The Dogecoin price pumped over 8% after Elon Musk announced he was resuming his bid to buy Twitter.
But as Dogecoin prices sharply corrected from $0.066 down to $0.061, not everyone believes that DOGE will return to the all-time high of $0.73 ever again.
This week The Motley Fool published an article saying that Dogecoin ‘isn’t the one’ to buy for anyone betting on the recovery of crypto.
The leading investment advisor said: “Dogecoin relies on hype because of its weak fundamentals, and eventually, hype stops working.”
It put the blame on low real-world utility and built-in inflation.
Let’s look at each of these in turn.
Dogecoin – is DOGE inflationary?
Dogecoin miners are given 10,000 DOGE as a block reward.
This means that 5 billion DOGE enters the circulating supply each year. With supply currently at 133 billion it means that Dogecoin has an inflation rate of around 4% annually.
This contrasts with the original cryptocurrency Bitcoin, which has a supply capped at 21 million.
There are also hyper-deflationary tokens on the market like EverGrow. EverGrow started out with a supply of 1 quadrillion and has sent over 53% to a burn address already. It is currently burning tokens at a rate of over 5% of the circulating supply – this is financed by a 2% transaction tax, and 100% of the profit from an ecosystem including an NFT marketplace, content subscription app and an ecosystem token, Lucro.
Tokens like Bitcoin and EverGrow are designed to increase in price over time. They are stores of value which do the opposite of national fiat currencies like the US Dollar or British Pound Sterling.
There are huge incentives for keeping money in currencies that appreciate over time.
Dogecoin, however, was created as a joke with no design for prices to continually increase. If volume remains the same, the price of Dogecoin is designed to fall.
Dogecoin – is DOGE useful?
This question is not just for Dogecoin, but is the primary problem for all cryptocurrencies.
Dogecoin has risen and fallen in price on hype and sensation in the media. The Dogecoin all-time high came in May last year as Elon Musk appeared on Saturday Night Live.
Why?
Because Musk had been Tweeting about Dogecoin. There wasn’t a lot of real use cases for Dogecoin going on apart from pure hype and attention.
Of course, had you bought Dogecoin when Elon Musk first Tweeted about it you would have earned a 2,400% return. But just because DOGE did that in the past doesn’t mean it will in the future. Crypto is facing its biggest test to date after losing $2 trillion in market cap and seeing a number of projects lose investors hundreds and thousands of dollars.
Neither is there a clear consensus on Dogecoin.
While there’s a chance Elon Musk could incorporate Dogecoin into Twitter (as he did by facilitating purchases of Tesla merch with DOGE) there’s a chance he won’t. That’s quite a gamble to bet your money on and a reason why more conservative investment advisors such as The Motley Fool warn against buying Dogecoin.
Any funds you do use to buy Dogecoin should be money you don’t need to live on, or save for a house or pension fund.
It’s just as likely that Dogecoin will pump again as it will fall.
