During 2022, the popular meme coin Dogecoin (DOGE -2.90%) all but disappeared from the radar of serious investors, who sought out less-risky assets during a market downturn. Dogecoin is now down 90% from its all-time high of $0.74, trading at just $0.07.

While Dogecoin experienced a few brief spikes during 2022 -- primarily on news related to Elon Musk and Twitter -- it's clear this crypto is facing a moment of truth in 2023. It has now been almost a decade since its launch, and the digital currency has never cracked the $1 price point. If it is going to do it in 2023, at least three things need to happen.

1. A crypto market rally

First and foremost, the crypto market must rebound in 2023. The perfect setup for a meme coin rally includes a lot of frothy, speculative sentiment that pulls in new retail investors hoping to get rich quick. And that implies a bullish market rally that pushes up all coins at once, garners a lot of media attention, and encourages retail investors to get back into the market.

Certainly, Dogecoin's recent history includes a number of impressive market rallies that suggest this is possible. In March 2017, the crypto surged more than 1,500%. In January 2018, there was another surge that helped Dogecoin break the $0.01 mark.

And there was a nearly 10,000% rally in early 2021, fueled in part by a massive Bitcoin (BTC -0.79%) rally happening at the same time.

2. The Elon Musk factor

The second big factor involves Elon Musk, who has become one of the highest-profile backers of Dogecoin. Musk has often promoted the features and benefits of Dogecoin, even going so far as to proclaim himself "The Dogefather" before a guest appearance on NBC's Saturday Night Live back in May 2021. That show ended up marking the peak of the last Dogecoin mania. 

So it's perhaps no surprise that Musk's $44 billion acquisition of Twitter became a major catalyst for price action in Dogecoin in 2022. The crypto briefly spiked when the deal was announced in April after Musk suggested that Dogecoin would be integrated into Twitter at some point.

The crypto spiked again in October, when the deal was finalized. But it never went any higher than $0.15. Thus, for Dogecoin to go to $1, Musk probably needs to announce a plan for full crypto integration into Twitter, in which the token becomes the preferred payment option for Twitter users worldwide.

Shiba Inu dog.

Image source: Getty Images.

The other little wrinkle in the Musk story involves SpaceX. Back in May 2021, Musk suggested that an upcoming space mission would be paid for entirely in Dogecoin. In a single tweet, Musk said: "Mission paid for in Doge. 1st crypto in space. 1st meme in space." 

Current speculation suggests that this Dogecoin-financed space mission might finally occur sometime in 2023. As you can imagine, if this happens, it might just break the internet and send Dogecoin soaring into, well, outer space.

3. A tech upgrade for Dogecoin

The final piece of the puzzle is a potential major technological upgrade for Dogecoin. Right now, its only value is as a payment option. A growing number of merchants accept it as a form of payment, but its utility elsewhere is extremely limited.

So for Dogecoin to skyrocket past the $1 mark, it needs to expand the number of uses for its blockchain and tap into the full potential of the blockchain and crypto space, including decentralized finance, non-fungible tokens (NFTs), and Web3.

One way to do this is by transforming into a modern proof-of-stake blockchain. In short, the crypto needs to pull off what Ethereum (ETH -1.38%) did in 2022 with The Merge. This might be the only way forward for Dogecoin, otherwise it's stuck with 10-year-old technology. This topic is hugely controversial within the Dogecoin community. In fact, an online spat over this erupted during the winter holidays.

How realistic is $1?

At the end of the day, Dogecoin skyrocketing from its current price of $0.07 to $1 in 2023 does not seem realistic. That price would mark a new all-time high. It would also imply a new market capitalization of $132 billion, which would make Dogecoin the third-most-valuable crypto in the world, trailing only Bitcoin and Ethereum. 

Investing in cryptocurrencies is risky and speculative, especially with meme coins like Dogecoin. At least three big things need to happen for it in 2023 -- a market rebound, an integration with Twitter, and a tech upgrade -- and none of them seem particularly likely right now. There are other places to put your money in the crypto market that are not nearly as speculative.