Popular meme coin Dogecoin (DOGE -4.02%) continues to underperform the crypto market, and is now up a meager 1% for the year. Dogecoin bulls, of course, will point to the meme coin's past history of explosive upside potential and argue that there's still time for Dogecoin to skyrocket.
But just how much longer are crypto investors willing to wait? There are three factors that should be of concern to anyone thinking about buying Dogecoin right now.
Lack of any growth catalysts
Perhaps the most frustrating thing about Dogecoin is that there are no immediate plans to make any fundamental changes to the way the Dogecoin blockchain works. This is going to limit any upside potential and it possibly explains why the price of Dogecoin has barely moved this year. By way of comparison, meme coin competitor Shiba Inu (SHIB -5.22%) is close to launching a new Layer-2 scaling solution called Shibarium that could dramatically increase the functionality of its blockchain, including the potential for new metaverse worlds and non-fungible tokens (NFTs). If Shiba Inu can do this, why can't Dogecoin?
Image source: Getty Images.
At the end of the day, Dogecoin offers very little utility until it can figure out ways to improve the functionality of its blockchain. There's a good reason you don't hear about "Dogecoin NFTs" or "Dogecoin decentralized apps" -- the current blockchain infrastructure doesn't support them. And speaking of the current blockchain infrastructure, there are still no concrete plans to transform Dogecoin from an old energy-intensive proof-of-work blockchain into a modern proof-of-stake blockchain. This despite assurances from Ethereum (ETH -0.96%) co-founder Vitalik Buterin that he would be more than happy to help out in such an endeavor, given his own blockchain's proof-of-stake transformation last year.
The Elon Musk factor
Secondly, Dogecoin just doesn't seem to be able to capitalize on its well-known relationship with billionaire Elon Musk. In the past, a playful tweet from Musk was enough to send the price of Dogecoin soaring. But this year, Musk has had to work harder and harder to get anyone to notice. He wore a Dogecoin T-shirt to the Super Bowl. He briefly swapped out the iconic Twitter bird logo for the Dogecoin dog mascot. And he continues to send out cryptic tweets, such as a recent one featuring an image of cartoon dog Scooby-Doo and a reference to Dogecoin.
The problem, quite frankly, is that Musk has been unwilling (or unable) to integrate Dogecoin into Twitter for crypto payments. The crypto market was rife with speculation that Dogecoin would be adopted as a payment system on Twitter as soon as reports surfaced about Musk's interest in buying the social media platform. Then, for the remainder of 2022, the market watched for signs that this much-ballyhooed integration was coming soon. But it hasn't happened, even as Musk continues to signal that crypto payments are coming to the platform soon. However, now that Musk is off on his latest venture, the artificial intelligence start-up xAI, his attention might be focused elsewhere.
Meme coin competition
Finally, it's important to consider Dogecoin's place within the meme coin universe. Back in 2013, when it first launched, Dogecoin was the only meme coin out there. And, as might be expected, it attracted a huge following because Dogecoin was the ultimate inside joke for the crypto industry. And that was largely the case until the launch of Shiba Inu in August 2020.
Since then, we've seen an explosion in the number of meme coins. And not just any meme coins, either, but dog-themed meme coins. If you go to a site like CoinMarketCap, it's possible to find dozens of meme coins with the word "Doge" in them. You can find meme coins featuring the Dogecoin mascot (the Shiba Inu dog). You can find meme coins featuring Musk's pet Shiba Inu. You can find meme coins featuring Musk, the Dogecoin mascot, and Mars. You get the idea -- meme coin world has gotten crowded.
Future prospects
Given all that, I think it's time to give up on Dogecoin. That's really a shame, because it is arguably one of the most unusual financial assets that has ever been created. But at some point, it's time to face reality. There are so many simple steps that Dogecoin could take to boost the value of the coin -- such as introducing a coin burning mechanism to reduce overall circulating supply. But it hasn't. If you're waiting for Elon Musk to send the price of Dogecoin soaring, it could be too late.
