Dogecoin Faces New Challenges After Recent Volatility

Dogecoin (CRYPTO: DOGE) originated as a lighthearted project between two friends in 2013. This was during a period when cryptocurrency was gaining serious traction, particularly with the rise of Bitcoin. The duo sought to bring some levity to the space by drawing inspiration from the popular Doge meme.

In 2021, Dogecoin soared to one of the most valuable cryptocurrencies, with its market capitalization exceeding $90 billion. This surge was largely fueled by high-profile endorsements, such as those from Elon Musk. However, the token struggled to establish a practical use case, and as the market cooled, Dogecoin saw its value plummet 90% by mid-2022.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Following a period of stagnation, Dogecoin experienced another significant rally coinciding with Donald Trump’s presidential victory last November. Although it did not reach its all-time high, it closed 2024 with an impressive 251% gain. Yet, the token has begun to decline again, leaving investors speculating whether this represents a buying opportunity or a further downturn.

The Influence of Trump and Musk on Dogecoin

Dogecoin enthusiast Elon Musk has been an integral supporter of the token since 2019, frequently sharing memes and engaging with the community. The cryptocurrency gained significant traction ahead of Musk’s appearance on Saturday Night Live on May 8, 2021, where he participated in a Dogecoin skit. That night, Dogecoin’s price surged to $0.73, translating to a staggering 15,769% gain for the year.

Unfortunately, this marked the peak of its value. Investors soon recognized a lack of a solid strategy to support Musk’s promotional activities, leading to Dogecoin’s dramatic decline of 90% by mid-2022.

Looking ahead to 2025, Trump appears committed to establishing the U.S. as the global hub for cryptocurrencies. Under his leadership, the Securities and Exchange Commission (SEC) has paused or halted some of its ongoing actions against crypto exchanges and other related businesses. In addition, Trump initiated a strategic Bitcoin reserve and proposed a stockpile of digital assets, potentially positioning the U.S. government as an active buyer of cryptocurrencies with future Congressional approval.

Moreover, Dogecoin’s recent struggles are linked not only to broader economic policies but also to a new governmental body Trump created—Department of Government Efficiency, or DOGE. This agency, which Musk is set to lead, aims to identify government waste to alleviate the national debt, cleverly referencing Musk’s favored cryptocurrency.

However, the Trump administration’s policies have created a mixed environment for Dogecoin. On April 2, Trump introduced a 10% tariff on all imported goods, alongside plans for reciprocal tariffs on specific countries. While these tariffs do not directly impact digital assets, they contributed to market panic, leading investors to withdraw into cash as fears of a potential economic slowdown grew.

Consequently, Dogecoin fell below $0.20 and is now down 66% from its recent 52-week high of $0.47.

Image source: Getty Images.

Why Fundamentals Matter for Dogecoin

While tariffs have contributed to Dogecoin’s decline, numerous structural issues also affect its performance. A significant drawback is the lack of adoption as a payment method; only 2,095 businesses worldwide currently accept Dogecoin for transactions, according to crypto directory Cryptwerk.

Additionally, the supply of Dogecoin poses a long-term risk. With 148.8 billion tokens already in circulation, there’s a limit on new annual issuance, but no endpoint for total minting. This creates an unlimited supply, which historically undermines the value of investment-grade assets.

Recurring Concerns for Dogecoin Investors

The latest Dogecoin rally peaked at $0.47, still shy of its 2021 high of $0.73. Recent trading has inched down to just $0.16, with historical trends suggesting further downside could occur. After its last collapse in 2022, the price bottomed out at $0.06, implying a potential decline of 65% from current levels.

Given that no fundamental changes have occurred regarding Dogecoin in the past few years, investors cannot disregard the possibility of further weakening. There are currently no signs indicating that Dogecoin will gain traction in the Department of Government Efficiency, nor is it viewed as a reliable hedge against tariffs and trade uncertainty.

This situation closely mirrors events from 2022, indicating that the recent downturn might not present a favorable buying opportunity. Investors should consider maintaining their distance.

Is Dogecoin a Smart Investment for $1,000 Right Now?

Before investing in Dogecoin, consider this:

The Motley Fool analyst team has recently highlighted the 10 best stocks for investors to consider at present, and Dogecoin is not among them. Those selected stocks have the potential to deliver significant returns in the coming years.

For instance, consider when Netflix made this list on December 17, 2004… if you invested $1,000 at that time, you’d have $502,231!*
Or when Nvidia was recommended on April 15, 2005… if you invested $1,000 then, you’d have $678,552!*

Currently, it’s notable that Stock Advisor’s total average return rests at 800 %—vastly outpacing 156 % for the S&P 500.

See the 10 stocks »

*Stock Advisor returns as of April 14, 2025.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.