After cratering in 2022 as a result of rapidly rising interest rates and a risk-off sentiment from investors, the cryptocurrency market has bounced back this year. And this might draw renewed interest in the space.
Dogecoin, the eighth-most-valuable digital asset, surprisingly hasn't benefited from the broader market's rally. Its price is down 7% in 2023 (as of June 22). A reversal of this downtrend may be in the cards.
But if you're looking at buying Dogecoin for your portfolio in hopes of capturing huge gains, think again. I believe it's a much better idea to use that money to buy Bitcoin instead. Here's why this is a no-brainer decision.
Dogecoin lacks investment merits
In 2013, programmers Billy Markus and Jackson Palmer wanted to create a lighthearted and fun version of Bitcoin, so they launched Dogecoin. That was really the only purpose behind the dog-inspired meme token. Although its price is down 91% from its peak, Dogecoin has skyrocketed over 2,400% in the last five years, so it has probably made some investors extremely wealthy.
But Dogecoin was invented with no real-world utility in mind. And even after being in existence for a decade, it still hasn't found much in the way of mass adoption. According to cryptwerk.com, only 2,167 merchants worldwide accept payment in Dogecoin.
Moreover, it's clear that this token's price moves up and down based on various hype cycles. Two years ago, the Reddit-fueled craze that helped the share prices of GameStop and AMC Entertainment also trickled over to the crypto market. And tweets by Tesla founder and CEO Elon Musk can pump up the price in short order.
You can't time this kind of social media-powered activity, and trying to do so is not a good investment thesis.
Bitcoin as a store of value
As the world's first and largest cryptocurrency, Bitcoin's current market cap of $585 billion crushes that of any other digital asset. And this gives it critical network effects that the smaller Dogecoin can't compete with. In fact, Bitcoin's more-than-14-year existence proves that it can handle anything thrown its way, from major crypto firms blowing up to significant volatility. It's still here, and its price has soared 81% this year alone.
While some investors and economists might view Bitcoin as a potential global reserve currency in the future, its most promising investment trait right now centers on it becoming more popular as a store of value. Throughout history, gold has been thought of as the best store of value. But Bitcoin has properties that make it superior to the precious metal.
Bitcoin is easier to transport across vast distances, and it's easier to transact with. This is obvious because it's digital. Bitcoin can also be divided by up to eight decimal places. And most importantly, the supply of Bitcoin is absolutely finite, with a hard cap of 21 million coins built into the bitcoin network's source code.
While gold is valued for its use in jewelry and certain industrial and medical applications, gold's largest advantage, in my opinion, is that it has been used in some form as money or a store of value for thousands of years. Bitcoin can't compete with this lengthy history, but the digital asset should attract more interest from younger and more tech-savvy investors.
Potential catalyst
A huge dark cloud over the overall crypto industry is the threat of a regulatory crackdown. The Securities and Exchange Commission recently filed lawsuits against Binance and Coinbase for operating unregistered brokerages and exchanges. But while this adds a huge element of uncertainty, there is an encouraging development for Bitcoin in particular.
According to Reuters, the massive asset manager BlackRock has filed to launch a Bitcoin-focused exchange-traded fund (ETF). This is a clear indicator that a huge player in financial markets sees the opportunity to get aggressive as two crypto exchanges are under heat.
And this could prove to be a huge boon for Bitcoin's long-term adoption. If BlackRock gets approved for this ETF, it could open the floodgates for both retail and institutional investors to gain easy access to Bitcoin. A growing base of buyers will only push up the demand for this fixed-supply asset.
