At a current market cap of $2.3 trillion, the cryptocurrency market is back in style. Thanks to the surging price of Bitcoin (CRYPTO: BTC), the world's most valuable digital asset, investors might be eyeing other tokens in the hopes that they can soar.
Perhaps there's no other cryptocurrency that exemplifies the meme-stock craze from 2021 better than Dogecoin (CRYPTO: DOGE). This speculative token skyrocketed in value during a raging bull market, but as of Feb. 28, it sits 86% below its peak price.
Can Dogecoin bounce back and rise 760% to one day reach $1? Let's take a closer look to figure out the chances this token can make a new all-time record.
Dogecoin's purpose
Created as a funny alternative to Bitcoin, Dogecoin is on a blockchain network that was made to have an abundant token supply. There are currently 143 billion tokens outstanding, a figure that increases by 10,000 every minute.
Dogecoin has no functionality other than to be used as a tool for financial gain or to send money to others. According to cryptwerk.com, just 2,523 merchants worldwide accept it as a method of payment, which is a drop in the bucket when it comes to the number of businesses out there.
There isn't a reason to be optimistic about Dogecoin achieving greater adoption in the future. Data from venture capital firm Electric Capital shows that only 19 full-time developers are working on Dogecoin, ranking it 90th out of 100 blockchain networks. This doesn't bode well for its long-term viability.
In order for Dogecoin's price to remotely have a chance at climbing to a new high, it would need to benefit from another momentum-driven hype cycle. This means a public mention of the token by someone like Elon Musk or Mark Cuban, with supporters quickly rushing in to buy the cryptocurrency. It's hard to know if this will ever happen.
In 2023, the overall crypto market roughly doubled in value. But Dogecoin was only up 27%. For one of the most speculative digital assets out there, you would expect it to rise rapidly when market conditions were favorable. This just wasn't the case, likely demonstrating tempered enthusiasm.
Promising alternative
Investors who are serious about putting money to work in the cryptocurrency industry should consider Bitcoin instead. Unlike Dogecoin, Bitcoin was launched to be a scarce asset. There will only ever be 21 million coins in circulation, based on a pre-determined inflation schedule. This alone gives it value, particularly when compared to constantly debasing fiat currencies.
Bitcoin appears to have made it in terms of becoming a legitimate financial asset. The recent introduction of spot exchange-traded funds, which are attracting billions of dollars in inflows, can be viewed as somewhat of a stamp of approval by the Securities and Exchange Commission, as well as major traditional asset managers who want to provide exposure to Bitcoin for their clients.
Given that its price has soared in the past few years, especially at a time when inflationary pressures are present, it might indicate that it's fulfilling its duty as a store of value. I don't believe Dogecoin holds a candle to this type of perception in the market.
Despite its extremely volatile nature, throughout its history, Dogecoin has been a massive winner. However, I believe the interest from the investment community is fading.
Not only do I think this crypto will never reach $1, but I wouldn't invest my hard-earned savings in it at all. In fact, I suspect this token has a better shot at going to zero first. There's a much better option for investors to choose.