Dogecoin (DOGE +1.87%) is one of the most popular meme coins in the crypto world, often getting a boost from Tesla Chief Executive Officer Elon Musk, who pumps up the digital currency either directly or indirectly, normally via social media. Dogecoin investors initially reacted positively to news that Donald Trump won last year's election, especially given Musk's close relationship with the new president.
One of the biggest changes involving the government this year was the creation of the initiative called the Department of Government Efficiency -- which is often referred by its acronym, DOGE, not unlike how people refer to Dogecoin. And Musk has played a key role in the project. But the launch of DOGE hasn't resulted in a boost for Dogecoin. Instead, the opposite has happened.
CRYPTO: DOGE
Key Data Points
Dogecoin has been in a free fall this year
On Jan. 20, as part of one of President Trump's initial executive orders, he announced the United States Digital Service would be reorganized and renamed as the United States DOGE Service.
Since the beginning, Musk has played a big role in DOGE, often pushing through aggressive cost-cutting initiatives. And while DOGE's goal is to cut costs, many people haven't been happy with it, to say the least. There have been protests across the country with people rallying against Musk's and Trump's controversial policies. Vandals have also been targeting Tesla dealerships and vehicles, and Tesla's sales have plunged.
Dogecoin hasn't benefited from the launch of DOGE, either. On Jan. 19, the cryptocurrency finished the trading day at about $0.36, and it proceeded to fall by as much as 55% since then. Despite Musk's prominent role with DOGE and close association with Trump, that hasn't had a positive effect on the meme coin at all.
Why DOGE may not be all to blame for Dogecoin's struggles
There's a lot of negativity due to DOGE and its drastic cuts but the bad press surrounding the initiative isn't likely all to blame for Dogecoin's poor performance this year.
Investors have been growing concerned about the economy in light of tariffs and a possible recession. Even Bitcoin, which is often seen as the safest cryptocurrency to own, declined in value at one point during the year, falling as much as 18%, proving that digital currencies may not provide much safety amid such uncertainty. Meme coins like Dogecoin may be even more vulnerable to sharp declines.
Plus, the launch of Trump's own meme coin this year also made some crypto enthusiasts question whether the new president would indeed help the crypto world gain legitimacy under his administration.
On top of all this, there's also the issue that Dogecoin went on a big rally after the election. Before Election Day, it was trading at around $0.16. The digital currency has effectively given back the gains it amassed in the weeks since then. And so while it may seem like a huge sell-off, the decline may not have been nearly as large if Dogecoin didn't rise so quickly late last year.
Is Dogecoin worth buying right now?
Dogecoin is a meme coin and there's always going to be high risk and volatility associated with it. Although its price has dropped, that doesn't mean that it's due for a big rally anytime soon.
If anything, the cryptocurrency's wild swings during the past six months should serve as a reminder to investors just what kind of a roller-coaster ride you can end up on by holding such an unpredictable investment in your portfolio. If you're bullish on crypto and want exposure to it, a much safer option probably is simply buying and holding Bitcoin.
