In 2023, Dogecoin (DOGE -7.42%) is up a blistering 32.73% amid a broader rally in the crypto market. Dogecoin's rapid ascent in January appears to be driven primarily by rampant investor speculation that billionaire Elon Musk will continue to support the coin, especially via his $44 billion acquisition of Twitter.
Most recently, Elon Musk doubled down on his famous Happy Meal challenge, saying, "I will eat a Happy Meal on TV if McDonald's (MCD -0.05%) accepts Dogecoin." This cheered investors and longtime Dogecoin enthusiasts. With Musk backing Dogecoin, the logic goes, the meme coin should be unstoppable. But just how accurate is that logic?
Elon Musk and the Happy Meal challenge
In many ways, the Happy Meal challenge, first issued almost exactly one year ago, perfectly symbolizes the meme coin phenomenon. Get a famous celebrity to express support or admiration for a particular coin, use that as a marketing or publicity stunt to generate buzz and awareness, and watch the coin go to the moon based on nothing more than speculation and hype.
Image source: Getty Images.
Yes, if McDonald's ever accepted Dogecoin, it might be a big deal. But as we saw in 2022, the chances of that happening are slim to none. When Musk first issued the Happy Meal challenge, the response from McDonald's via Twitter was playful yet dismissive: "Only if Tesla (TSLA 12.06%) accepts Grimacecoin." The tweet included an image of the purple, rotund Grimace character, who is the best friend of Ronald McDonald, on a coin. The message was clear: "If you want us to accept your meme coin for our burgers, then let our customers pay for your Tesla cars with our own meme coin."
If you had speculated on the future price of Dogecoin based on the original Happy Meal challenge, you'd be disappointed. A $100 investment in Dogecoin at the time of Musk's original tweet would be worth about $60 today. In comparison, a $100 investment in McDonald's at the same time would be up 7.9%, for a gain of $7.90. That's not a lot, but it is enough to buy a Happy Meal.
Is Dogecoin ever going to integrate with Twitter?
If a promotional tweet from Musk isn't enough to move the price of Dogecoin, there's still a chance that a Twitter integration of Dogecoin as a payment option could move the needle, right? Again, you'd be disappointed. Take, for example, the new Twitter Coins project, which Twitter is promoting as a way to reward content creators. As investors found out this month, Twitter Coins is not going to feature Dogecoin. Instead, Twitter is going to use Stripe as the payment provider for the project.
Or, for example, take Musk's recent announcement that Twitter will soon launch a new payment feature for things like subscriptions and purchases made via the social media platform. For months, the speculation had been that this payment feature would prominently highlight Dogecoin. But, as Musk himself pointed out, the primary focus, for now, will be fiat currencies, not cryptocurrencies. So, even if Twitter decides to integrate Dogecoin at some point, it's not happening anytime soon.
Is there a real catalyst for Dogecoin?
Right now, Dogecoin needs more than just the support of Musk. It needs a better roadmap for the future. As it stands now, Dogecoin is doing little to build utility and value. Plans to convert from a proof-of-work blockchain to a proof-of-stake blockchain -- a move that Vitalik Buterin of Ethereum (ETH -4.50%) championed back in September -- have apparently been tabled. Moreover, there are no immediate plans to make the Dogecoin blockchain smart contract-compatible, which means there is no way Dogecoin can ever get involved in some of the most promising areas of the crypto world, such as non-fungible tokens (NFTs) and decentralized finance (DeFi).
As a result, I'm not convinced there's enough to boost the long-term value of Dogecoin, especially when compared to what other meme coins, such as Shiba Inu (SHIB -7.87%), are doing to boost value. Shiba Inu, for example, is getting ready to launch a Layer 2 scaling solution called Shibarium. It is also working overtime on new coin-burning initiatives to remove millions of Shiba Inu coins from circulation.
For that reason, I'm avoiding Dogecoin. Given my enormous respect for Musk, I'm willing to change my mind in the future, but for now, I'm very skeptical about Dogecoin. I just don't see any fundamental catalysts to boost the value of this meme coin.
