In the spring of 2021, meme-stock mania had taken over not only stocks, but the crypto market as well. Dogecoin's (DOGE -3.64%) price was going bonkers.
Today, it's the spring of 2024. The dog-themed cryptocurrency sits 74% below its all-time high (as of Monday, March 25), as investor interest has cooled off dramatically. But some of Dogecoin's strongest supporters are hoping that it can not only get back to its previous high-water mark, but exceed it and reach that coveted $1 per coin.
Can Dogecoin achieve this? Yes, it can, but only if one important thing happens.
Following in Bitcoin's footsteps
Dogecoin was created in 2013 to be a lighthearted version of Bitcoin. It operates on its own blockchain -- a tweaked version of Bitcoin's code -- and has its own crypto coin that's meant to help facilitate transactions. Dogecoin's main uses, then, are as a payments network and a store of value.
Should Dogecoin become more like Bitcoin, following in the bigger cryptocurrency's exact path, reaching $1 should be no problem. But what needs to change?
Dogecoin has an abundant supply. There are 144 billion coins in circulation, a figure that increases by 10,000 every minute with no maximum supply. If developers can figure out a way to stop creating new coins, while also burning sizable amounts of existing ones, Dogecoin can become significantly scarcer. That can help support a higher price.
The Securities and Exchange Commission (SEC) has hinted that every crypto besides Bitcoin is basically a security. This is viewed unfavorably because it would raise the regulatory requirements of a digital coin or token. If lawmakers came out and said Dogecoin wasn't a security, demand should rise because it wouldn't be as risky to own it from a regulatory perspective.
Dogecoin will also benefit if it finds itself in the portfolios of institutional investors, on the balance sheets of corporations, and in the holdings of government reserves. Bitcoin already has this type of standing. Given the massive amounts of capital these entities represent, it could drive Dogecoin's price to new heights.
It's best to lower your expectations
There is a clear path for Dogecoin to rise sixfold to get to $1 per coin. All it has to do is make progress toward greater adoption in the way Bitcoin has.
That might give Dogecoin bulls reason to be optimistic, but we have to try and assess the probability of this actually happening. To be frank, I believe there's close to zero chance Dogecoin accomplishes those things and reaches $1.
For one thing, it's strikingly clear that Dogecoin is losing significant interest from the investor community. Google Trends data shows that searches for "Dogecoin" are at about 3% of what they were during meme craze of three years ago. And this is during a raging bull market for the crypto industry.
In fact, the capitalization of the entire crypto market is at $2.5 trillion now (as of March 22), as it tries to approach a new record. But during all of this bullish sentiment, Dogecoin's performance has lagged the overall market since the start of 2023. One of the most speculative blockchain coins is underperforming the asset class, which clearly isn't an encouraging trend.
It's silly to expect Dogecoin's trajectory to mimic that of Bitcoin. Bitcoin has a first-mover advantage and deeper and more powerful network effects. The market is fully aware of its clear edge over Dogecoin. So, while Dogecoin might have random moments of hype and speculative behavior that can push up the price in short bursts, long-term capital is set to continue flocking to Bitcoin.
If you're hoping Dogecoin can reach $1, it's smart to seriously lower your expectations. If the meme coin ever reaches that pinnacle, it'll be many years from now.
