Dogecoin (DOGE -1.34%) investors have been on a wild ride this year. The meme currency soared more than 12,000% in a matter of months, then lost half its value when the market crashed in May. 

Now, investors may be tempted to buy the dip, hoping to strike it rich when Dogecoin returns to growth. But that may never happen -- and even if it does, there are smarter ways to invest your money. Here's what you should know.

Dogecoin: The problem

Warren Buffett once offered this advice: "The key to investing is...determining the competitive advantage of any given company." Dogecoin is not a company, but the principle still applies. As an investor, you should want to buy the best cryptocurrencies, the ones that differentiate themselves in some way.

Person in suit, holding tablet that displays upward trending bar chart.

Image source: Getty Images.

For instance, Polkadot was architected to solve the scalability problem that plagues many cryptocurrencies. To that end, the Polkadot blockchain can theoretically support up to 1 million transactions per second. To put that in context, the Dogecoin network currently handles 0.26 transactions per second.

Likewise, Dogecoin supply is unlimited -- every minute a new block is added to the blockchain, and each time that happens, 10,000 new tokens are created. That system might make sense if Dogecoin supported decentralized applications (like the Polkadot blockchain). But it doesn't. It's just a platform that supports transactions, and there are thousands of cryptocurrencies that do the same thing.

In fact, Dogecoin has only one exceptional quality: Its popularity. Since the meme currency launched in 2013, it has captivated the Reddit community. And earlier this year, it became the most-mentioned cryptocurrency on Twitter. But popularity is fickle, especially when it's not backed by a true competitive advantage.

In fact, this situation is reminiscent of another famous market bubble. In the 1600s, Holland saw tulip demand skyrocket, and the price of a single bulb reached $750,000 in today's money. Of course, there was nothing special about those tulips, but popularity has a way of making people act irrationally.

Eventually, the "tulip-mania" bubble burst and tulip prices plunged. I believe Dogecoin is headed for the same fate.

Beige home with a "For Sale" sign in the front yard.

Image source: Getty Images.

Zillow Group: The smarter buy

Zillow Group (Z -0.53%) (ZG -0.51%) takes a digital-first approach to real estate. Its end-to-end platform streamlines the home buying and selling process, simplifying what is often a very stressful experience.

The heart of Zillow's business is its network of websites and mobile apps. These real estate listings drew 9.6 billion visitors last year, making Zillow the most visited brand in the industry. That scale is a significant advantage, allowing the company to acquire customers more easily than its rivals.

In general, Zillow connects potential buyers (and sellers) with local real estate agents, and it provides mortgage and closing services to facilitate transactions. Zillow also buys homes directly; this gives sellers the certainty of a cash offer, without the hassle of listing, preparing, and showing the home.

Zillow's management has chosen to prioritize market share gains over near-term profitability. As a result, the company operates at a loss. But its top line is growing quickly, and Zillow is free cash flow positive, which bodes well for the future.



Q1 2021 (TTM)



$1.1 billion

$3.4 billion


Free cash flow

$179.6 million

$276.9 million


Data source: Zillow SEC Filings. TTM: trailing 12-months. CAGR: compound annual growth rate.

In the near term, Zillow's business should continue to benefit from the hot housing market. Strong consumer demand and limited inventory have caused home prices to skyrocket -- the average U.S. home value jumped 11.6% in April -- and Zillow expects existing-home sales to rise 10.3% to 6.2 million in 2021.

In the long term, Zillow's market opportunity exceeds $100 billion. Moreover, I think the real estate industry is ripe for disruption, and Zillow has positioned itself to be that disruptive force. As its direct buying business (i.e. Zillow Offers) continues to scale, I expect Zillow to take market share in the years ahead. That should make this growth stock a rewarding long-term investment.