Dogecoin Investment Strategies: A Beginner's Guide To Crypto Investing

Dogecoin is a cryptocurrency that was created as a joke based on a popular internet meme featuring a Shiba Inu dog. Despite its lighthearted origins, Dogecoin has gained a passionate following, with some investors seeing it as a promising crypto asset. However, it is also a highly volatile investment, with its value subject to extreme fluctuations. In this article, we will outline the steps to investing in Dogecoin, as well as the risks and rewards of doing so.

Choosing a crypto wallet

Crypto wallets are a way to protect the secret information that gives you control over your digital assets. They come in two main forms: hot wallets and cold wallets.

Hot wallets are connected to the internet, often in the form of a browser extension or mobile app. They are often free to use, but they may be more vulnerable to hacking. Examples of hot wallets include MetaMask, Exodus, and Coinbase Wallet.

Cold wallets are not connected to the internet and are usually physical devices, such as a USB stick. They tend to be more secure, but they are also more expensive and less convenient to use. Examples of cold wallets include Trezor and Ledger.

When choosing a crypto wallet, consider the following:

• Security: How vulnerable is the wallet to hacking?
• Accessibility: Is the wallet easy to use and mobile-friendly?
• Cost: Does the wallet charge fees for certain services?
• Supported assets: How many types of digital assets can the wallet support?
• Cold storage: How easy is it to move crypto offline into a cold wallet?
• Staking/DeFi support: Does the wallet support staking or other decentralised finance products?
• Zengo Wallet: Offers advanced security protocols and has a good track record. However, it does not support some popular cryptocurrencies.
• Crypto.com DeFi Wallet: Supports a wide variety of coins and is tailored for use in decentralised finance.
• Guarda: A free, all-purpose crypto wallet that supports more than 400,000 digital assets.
• Exodus: Offers a solid set of software tools, including a mobile app and a desktop app.
• Coinbase Wallet: Integrates easily with the Coinbase exchange, making it a good choice for beginners.
• Trust Wallet: The official wallet of Binance, allowing users to buy, sell, and trade directly from their wallet.
• MetaMask: A popular choice for users of the Ethereum blockchain, with mobile and browser-based wallets.
• Trezor: Offers high-end hardware and built-in services such as staking and crypto purchases.
• Ledger: One of the best-known names in crypto wallets, with a range of security features and educational resources.

Selecting an exchange

When selecting an exchange to purchase Dogecoin, there are a few factors to consider. Firstly, you should ensure that the exchange offers Dogecoin, as it is not available on all crypto exchanges. Popular exchanges that offer Dogecoin include Coinbase, Binance, Kraken, and Gemini. These exchanges provide simple, user-friendly platforms for buying and selling cryptocurrencies.

Another consideration is the payment options accepted by the exchange. Most exchanges allow deposits from checking or savings accounts, while some also accept wire transfers, PayPal transfers, or credit card payments. However, using a credit card to purchase cryptocurrencies can be risky and expensive due to the associated fees and higher APR.

It is also important to consider the security and protection of your assets. Some investors prefer to use separate crypto wallets to protect their coins from potential hacks or crashes on the exchange. Hot wallets are digital and constantly connected to the internet, offering convenience but increased susceptibility to hacking. On the other hand, cold wallets are physical hardware that can be disconnected from the internet, providing greater security but less accessibility.

Additionally, you should review the fees charged by different exchanges for buying or selling Dogecoin. Trading fees can range from about 0.05% to 5% per trade, but some investing apps like Robinhood and Webull offer commission-free crypto trades.

Lastly, check if the exchange allows you to access your own digital wallet. Some platforms may only let you buy and sell Dogecoin with USD, while others provide the ability to send and receive Dogecoin to and from your digital wallet.

Payment methods

There are several ways to pay for Dogecoin, depending on the platform you use. Here are some of the most common payment methods:

• Cash: You can generally use fiat currencies like the US dollar to buy Dogecoin directly on cryptocurrency exchanges. You will need to create an account and fund it from your bank account.
• Credit/Debit Card: Some exchanges, like Binance, allow you to buy Dogecoin with a credit or debit card. However, be aware that your bank will treat the transaction as a cash advance, resulting in higher fees and interest rates.
• Google Pay or Apple Pay: Exchanges like Binance also offer the option to use Google Pay or Apple Pay to purchase Dogecoin.
• Cryptocurrency: If you already own other cryptocurrencies, you may be able to trade them for Dogecoin. However, not all cryptocurrencies can be exchanged for Dogecoin, and the availability varies by platform.
• Third-Party Payment Channels: Binance, for example, offers multiple options for third-party payment channels, which may include PayPal or wire transfers. Check with your chosen platform to see what specific options are available in your region.

It's important to note that the availability of payment methods may vary depending on the cryptocurrency exchange or platform you choose. Additionally, some platforms may charge higher fees or have different transaction limits for certain payment methods. Therefore, it's always a good idea to review the fees, limits, and available payment options before making a purchase.

Peer-to-Peer (P2P) Transactions

Another way to acquire Dogecoin is through peer-to-peer (P2P) transactions. P2P trades are typically facilitated by online platforms and forums that connect local users willing to trade Dogecoin for products, services, or fiat currencies. These platforms allow you to socialize and plan face-to-face meetings with potential participants for a predetermined trade. Sending Dogecoin in a P2P transaction usually involves scanning the recipient's wallet QR code and authenticating the transaction on your Dogecoin wallet.

P2P transactions offer the advantage of bypassing the fees incurred on cryptocurrency exchanges and third-party platforms. Additionally, they provide a more direct and private method of acquiring or sending Dogecoin.

Amount to invest

Dogecoin is a highly volatile and unpredictable asset. Its price is largely driven by social media movements and hype. For example, in 2021, Elon Musk tweeted that he would host Saturday Night Live, setting off rumours that he would mention Dogecoin on the show. As a result, Dogecoin's price doubled in less than a month. However, when Musk poked fun at the cryptocurrency instead, its price fell by nearly 30%.

Given the unpredictable nature of Dogecoin, it is recommended that you only invest an amount that you are willing to lose. Financial planners generally recommend investing no more than 3% to 5% of your money in highly volatile assets like cryptocurrencies. This is especially true for Dogecoin due to its high volatility and the fact that it has an unlimited supply.

When deciding how much to invest, consider your overall financial situation, investment portfolio, and risk tolerance. If you are behind on your retirement savings and don't have an emergency fund, you should invest a smaller amount. On the other hand, if you are financially stable, on track to meet your retirement goals, and have a comfortable cushion of savings, you may be willing to invest a larger portion of your portfolio in Dogecoin.

It's important to remember that investing in Dogecoin is a risky proposition. The cryptocurrency has seen extreme fluctuations in value, and there is a chance that its price could drop significantly or even crash to zero. Therefore, it is crucial to carefully consider your financial situation and risk tolerance before deciding how much to invest in Dogecoin.

Storage options

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

There are two main types of crypto wallets: hot wallets and cold wallets. Hot wallets are digital and connected to the internet, while cold wallets are physical hardware that can be disconnected from the internet, making them much less susceptible to hacking.

Hot Wallets

Hot wallets are typically free and highly convenient, as they can be accessed from anywhere at any time. However, they are more susceptible to hacking. Examples of hot wallets include:

• Binance custodial software wallet
• Exodus
• Coinbase Wallet
• Atomic Wallet

Cold Wallets

Cold wallets are generally more expensive than hot wallets, and there is a greater risk of being unable to access your cryptocurrency if you lose or forget the password. However, they are considered the safest way to store crypto assets. Examples of cold wallets include:

• Ledger Nano X or S
• Trezor Model T or One
• KeepKey

Paper Wallets

Paper wallets are another option for storing your Dogecoin. They are a very secure way to store your crypto as they are not connected to the internet. However, they are vulnerable to theft or destruction, so it is important to keep them in a safe place.

Frequently asked questions