Dogecoin (DOGE +2.19%) is one of the largest cryptocurrencies on the market today. At the same time, its price chart is prone to wild swings, often inspired by viral posts on social media platforms.
Is Dogecoin a solid investment for the long haul, despite its quirky design choices? Read on to see two Motley Fool contributors analyzing this all-important question on your behalf.
Dogecoin: Is a meme coin comeback possible?
Dominic Basulto (Dogecoin bull): Admittedly, Dogecoin hasn't done much since May 2021, when it hit an all-time high of $0.74. That coincided with the previous meme craze mania in the crypto market, when many investors thought they could become millionaires overnight.
That being said, Dogecoin remains the largest and most popular meme coin in the world, with a staggering $15.5 billion market cap. And it boasts something that no other cryptocurrency can: the support and endorsement of billionaire tech mogul Elon Musk.
3 bullish scenarios for Dogecoin
While Musk's support of Dogecoin has cooled since those heady days in 2021, when he appeared on NBC's Saturday Night Live as "The Dogefather," it's impossible to ignore his potential role in pushing Dogecoin higher. In fact, just about any bullish scenario involves his support in one capacity or another.
Image source: Getty Images.
For example, Musk could integrate Dogecoin into his social media platform X (formerly known as Twitter) as a preferred form of payment. That is an idea that has bounced around the internet ever since Musk acquired Twitter for $44 billion back in 2022. In this scenario, the platform's 600 million users would be able to use Dogecoin as a form of payment for subscriptions or advertising. That alone could spike the price of Dogecoin from its current value of $0.10 to $1, for a 10x return on your investment.
But think even bigger. What if Musk also makes Dogecoin a form of payment at his other companies, such as Tesla (TSLA +0.32%)? In May, Musk announced that he was bringing back Dogecoin as a form of payment for Tesla merchandise (but not Tesla cars), and that promptly resulted in a 20% bounce for Dogecoin.
And, finally, there's one Elon Musk scenario that could send Dogecoin to the moon. Literally. In discussing his plans for SpaceX, Elon Musk has mentioned the possibility of paying for future SpaceX missions with Dogecoin. Maybe on Mars one day, we'll all be paying with Dogecoin and not dollars.
Just keep in mind: Dogecoin has never once broken the $1 mark, and many hyped scenarios have never come to pass. But that's what makes meme coins so popular: They open up some interesting "what if" scenarios and make investing more fun.
CRYPTO: DOGE
Key Data Points
Dogecoin is too silly for its own good
Anders Bylund (Dogecoin bear): I'm sorry, but Dogecoin doesn't make sense in the long run. The meme coin has a history of sudden jumps and equally abrupt price drops, but Dogecoin wasn't built for sustained, wealth-building gains.
I'm talking about a tweaked version of Bitcoin (BTC +2.25%) here -- and the changes were never intended to make Dogecoin more valuable or help its owners. Launched as a cryptocurrency-mocking joke in 2013, Dogecoin copied Bitcoin's blockchain ledger technology in a roundabout way. The Litecoin (LTC +0.07%) cryptocurrency is a payment-oriented version of Bitcoin, and Dogecoin started out from that code base with a few additional changes.
That may not sound too bad. Dogecoin grabbed a Bitcoin version with faster transactions and took it to the next level. The transaction processing system processes a new block of data every minute, while Litecoin takes the same step in 2.5 minutes and Bitcoin drags its digital feet with a 10-minute block processing gap. Dogecoin also removed the hard supply side cap, leaving the door open for unlimited coin production. Wrapping that bundle of technical tweaks in a dog-themed marketing message turned out to be a winning strategy. The joke coin attracted a serious developer community and tons of social media hype. What's wrong with that?
So I get it. Dogecoin looks like a potentially useful cryptocurrency at first glance. But its benefits also come with serious downsides.
- Its chosen encryption system offers less security than Bitcoin's robust platform. Bullish investors like to point out that Dogecoin's mining algorithm uses less electric energy than Bitcoin's, but the heavy energy cost also makes Bitcoin's platform harder to hack. Researchers have found hackable vulnerabilities in its code, and it might just be a question of time before a bad actor figures out how to steal Dogecoin assets.
- There will never be more than 21 million Bitcoins or 84 million Litecoins. These limits protect investors against inflationary forces. Dogecoin removed that function, letting crypto miners create as many new coins as they want. The Dogecoin supply is rising by about 5 billion coins a year, adding up to 146 billion coins in circulation today. That inflation rate could soar at any time.
- The meme-based marketing has been effective so far, but it also makes Dogecoin more volatile. Newer and fresher meme coins can steal the social media spotlight from Dogecoin at the drop of a hat. Shiba Inu (SHIB +0.45%) did it in 2021. Floki (FLOKI +1.37%) and dogwifhat (WIF +0.00%) have undermined Dogecoin's popularity in 2024. The next dog-themed crypto fad might steal even more Doge enthusiasts for the long haul.
I'd much rather hold Bitcoin in my long-term investment portfolio and perhaps use Litecoin as a payment processing medium someday. There's no place for Dogecoin's deliberately flawed platform in the real world, no matter how often the meme coin is promoted by the stars of social media. This adorable crypto puppy is too risky for me.
