Dogecoin Investment Guide: Strategies For Beginners

Dogecoin is a cryptocurrency that was initially created as a joke based on a popular internet meme. Despite its lighthearted origins, Dogecoin has gained a devoted community and surged in value, making it a viable investment option. However, it is crucial to approach Dogecoin investment with caution due to its volatile nature and limited use cases.

To invest in Dogecoin, you will need to sign up for an account on a cryptocurrency exchange, such as Coinbase, Kraken, or Binance. These platforms allow you to buy, sell, and trade Dogecoin and other cryptocurrencies. When choosing an exchange, it is important to consider factors such as security, fees, the number of supported cryptocurrencies, wallet quality, and compliance with regulatory requirements.

Once you have selected an exchange, you will need to verify your account and deposit funds, either through fiat currency or other cryptocurrencies. After that, you can start purchasing Dogecoin on the exchange. It is recommended to only invest an amount you are willing to lose, as the cryptocurrency market is highly volatile.

Additionally, consider storing your Dogecoin in a secure crypto wallet instead of leaving it on the exchange. Software wallets tend to be more convenient, while hardware wallets are typically seen as more secure but less user-friendly.

Choosing a wallet

Software wallets, also known as hot wallets, are typically more convenient and are usually free. They are connected to the internet, allowing users to access their crypto anytime and anywhere. However, they may be more susceptible to hacking incidents. Examples of hot wallets include crypto exchange wallets, such as those provided by Coinbase, Kraken, or Binance, and software wallets like MetaMask or Trust Wallet.

Hardware wallets, also known as cold wallets, are physical devices that store your crypto keys. They are considered more secure than hot wallets since they are not connected to the internet. Examples of cold wallets include Ledger and Trezor devices. While they offer greater security, hardware wallets require an upfront purchase and are less convenient for those who engage in frequent transactions.

When choosing a wallet, it is essential to research the features and security measures offered by each option. Additionally, ensure that the wallet you choose supports Dogecoin and is legally operating within your jurisdiction. It is also recommended to withdraw most of your Dogecoin from the exchange wallet and store it in a hardware wallet for added security.

Selecting an exchange

• Legal compliance: Ensure the exchange is legally operating in your jurisdiction. Not all exchanges offer their services in every country, so check if the exchange allows trading in your country and does so legally.
• Know Your Customer (KYC) and Anti-Money Laundering (AML) practices: Many exchanges will require you to verify your identity, proof of address, and other personal details. While some crypto traders may find this a hassle, it can be a sign of a reputable exchange that is compliant with regulations.
• Security measures: Look for an exchange that prioritizes security to protect your funds and personal information. Features like two-factor authentication, cold storage of funds, and regular security audits are important.
• Fees: Different exchanges have varying fee structures, which can impact your trading costs. Compare fees across exchanges to find the most cost-effective option.
• Supported cryptocurrencies and fiat currencies: Ensure the exchange supports Dogecoin and any other cryptocurrencies you may want to trade. Also, check if it supports fiat currencies you may want to use to buy or sell crypto.
• Wallet quality and safety: Choose an exchange that provides a high-quality, secure wallet. Research the reputation of the wallet provider and their track record for security and reliability.
• Storage and custody solutions: Select an exchange that offers secure storage and custody options for your cryptocurrencies. Features like cold storage, multi-signature authorization, and insurance coverage for theft or loss of funds are important.
• Trading volume and liquidity: Consider the trading volume and liquidity of the exchange, especially if you plan to trade Dogecoin frequently. High trading volumes indicate a well-used and reputable exchange.
• User reviews and reputation: Research the exchange's website, social media presence, and user reviews to gauge its reputation and how it treats its users. Check for any news stories or reports of past issues, such as security breaches or unethical behaviour.

Taking the time to evaluate your needs and thoroughly investigate different exchanges will help you make an informed decision when selecting an exchange to invest in Dogecoin.

Payment methods

Once you've chosen a crypto exchange or brokerage, you'll need to select a payment method to deposit money into your account. Most exchanges will allow you to deposit money from a checking or savings account, and some may also accept wire transfers, PayPal transfers, or credit or debit cards. However, it's important to note that if you use a credit card, your bank will treat the transaction as a cash advance, resulting in higher fees and interest rates. Therefore, experts generally advise against using credit cards for crypto purchases.

When using a checking account, the bank transfer may take several days. Typically, you'll have instant access to a portion of the deposited funds for trading, but if you deposit a large amount (usually more than $1,000), you may need to wait a few days for the entire amount to clear.

If you already own cryptocurrency, you can use it to buy Dogecoin. However, not all cryptocurrencies can be exchanged for Dogecoin, and the allowed pairings may vary across platforms. Make sure the platform you're using allows you to trade your existing crypto for Dogecoin before placing a trade.

Storage options

When you buy Dogecoin, it is usually kept in your exchange's or brokerage's crypto wallet by default. These wallets are generally connected to the internet, so some investors prefer to withdraw their crypto and store it in another wallet.

You can store your Dogecoin in a hot wallet or a cold wallet outside of your exchange. Hot wallets are digital and connected to the internet, making them more convenient as you can access your Dogecoin from anywhere at any time. However, they are more susceptible to hacking. Cold wallets, on the other hand, are physical hardware that you can disconnect from the internet, making them much less vulnerable to hacking. They are generally more expensive than hot wallets, and you run a greater risk of being unable to access your cryptocurrency if you lose or forget your password.

Another option is to use a digital wallet, which can increase security but requires more responsibility from the investor. Hot wallets are always connected to the internet and are therefore more convenient, but they are also more susceptible to hacking. Cold wallets, on the other hand, are not connected to the internet and are thus less vulnerable to online hacks, but they are less convenient to use as you must have physical possession of the wallet to access its contents.

For an additional layer of protection, you might consider using a digital wallet to store your assets. Major cryptocurrency exchanges have crashed and filed for bankruptcy in the past, leaving investors without access to their funds.

Risks and benefits

Dogecoin is a cryptocurrency that was created in 2013 as a joke based on the Doge meme, featuring a Shiba Inu dog. Despite its humorous origins, Dogecoin has grown into a recognised digital currency with a market cap of $14 billion as of 2024, making it the 6th most popular cryptocurrency in the world.

Benefits

Dogecoin has a loyal community behind it, and its popularity means high liquidity, making it easy to buy and sell. It also has a fast transaction time and low fees, making it a popular choice for online tipping and micropayments. Its low price also makes it a good entry point for investors new to the cryptocurrency market.

Risks

Dogecoin is highly volatile and unpredictable, and its value can fluctuate rapidly. It is also not as well-known as Bitcoin or Ethereum, so it may be more vulnerable to changes in the market. It does not pay dividends or interest, and it is not backed by any substantial assets, so if the public loses interest in Dogecoin, its price could theoretically fall to zero.

Dogecoin also has an unlimited supply, which means that for its price to increase or even remain steady, investors have to continually buy more coins. This is in contrast to cryptocurrencies like Bitcoin, which have a cap on the number of coins issued, creating scarcity and helping to retain their value.

Tips for Investing in Dogecoin

If you do choose to invest in Dogecoin, it is recommended that you do not invest more than you can afford to lose. Financial planners generally recommend investing no more than 3-5% of your money in highly volatile assets like cryptocurrencies.

You can buy Dogecoin on a cryptocurrency exchange such as Coinbase, Binance, or Kraken, or through investment apps like Robinhood, SoFi, Webull, and eToro.

When storing your Dogecoin, you can choose between a hot wallet, which is digital and connected to the internet, or a cold wallet, which is a physical device that is not connected to the internet and is therefore less susceptible to hacking.

Frequently asked questions