Why You Should Be Careful Investing in Dogecoin  by@Sergeenkov

Why You Should Be Careful Investing in Dogecoin

Andrey Sergeenkov HackerNoon profile picture

Andrey Sergeenkov

Cryptocurrency researcher

Even though Dogecoin is getting a lot of attention from investors and speculators, investing blindly can be problematic. Giving in to FOMO without researching this project may yield unsatisfactory results. Its semi-obsolete technology combined with a lack of long-term goals makes it unsuitable for most investors. 

Dogecoin Hype Isn't Sustainable

Even though there has been plenty of DOGE price momentum lately, it will come to an end sooner rather than later. Its current value of $0.38 is not sustainable for a project that has no long-term plan whatsoever. That is not the most significant drawback, but considering how there is no real vision for the future should serve as a warning sign to everyone. 

Making matters worse is the lack of a supply cap for Dogecoin.

Unlike Bitcoin, there is no limit as to how many DOGE there can ever be in circulation. It may seem insignificant to those who invest for speculative purposes. However, everyone should know there is 10,000 DOGE added to the network every minute. There will be a time when the supply outweighs demand unless investors keep buying up the freshly generated 5 billion coins per year. 

Inflation has proven problematic for every type of currency, either physical or digital. The US Dollar and Euro are subject to inflation, reducing consumers' purchasing power and devaluing the existing circulating supply. Dogecoin has a very similar cycle that may prove difficult to break. Those who consider Dogecoin as a long-term investment may want to rethink their position based on this information. 

Cryptocurrency enthusiasts will be familiar with the name Mike Novogratz. The investor is best known for his bullish opinion on Bitcoin. In a recent interview, Novogratz weighed in on Dogecoin, claiming people shouldn't buy it, certainly not at these price levels. He also hints at the sheer number of "uneducated investors fueling the market momentum", indicating savvy investors wouldn't explore this currency right now. 

Solving The Downsides

Other than the two potential downsides above, there are other factors to consider before investing in Dogecoin. Unlike other crypto assets, it has minimal utility. Although over 1,000 businesses or merchants accept DOGE transactions, it will remain a very niche market for some time to come.  Dogecoin ranks well behind other top cryptocurrencies in this department, with little or no signs of improvement.

Combined with the lack of any real catalyst - other than social media hype and FOMO - there is no compelling reason to invest in Dogecoin. The currency had a good run and saw its price explore, but doing so again will prove incredibly challenging. Contrary to Bitcoin, no publicly traded companies are openly investing in Dogecoin, as the currency lacks that level of appeal. 

On the technology front, Dogecoin brings nothing new or exciting to the table either. The network lacks exciting features and is little more than a clone of other existing solutions that have gained broader adoption and traction. The issue leads to the emergence of new projects that are able to fill the gap. For example, Frenchie Network wants to compete with Dogecoin technology as a meme-like currency but with a blockchain that offers more usability. Seeing the French bulldog compete with the Shiba Inu will go beyond the overall theme, as FRENCHIE will focus on decentralized finance purposes. 

Closing Thoughts

It is normal to see successful or hyped-up projects attract attention from developers who think they can do better. Dogecoin, initially created as a meme currency for the internet, has stayed true to its roots for several years now. While that will make some people happy, it also highlights the lack of a long-term vision and appeal. Competing concepts have a good chance of taking over from Dogecoin in terms of market share and appeal. 

There is room for multiple meme currencies on the internet. Previous attempts have tried to mimic Dogecoin in every way, without adding anything innovative. Up-and-coming ventures will need to take a very different approach m as many opportunities are waiting to be explored. Time will tell whether alternative projects can make their mark on the industry.

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