Can Dogecoin reach $1? | Motley Fool

Dogecoin (Doug -11.92%) The monster returns. On October 31, the speculative cryptocurrency was trading 75% below its all-time high in May 2021. But since the beginning of November, it has risen almost 150% as investor enthusiasm grows.

As of the afternoon of December 17, this meme token is trading at $0.40. But could it rise another 150% and one day reach a new record high of $1? Continue reading to understand DogecoinPotential price path.

Increased speculative behavior

The stock market has benefited greatly from investor optimism following the presidential election, as has the broader cryptocurrency market. Even Dogecoin, one of the most speculative tokens, rose higher.

This trend provides a clear example of Dogecoin’s most pronounced bullish case, which is known as Biggest idiot theory. The idea is that you should buy something not because it has value in itself, but because you will be able to sell it for a higher price later to someone less informed. This risky strategy relies on the constant hype of everything you buy.

It definitely helps with that Tesla Founder and CEO Elon Musk, who is attracting a lot of attention and currently has the ear of Donald Trump, has expressed his support for Dogecoin. Add to that the fact that President-elect Donald Trump said he would put Musk in charge of a new government agency called the Department of Government Efficiency (DOGE) — which has nothing to do with cryptocurrency — and the speculation around Dogecoin could be good. intensification.

Lack of competitive strengths

It is not difficult to have a bearish view on Dogecoin. This is because digital assets do not have any competitive strengths.

Dogecoin was launched in 2013 as a lightweight alternative to Dogecoin Bitcoin. A is used Proof of work Consensus protocol. DOGE tokens can be used to send and receive money. But 10,000 new Dogecoin tokens are generated every minute without the maximum supply. There are already 147 billion coins in circulation.

Bitcoin, on the other hand, has a fixed maximum supply of 21 million coins. Moreover, as the world’s oldest and most valuable cryptocurrency, with a market capitalization of $2.1 trillion, Bitcoin has the advantages of huge scale, Network effectsand a vast and expanding financial ecosystem that puts it ahead of Dogecoin.

The number of developers working on a project can be an indication of its potential. It’s a good sign if there are smart computer scientists working on a technology to boost utility and adoption. But according to investment firm Electric Capital, Dogecoin is not one of the top 100 blockchain networks in terms of developer activity. This is not an encouraging sign.

Dogecoin is gambling

I am not a buyer of Dogecoin because I believe in the bearish case, which is basically that it does not have any notable competitive strengths. It is possible that this issue will become more popular, leading to it being considered worthless in the market.

But I can certainly understand how important speculation is among the investment community. This could continue to support the price of Dogecoin for the foreseeable future.

So, frankly, I wouldn’t be surprised if Dogecoin continues to have random spikes, like the one it’s experiencing now, which eventually brought it to the $1 mark. But such mutations will be unpredictable, because they are not based on anything fundamental.

If the coin reaches $1, it will likely see a significant decline soon after. Buying this cryptocurrency is nothing more than a gamble, so I think the best thing long-term investors can do is avoid it.