The cryptocurrency landscape looks very different today than it did at the height of the frenzy among investors in 2021. Back then, the vast majority of mainstream tokens were experiencing strong gains, whereas today, investors are being much more selective.
For example, industry leaders like Bitcoin and Ethereum are trading in the green in 2023 with gains of more than 50%, whereas speculative token Dogecoin is in the red and is down about 3%.
Dogecoin is still a favorite of some crypto enthusiasts, including Tesla (TSLA 0.34%) Chief Executive Officer Elon Musk, but not even he could stop the token from sliding more than 90% from its all-time high. So is it time to finally give up on the token for good?
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Dogecoin's use cases are scarce
Dogecoin isn't the only cryptocurrency token with this problem. Virtually none of them have established a clear, mainstream use case that could entice mass adoption by consumers and businesses. Without that, it becomes very difficult to sustain value because the only people who want to hold on to their tokens are those who believe someone will come along later and pay a higher price. In other words, speculators.
For example, a mere 2,163 merchants around the world accept Dogecoin as payment for goods and services. Keep in mind, there are an estimated 334 million registered businesses globally, so Dogecoin's penetration so far can barely be classified as a drop in the bucket.
One high-profile merchant, however, is Tesla. In early 2022, the company said it would start accepting Dogecoin as payment for merchandise (like clothing) in its online store. Plus, Musk has tried to support the token by accepting it for novelty products like the Burnt Hair fragrance he released under his Boring Company last year.
He has also been a vocal advocate for Dogecoin, regularly supporting it with bullish commentary on the Twitter social media platform and even on an episode of Saturday Night Live back in 2021 -- which happened to mark Dogecoin's peak price of $0.74 per token. It now trades for about $0.06, a decline of 91% from the peak.
Cryptocurrency sentiment might stand in the way of a Dogecoin resurrection
So far, nothing Musk has done has been enough to arrest Dogecoin's decline. That's probably because there are greater forces at play, namely the deteriorating sentiment toward cryptocurrencies among investors. It appeared to reach new lows in 2022 after a series of spectacular collapses in some of the industry's most popular projects and exchanges.
The TerraUSD stablecoin de-pegged and wiped $60 billion in value off the face of the Earth seemingly overnight. Then top crypto exchange FTX was caught commingling client funds with its own, and when it all unraveled, regulators were left chasing approximately $3 billion in missing customer funds. In both cases, the investors faced a full and complete loss with practically no recourse.
Now Binance -- the world's largest crypto exchange -- is being sued by the U.S. Securities and Exchange Commission (SEC) for operating a "web of deception," having allegedly committed similar offenses. It's part of a broader crackdown by the SEC to bring the cryptocurrency industry into compliance with the same rules and regulations that apply to other financial securities, which exist to protect investors.
It's little wonder trust is near an all-time low in the crypto sphere. Here's the problem for Dogecoin: Speculative tokens with no real use case could be among the last to recover from this challenging time for the industry -- if they ever recover at all.
If I were an investor holding Dogecoin, I'd be thinking about selling my tokens while they still have at least a little bit of value. There doesn't appear to be any catalyst on the horizon that would lead to a meaningful recovery.
