2021 was the year of the doge, at least up until May. A popular meme cryptocurrency called Dogecoin (DOGE 4.38%) rocketed from a price of $0.005 per token to an all-time high of $0.74 in the space of five months, generating a return of about 150 times.

In other words, a $10,000 investment on Jan. 1, 2021 would have turned into $1.5 million by May 9. But what was the trigger? Besides a red-hot market for speculative assets, which sent everything from tech stocks to Bitcoin soaring, Dogecoin had a powerhouse in its corner: Elon Musk, the head of electric vehicle maker Tesla (TSLA -1.92%).

Musk had spent several months promoting Dogecoin on Twitter and would then famously appear on Saturday Night Live, where he was widely expected to mention the meme token. He did, and instead of heading to the moon, Dogecoin subsequently collapsed.

The token has lost almost 92% of its value since. Why? Well, Dogecoin has failed to evolve into a currency worth adopting for real-world use, and the speculation fever inevitably ran its course. But Musk is back with a new round of support for Dogecoin, and it's...unconventional. 

Dogecoin faces a mountain of challenges now

The entire cryptocurrency industry is in a cold winter at the moment, having shed nearly $2 trillion of its total value in the last 12 months. No token has been spared from the carnage, not even market leaders like Bitcoin and Ethereum, so Dogecoin isn't alone in this struggle. 

The sector has been plagued by recent high-profile failures that have wiped out billions of dollars of investors' money, teaching them a valuable lesson in the process: The traditional monetary system isn't so bad after all. See, if a U.S. bank collapses, customer deposits are automatically insured up to $250,000. When a stablecoin or a cryptocurrency-based lender collapses, the funds and assets are often gone for good.

It has eroded the faith many once had in cryptocurrencies, and now the U.S. government is stepping in with new rules to protect investors and effectively lift the veil on a market once that thrived on anonymity. From 2023, crypto brokers and exchanges will be required to report their clients' transactions to the Internal Revenue Service, which means investors will face a tax liability every time they sell tokens, spend them, or exchange them for a gain.

But Dogecoin faces a more structural issue. A mere 2,058 mostly obscure businesses worldwide actually accept it as payment for goods and services. That lack of adoption means consumers have no real reason to own it, because they can't spend it day to day. Elon Musk has tried to contribute by accepting Dogecoin for a range of Tesla merchandise products like a mug and a belt buckle, though the effort hasn't arrested the token's steep decline in value. 

Now he's hit the market with another attempt, and it's on fire. 

Burnt Hair by Elon Musk

Yes, Elon Musk's Boring Company just released a fragrance that smells like singed hair. "Just like leaning over a candle at the dinner table, but without all the hard work" is one line the company uses to describe the scent.

Its price tag of $100 places it on par with fragrances from luxury brands like Gucci and Tapestry's Coach. Yet within six hours of announcing its release on Twitter, Musk claimed that over 10,000 bottles of the perfume had been sold. That's a quick $1 million in the bank.

But as usual, there was something in it for Dogecoin enthusiasts. The billionaire quickly told fans that the Boring Company would be accepting Dogecoin as payment for Burnt Hair. We don't know just how many units have been purchased using the token, but could it be possible this product helps resurrect Dogecoin's languishing price?

Unless Burnt Hair becomes more than just a novelty, it's unlikely. But the publicity it draws could shine a light on Dogecoin, which would theoretically generate some interest from potential investors. Though as mentioned earlier, this isn't the first time Musk has leveraged his business interests to support the Dogecoin community. 

The result is unlikely to be any different on this occasion. Dogecoin will likely continue to stink up investors' portfolios.