For the year, meme coin Dogecoin (DOGE -1.96%) is down a dreadful 32%. That's easily the worst performance of any major cryptocurrency. By way of comparison, crypto bellwether Bitcoin (BTC -0.33%) is up 22% for the year, and recently hit an all-time high of $124,000 this summer.
So, how is it possible that Dogecoin still ranks among the top 10 cryptocurrencies in terms of market cap? And why is it that many investors still consider this meme coin to be a high upside cryptocurrency? The answer might surprise you.
Dogecoin coin supply
When it comes to Dogecoin, the one thing you need to know is that it has a massive circulating coin supply of 150.5 billion. Thus, even though it still trades for a price of less than a quarter ($0.21), it has a market cap of $31.5 billion.
Admittedly, that's an impressive number, which is why Dogecoin inevitably enters the conversation anytime investors start talking about potential high upside cryptocurrencies. Last year, for example, Dogecoin turned heads when it passed Ford Motor Co. (F 3.44%) and General Mills Inc. (GIS 0.66%) in terms of overall market cap.
But, at the end of the day, it's just math. A really big number multiplied by any number will still give you a really big number. When you multiply 150.5 billion by $0.21, you get $31.5 billion.
That's the reason why many new meme coins launch with spectacularly large coin supplies. This is necessary because their intrinsic value is close to zero, so they need coin supplies measured in the trillions (!) in order to move up the market cap ranking charts.
So, for example, the frog-themed meme coin Pepe (PEPE -4.37%) has a circulating coin supply of 420 trillion. And Shiba Inu (SHIB -2.32%) has a vertigo-inducing coin supply of 589 trillion. Thus, even though the prices of Pepe and Shiba Inu are as close to zero as you can possibly get, they still rank among the top 30 cryptocurrencies in the world.
Making things even more challenging for Dogecoin, its total lifetime coin supply is uncapped. It is growing over time, and has no final limit on how many coins can ever be created. In contrast, Bitcoin has a maximum lifetime coin supply of 21 million coins. That's hard-coded into the Bitcoin algorithm, and there's no way that anyone can change it. That's music to the ears of investors, who view Bitcoin as a potential safe store of value over time. They don't have to worry about its value being inflated away.
Surely, there must be value somewhere for Dogecoin?
This is not to say that Dogecoin is completely worthless. Even though it has limited real-world utility, it's possible to argue that it has some sort of intangible value from a marketing and branding perspective.
Image source: Getty Images.
All of the brand assets of the iconic DOGE dog avatar, if they were somehow packaged up and sold, would surely be worth something to someone. Billionaire Mark Cuban famously embraced Dogecoin in 2021, when he started to accept it as a form of payment for Dallas Mavericks NBA tickets and merch. But it was really just a marketing and branding play -- it was a way to attract a younger, crypto-savvy audience for basketball games.
The name DOGE, too, carries some value. Why else would billionaire Elon Musk name an entire government entity (Department of Government Efficiency) after this meme coin? The name "DOGE" acts as a dog whistle, suggesting a bit of fun, whimsy, and entertainment. And that, at the end of the day, is what all meme coins are about. There's nothing real supporting them, just an inflated coin supply and a bunch of hype, buzz, and speculation.
Should you buy Dogecoin?
It's hard to recommend any meme coin for a long-term portfolio, and that includes Dogecoin. Consider, for a moment, that in more than a decade, Dogecoin has never, ever, ever traded higher than $1. And that's despite the high-level support of billionaires such as Elon Musk and Mark Cuban!
If you're looking for a cheap source of entertainment, buying some DOGE for your portfolio might be the answer. But, for now, I'm looking elsewhere for a good time.
