Dogecoin: A Viable Investment Or Just A Meme?

Dogecoin is a cryptocurrency that was started as a joke in 2013 by software engineers Jackson Palmer and Billy Markus. It is a risky, volatile investment and should only be purchased if you are in a strong financial position and can afford to lose money. Dogecoin's price history has been turbulent, with a rapid rise in value in 2020 and 2021, a fall in 2022, and a 30% increase in 2023. The price of Dogecoin recently hung around the $0.10 level, with a market cap of around $18 billion. Dogecoin is considered a short-term investment option, with its long-term prospects being uncertain.

Dogecoin's volatility

Dogecoin's block reward schedule has also contributed to its volatility. Initially, block rewards were completely random, with miners receiving anywhere from 0 to 1 million Dogecoin for mining a single block. This range was tapered over time until 2014, when the block reward system changed to a fixed schedule, with successful miners receiving 10,000 Dogecoin per block.

Dogecoin's price has also been influenced by Tesla CEO Elon Musk, who has used his social media presence to drive up prices. Despite these short-term gains, Dogecoin's overall price performance has been weak compared to other cryptocurrencies, reinforcing its reputation as a highly volatile and speculative investment.

Short-term vs long-term investment potential

Dogecoin is a risky investment due to its high volatility and uncertain long-term value. While it may offer short-term gains, particularly in a bullish crypto market, it is not suitable for long-term investors.

Dogecoin's price volatility has been influenced by Tesla CEO Elon Musk, who has used social media to drive up prices. However, Dogecoin's performance pales in comparison to Bitcoin, the leading cryptocurrency. Dogecoin's lack of scarcity due to its unlimited supply further diminishes its long-term investment potential.

In contrast, Bitcoin has a finite supply, creating scarcity and helping retain its value. Bitcoin is also more widely accepted and traded, with a larger market capitalization, making it a more stable and less risky investment option.

Dogecoin's short-term potential is influenced by its viral nature and the fear of missing out among new retail investors. Its price can increase rapidly in the short term, making it attractive for quick gains. However, the potential for loss is significant, and the lack of decentralization and unlimited supply make it a risky investment.

For those considering investing in Dogecoin, it is crucial to assess your financial situation, risk tolerance, and overall investment portfolio. Experts recommend investing no more than you are willing to lose, as cryptocurrencies are highly speculative.

Pros and cons of investing in Dogecoin

Pros

• Fun factor: Dogecoin is a fun investment vehicle that appears to have some entertainment value for the non-critical portion of their long-term investment portfolios.
• Potentially vigorous short-term value: Meme coins tend to increase in price in the short term virally. For example, during the Covid-19 lockdowns, the token went viral on TikTok, bringing in new investors.
• Low transaction costs: Dogecoin transactions are much faster and cheaper than Bitcoin transactions.

Cons

• Risk of loss: The potential for loss is high. The drawbacks of investing in Dogecoin include potentially losing all of your money.
• Potential lack of decentralisation: Dogecoin's governance might not be decentralised, which would introduce the risk of certain actors being able to change Dogecoin at will and to their benefit.
• Energy-intensive: Dogecoin still uses proof-of-work technology to validate blockchain transactions, meaning it uses far more energy than many proof-of-stake cryptocurrencies.

How to buy Dogecoin

Dogecoin is a decentralised cryptocurrency that was created as a parody of Bitcoin. It has gained significant attention due to its meme-inspired branding and support from Tesla CEO Elon Musk.

• Consider how much you want to invest in Dogecoin: Dogecoin is a highly volatile investment because it has an unlimited supply. For Dogecoin's price to increase or remain steady, investors must continually buy more coins. Otherwise, the supply of Dogecoin rises rapidly, and the value of the coins already in circulation decreases.
• Decide on a cryptocurrency exchange: To purchase Dogecoin, you will need to open an account with a cryptocurrency exchange, where buyers and sellers meet to exchange cryptocurrency for dollars. Popular exchanges include Coinbase, Kraken, and Binance, which offer simple, easy-to-use platforms.
• Select a payment option: Before you can start trading, you must deposit money into your exchange or brokerage account. The exchanges will usually let you deposit money from a checking or savings account, and some accept wire transfers and PayPal transfers. A few exchanges also allow you to use a credit card to buy Dogecoin, but this is generally discouraged as your credit card company will consider the money to be a cash advance and charge added fees and a higher APR.
• Place your order for Dogecoin: Once your money is in your account, you can purchase Dogecoin. Search for Dogecoin or enter its ticker symbol, DOGE, on the exchange's trading or purchase platform. Then, pick your trade type and input the dollar amount you want to invest or specify how many Dogecoins you want to buy.
• Consider your storage options: When you buy Dogecoin, it is, by default, kept in your exchange's or brokerage's crypto wallet. Some investors prefer to withdraw their crypto and store it in a separate wallet. You can choose to store your Dogecoin in a hot wallet or a cold wallet. Hot wallets are digital and connected to the internet, while cold wallets are physical hardware that you can disconnect, making them less susceptible to hacking.

Please note that investing in cryptocurrencies is highly risky and speculative, and the markets can be extremely volatile.

Storing Dogecoin

When you buy Dogecoin, it is, by default, kept in your exchange's or brokerage's crypto wallet. However, because these wallets are generally connected to the internet, some investors choose to withdraw the crypto they purchase and store it in another wallet.

You can choose to store your Dogecoin in a hot wallet or a cold wallet outside of your exchange. Hot wallets are digital and connected to the internet, while cold wallets are physical hardware that you can disconnect, making them much less susceptible to hacking.

Ledger Nano S Hardware Wallet

The Ledger Nano S is a popular hardware wallet that offers a wide array of security features to keep your coins safe and out of the reach of hackers. It looks like a small USB device but has a built-in OLED display that is used in conjunction with small buttons on the device to confirm and manually verify transactions. The Ledger features secure PIN storage of your private keys and an easy-to-use backup and restore feature, as well as two-factor authentication. The device supports the storage of more than 700 different cryptocurrencies, including Dogecoin, Bitcoin, Ethereum, Dash and Litecoin.

Trezor One Hardware Wallet

The Trezor One is a slightly cheaper hardware wallet developed by SatoshiLabs, a company based in the Czech Republic. Like the Ledger Nano, the private keys to your Dogecoin wallet are kept on your device, making it difficult for hackers to access them through online connections. The Trezor Model One is the entry-level wallet, but SatoshiLabs has also developed a more expensive version called the Model T, which has a colour touchscreen.

Exodus Wallet (Desktop and Mobile Wallet)

The Exodus wallet is one of the most popular and well-designed wallets in the crypto industry. It is a multi-coin wallet that can be accessed on multiple devices and supports a plethora of different tokens and coins, including Dogecoin. Exodus has forged a strategic partnership with Trezor, enabling users to harness the security of the Trezor device while enjoying the user-friendly Exodus interface. The Exodus wallet caters to a wide range of users, offering compatibility with Windows, Linux, Mac, iOS and Android operating systems.

Official Dogecoin Wallet

The official Dogecoin wallet is the best way to store your coins if you're really interested in Dogecoin. The desktop version comes in a core wallet that downloads the entire blockchain and helps to secure the network, as well as a lite version called MultiDoge, which is suitable for simply storing and transferring Dogecoin. There is also a mobile version for Android devices. The synchronization process is relatively quick, especially with the lite version, and the interface is easy to understand and navigate. However, the official Dogecoin wallet lacks support for iOS, and it's only compatible with Dogecoin.

Dogechain Wallet (Online Wallet)

The Dogechain Wallet is an online wallet that can be accessed from any browser. While online wallets are not generally recommended due to security issues, the Dogechain wallet is a solid choice if you're dealing with small amounts of Dogecoin. The wallet encrypts everything, and your wallet information is never accessed by Dogechain. The encrypted files are stored in the cloud, so even if the Dogechain servers were to be destroyed, you would still be able to access your coins.

Dogecoin Paper Wallet

A paper wallet is a simple and secure way to store your cryptocurrencies. It involves printing your private keys on a piece of paper, which can then be stored in a safe or bank safe deposit box. While paper wallets are vulnerable to theft or destruction, they offer an added layer of security as they are not connected to the internet, making it impossible for hackers to steal your coins.

Frequently asked questions