Dogecoin (DOGE +5.17%) was founded in 2013 by two friends who thought the cryptocurrency industry was taking itself too seriously. Inspired by the "Doge" meme that was spreading across the internet at the time, they created Dogecoin as a joke (in their own words).
Little did they know it would become one of the most valuable cryptocurrencies on Earth in 2021, reaching a peak valuation of around $90 billion. But it spiraled from there and lost more than 90% of its value by mid-2022. Unfortunately, Dogecoin has almost no real-world utility, and speculative frenzies never last. So it simply couldn't sustain its momentum.
But after spending all of 2023 and most of 2024 licking its wounds, Dogecoin found its footing again when Donald Trump won the recent presidential election in November, after campaigning on a series of pro-crypto policies. Moreover, his campaign was boosted by Elon Musk, a longtime supporter of Dogecoin.
In fact, the meme token ended 2024 with a gain of 251%, beating other top cryptocurrencies like Bitcoin, Ethereum, and XRP:
Dogecoin Price data by YCharts
Dogecoin's recent rally appears to have stalled for now, and its current price of $0.17 per token remains 76% below its 2021 peak. But with a crypto-friendly administration now in the White House, could this be the ultimate time to buy Dogecoin before it potentially soars to $1?
The Musk-Trump effect
On the campaign trail, President Trump vowed to make America the crypto capital of the world. Since taking office, he has signed an executive order to establish a strategic Bitcoin reserve within the government, in addition to a digital asset stockpile that could eventually hold cryptocurrencies other than Bitcoin.
Plus, the acting head of the Securities and Exchange Commission, who Trump appointed, has already started pausing the agency's active lawsuits against crypto giants like Binance and Coinbase. This is a step toward creating a much friendlier regulatory environment for the crypto industry, arming it with the freedom to potentially create new use cases to drive value for investors.
But Dogecoin investors received their own special surprise when President Trump established an external agency to help reduce wasteful spending in the government, and appointed Elon Musk to run it. It's called the Department of Government Efficiency, or DOGE for short, which is a nod to the cryptocurrency Musk once called his favorite: Dogecoin.
Musk has promoted Dogecoin often since 2019 by sharing memes and interacting with other enthusiasts on social media. He even participated in a Dogecoin-themed skit on Saturday Night Live on May 8, 2021, which happened to mark the token's peak price of $0.73. Simply put, investors realized Musk didn't have any concrete plans to support his banter, so they rushed for the exits -- driving the 90% decline through 2022 I mentioned earlier.
Last year's rally in Dogecoin appeared to be driven by the idea Musk's involvement in DOGE could create value for the meme token, but there has been no indication it will have any utility within the agency at all.
CRYPTO: DOGE
Key Data Points
Dogecoin's fundamental issues haven't disappeared
Dogecoin has two core issues: a lack of adoption, and practically unlimited supply. According to Cryptwerk, just 2,061 businesses around the world are willing to accept the token as payment for goods and services, and many of them are obscure providers of internet and crypto services, and even online gambling websites.
If consumers can't spend Dogecoin at their favorite stores, then they have no reason to own it. Without that adoption, the token will swing in value purely at the whims of speculative investors, making it practically impossible to sustain upward momentum over the long term.
On the supply front, there are 148.5 billion Dogecoin tokens in circulation. That figure will grow in perpetuity -- while there is a cap on how many new tokens can be "mined" each year, there is no end date, so supply is actually uncapped in reality. Since investors are steadily diluted as more time passes, it becomes extremely difficult for Dogecoin to maintain value. After all, I can't think of an asset with an infinite supply that generates steady returns.
Even Bitcoin has a capped supply of 21 million coins, and that scarcity is a key reason investors consider it a legitimate store of value.
Image source: Getty Images.
This could be 2022 all over again
Dogecoin's latest rally fizzled out in December at $0.47 per token, so it was still a long way from reclaiming its 2021 high of $0.73. Considering it has already plunged by 64% from its recent peak to trade at $0.17 as of this writing, investors might be feeling a sense of déjà vu.
Dogecoin's 2022 low point was $0.06, so it's much closer to reaching that level than its record high, let alone $1. Unless the community comes up with a new use case to drive real value over the long term, I think it's unlikely Dogecoin will ever reach that milestone.
As a result, investors might want to steer clear of this meme token.
