Back in 2013, two software engineers created Dogecoin (CRYPTO: DOGE) which was named after the popular "doge" meme featuring a Shiba Inu dog as a playful parody of Bitcoin and other cryptocurrencies. Dogecoin didn't initially gain much attention from serious crypto investors, but a series of upgrades, big celebrity endorsements, and a fear of missing out (FOMO) caused its price to skyrocket over the past three years.
On May 8, 2021, Dogecoin's price hit an all-time high of $0.73, which represented a 73-fold gain from its price of $0.01 at the beginning of the year. At the time, some analysts claimed its price would reach $1 by the end of the year.
As of this writing, Dogecoin trades at about $0.16. The cryptocurrency lost its luster as rising rates drove investors toward more conservative investments. Bigger cryptocurrencies like Bitcoin ,which actually rose more than 10% as Dogecoin shed more than 80% of its value , also attracted more retail and institutional investors.
Why did Dogecoin's price skyrocket in 2021?
Dogecoin was created from the open-source code for Litecoin, an altcoin that was forked from Bitcoin's blockchain in 2011. Many investors initially dismissed Dogecoin as a joke, but its developers subsequently upgraded the token with higher access speeds and cheaper transactions.
Dogecoin's developers achieved those improvements through its own hashing algorithm Scrypt, which was less power-intensive than Bitcoin's own mining algorithm. As a result, Dogecoin started to gain more attention from online supporters, who called themselves the "Doge Army."
Its growing popularity caught the attention of celebrities like Elon Musk, Mark Cuban, and Snoop Dogg, who all promoted the token to their social media followers in 2021. At the same time, social media buzz and stimulus checks drove many retail investors toward growth stocks, meme stocks, cryptocurrencies, and other speculative investments. Those tailwinds propelled Dogecoin's stock to its all-time high.
Why did Dogecoin's price tumble during the next three years?
But during the next three years, Dogecoin's price tumbled as rising interest rates heralded the beginning of a new "crypto winter." Dogecoin was also left out in the cold earlier this year when the U.S. Securities and Exchange Commission (SEC) approved the first batch of Bitcoin spot price exchange-traded funds (ETFs) while dismissing similar ETFs for other cryptocurrencies.
To make matters worse, the failures of several high-profile cryptocurrency exchanges and tokens cast dark clouds over Dogecoin and other altcoins. The New York State Department of Financial Services (DFS) also recently excluded Dogecoin from its "green list" of eight regulated cryptocurrencies: Bitcoin, Ethereum, and six stablecoins from PayPal and Gemini. That exclusion implies that Dogecoin is a much riskier asset.
Dogecoin is now accepted as a payment method at a handful of businesses, but its volatile price doesn't make it an appealing option for making most payments. The Dogechain blockchain network, which was built by Dogecoin holders, enables the development of decentralized apps, games, and non-fungible tokens (NFTs) , but it isn't as widely used as the Ethereum Network for developing decentralized applications.
Without those foundations, it's hard to properly value Dogecoin. That's why Bitcoin and Ethereum both outperformed Dogecoin after it peaked in 2021.
Could Dogecoin still generate millionaire-maker gains?
For now, the biggest catalysts for Dogecoin include its new future contracts on Coinbase. This might eventually lead to the approval of Dogecoin future ETFs, and hopes for spot price ETFs in the distant future.
If you invest $10,000 in Dogecoin today, you would need its price to rise to $14 to generate a millionaire-maker gain. However, the most bullish analysts expect Dogecoin to only reach $2 to $3 by 2030. In a best-case scenario, it could potentially turn a $10,000 investment into $140,000 to $214,000 by the end of the decade.
We should take those estimates with a grain of salt since it's difficult to predict the exact price of a volatile cryptocurrency over a multiyear period. It doesn't seem like Dogecoin can generate millionaire-maker gains on its own.