Dogecoin (DOGE +3.91%) just got exposure to what might become a strong new tailwind. While it will take at least a few months for it to develop, it could provide the king of the meme coins with some additional liquidity, and that could send the price higher for quite some time, under the best of conditions.
But does this new possibility make the token worth investing in for those who don't already hold some? Let's investigate what's going on and whether it changes the picture.
CRYPTO: DOGE
Key Data Points
This new investment vehicle might allow more cash to flow in
Cryptocurrencies tend to flourish when they have plenty of fresh capital flowing in from new buyers. It's obvious that injecting new money into an asset causes the price to rise.
In that vein, Dogecoin has been around for years now. The investors who wanted to buy it and hold it have had many opportunities to do so, both when prices were low, as well as during periods like right now, when prices are elevated. Still, it's a bit complicated to invest in the coin compared to something like a stock, which may be preventing some investors from buying.
Providing those potential investors with a new avenue for investing within the confines of the traditional financial system could be a way for Dogecoin's price to continue rising.
And that's exactly what several asset managers that issue exchange-traded funds (ETFs) have sought to do with it.
According to a series of regulatory filings in late January, businesses including Osprey Funds and Bitwise Asset Management want to create Dogecoin ETFs, making it possible for investors with traditional financial accounts to easily buy an asset that matches the price action of the cryptocurrency. Now, a number of technical hurdles make it challenging for these investors to buy Dogecoin.
These firm also filed for permission to offer ETFs for other major meme coins, like Bonk and the Official Trump meme coin that's currently hosted on Solana with the ticker $TRUMP.
But, assuming the Dogecoin ETF is approved by regulators at the Securities and Exchange Commission (SEC), will it matter for investors?
The "fundamentals" are going to stay the same here
There's no avoiding the fact that a potential approval of a new ETF could be a tailwind for Dogecoin.
Most people have more money in their retirement accounts and brokerage accounts than they do in their cryptocurrency wallets, assuming they directly hold any crypto at all. Weakening some of the walls preventing money from flowing between those different places will probably result in a bit more money going into the cryptocurrencies in question.
That doesn't mean Dogecoin is going to the moon again. Nor does it change anything about the fact that it's a speculative meme coin with relatively unpredictable price action in any given period.
This is not an investment to dabble in until you have properly diversified your portfolio and attended to your (vastly) more important financial goals like building an emergency fund and paying down debt with high interest rates. Nor is it suitable for short-term holding, as it would be much too close to gambling for a serious investor to approach.
Nevertheless, if the ETFs gain approval, it would contribute to the investment thesis for Dogecoin. Though the asset lacks fundamentals to determine its fair market value with any measure of confidence, after surviving for more than 10 years, it's clear that this meme coin isn't going to go to zero, even if it could easily lose 80% of its value.
Furthermore, if more money can flow from traditional financial accounts into Dogecoin that could help to support a floor for the coin's price.
At present, the ETF should only factor into your decision as a potential bonus that could drive prices a bit higher in the future, not as some ambrosia for the volatility and high risks that are associated with investing in any meme coin.
Therefore, if you are desperate to get some exposure to meme coins, it is acceptable to invest a very small portion of your portfolio in Dogecoin, provided that you have already comprehensively covered the more important financial objectives described above.
Remember: If you're not willing to hold on to your Dogecoin for a few years, an ETF isn't going to be much help though it might make it a bit more convenient for you to keep track of -- if it gets approved.
