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One of the hottest currencies last year, Dogecoin (CRYPTO: DOGE) currently has US $ 18.55 billion, making it the 11th largest digital asset in the world. Eight years ago, the DOGE token increased by 12,600%. However, it also drops by 81% from the top, allowing investors to buy a dip. But let’s see if Dogecoin should be part of your portfolio now.

What is Dogecoin, and how is it different from Bitcoin?

Created as a meme coin, Dogecoin is a nationally distributed digital currency launched in 2013. Investors flocked to buy Dogecoin in 2021 after a series of tweets by Tesla CEO Elon Musk sparked widespread interest in social media. While Bitcoin uses a proof-of-operation method to verify transactions, Dogecoin uses Scrypt technology.

Investors are aware of Dogecoin, as there is an endless supply of DOGE tokens, making it a natural inflation. By comparison, the total amount of Bitcoin mined has reached 21 million, of which 19 million have been mined. Its scarcity makes Bitcoin a stock market and a hedge against inflation.

Another major difference between Dogecoin and Bitcoin is security. The Bitcoin network has more than 14,000 visual coders distributed worldwide, making it impossible to capture the blockchain by producing false trading. Besides, Dogecoin has 1,400 nodes, and 98 people control two-thirds of the total token distribution.

Why am I bearish on Dogecoin?

I expect cryptocurrencies to gain momentum in the next decade. However, the success of these assets depends on the real-world use of blockchain networks. Like other cryptocurrencies, Dogecoin aims to make payments easier at a lower cost. However, data from Cryptwerk suggest less than 2,000 merchants accept DOGE as a payment method.

Dogecoin co-founder, Billy Markus, said DOGE could be used to enrich content creators in online communities such as Twitter and Reddit. Although the average transaction fee for Dogecoin over time has dropped to $ 0.15, it is still very high and will weaken the availability of those who want to suggest a lower price. Moreover, the daily transaction of Dogecoin stands at 33,000, and this figure has not risen much in the last few years, which should be a shock to investors.

Currently, there are 133 billion DOGE tokens, and this number will grow by 5 billion each year. Therefore, the requirement should exceed the supply speed so that the price of the DOGE token can be boosted.

Stupid takeaway

Investing in cryptocurrencies poses significant risks, as it is still a speculative asset class. But, as mentioned above, you need to identify the use of blockchain networks that will drive the prices of cryptocurrencies higher or lower. For example, the Ethereum blockchain supports smart contracts, while Solana processes thousands of transactions per second at very low cost.

Dogecoin gained popularity after positive investor views last year but also burned the wealth of investors over the past 10 months. Investing in DOGE remains a highly risky proposition, as there are other blockchain networks that are projects coming in at a rapid pace.

Posted Dogecoin Should Be Part Of Your Cryptocurrency Portfolio Right Now? first appeared in Motley Fool Canada.

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