in other altcoins that offer significantly more utility.
On the date of publication, Muslim Farooque 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.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.