Dogecoin’s Roller Coaster Ride: A Look at Its Future Compared to Bitcoin
Dogecoin (CRYPTO: DOGE), known for its Shiba Inu mascot, started 2021 at a mere $0.0046 per token. In just five months, it skyrocketed by 15,769% to reach $0.73, fueled by the enthusiasm surrounding the cryptocurrency market. The support from Tesla CEO Elon Musk played a significant role in this explosive growth.
However, the meme token then fell sharply, declining 92% from its peak as the cryptocurrency market experienced a bear trend in 2022. Despite this, investor sentiment has seen a notable shift this year, with major cryptocurrencies like Bitcoin (CRYPTO: BTC) reaching new levels.
Yet, Dogecoin encountered difficulties and was trading near its 52-week low as recently as September. This changed following Donald Trump’s presidential election win on November 5, which Musk helped influence.
This year, Dogecoin has gained 324%, significantly outperforming Bitcoin’s 107% return. As the market evolves, which of these cryptocurrencies will prove to be the better investment?
The Musk Factor
Musk became synonymous with Dogecoin in 2021, frequently sharing memes related to the cryptocurrency on social media, primarily on X (formerly Twitter), which he owns today. He referred to Dogecoin as his favorite cryptocurrency, signaling strong support to investors.
The peak of Musk’s influence occurred when he appeared on Saturday Night Live on May 8, 2021. Investors anticipated a grand declaration of support, but his participation turned out to be a comedic skit without serious backing, leading to a drastic drop in Dogecoin’s value that it has yet to recover from.
In an effort to lend credibility, Musk announced late in 2021 that Tesla would accept Dogecoin for select merchandise, but this did not significantly drive adoption, and the price continued to decline.
Recently, Dogecoin has shown signs of revival, coinciding with Musk’s financial involvement in Trump’s re-election campaign. Trump announced the formation of a new initiative called the “Department of Government Efficiency” — or D.O.G.E — seemingly alluding to Musk’s favored cryptocurrency.
Musk is set to lead D.O.G.E alongside Vivek Ramaswamy. Remarkably, Dogecoin’s value has more than doubled since November 5, though there are no guarantees the initiative will result in any direct benefits for the token.
Image source: Getty Images.
Bitcoin’s Strong Position
Many cryptocurrency advocates believe that digital currencies could eventually replace traditional money. Bitcoin, for instance, is decentralized, preventing manipulation by individuals or governments, and relies on a robust system known as blockchain. However, the current adoption rates among consumers and businesses remain low, hindering its use as a currency.
Globally, only 8,952 merchants accept Bitcoin, as noted by Cryptwerk. In comparison, just 2,521 businesses accept Dogecoin. Without widespread acceptance, both cryptocurrencies struggle to maintain their value as viable currency options.
There is a growing perception that Bitcoin could be more valuable as a store of value akin to gold. This year, the U.S. Securities and Exchange Commission approved several Bitcoin exchange-traded funds (ETFs), making it easier for investors to add Bitcoin to their portfolios.
Currently, Bitcoin is trading around $92,000, but Cathie Wood’s Ark Investment Management believes it could rise to $1.48 million by 2030, driven by multiple use cases boosting its adoption.
Ark predicts that Bitcoin could transition into a digital gold reserve for institutional investors, especially now that spot Bitcoin ETFs are available. This change might encourage companies and even governments to hold Bitcoin as a means of hedging against economic challenges like inflation.
Intriguingly, Trump has expressed openness to the idea of the U.S. government creating a Bitcoin reserve, suggesting that the nation could become an active buyer of this cryptocurrency.
Lessons for Dogecoin Investors
Even though Dogecoin has tripled its percentage gain this year, it still hasn’t reached its previous highs. However, Bitcoin continues to advance into new territory and shows real potential for future growth.
Currently, Dogecoin lacks substantial utility and doesn’t have the backing of institutional investors or regulators, making it primarily a speculative investment. The decline it experienced in 2021 serves as a cautionary tale; after a surge driven by speculation, it plummeted 92% due to a lack of fundamental support.
In light of this information, Bitcoin emerges as the more promising long-term investment. Its track record since its inception in 2009 shows consistent positive returns, suggesting it will likely outpace speculative tokens like Dogecoin over time.
Is Now the Time to Invest $1,000 in Dogecoin?
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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 the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
