Should you buy Dogecoin? Is DOGE a good investment?

Should you buy Dogecoin?

This is a question on which you will have to make up your own mind once you have read this guide. Later on, we will take a detailed look at the factors that could make Dogecoin a good investment, but it is beneficial to do your own research as well.

Dogecoin is a memecoin that was introduced as a tipping system on platforms such as Twitter and Reddit. Users could reward each other for the content they created or shared by giving some DOGE, with the low price of the coin making it ideal for tips.

It is a Proof of Work cryptocurrency that was forked from Litecoin in 2013 and is secured by a network of miners. It was created to be a light-hearted and humorous cryptocurrency, but thanks to social media hype, celebrity endorsements, and an enthusiastic community, Dogecoin has gained much broader acceptance and is now seen by many as a serious investment.

Before deciding whether you should buy DOGE, it is also wise to consider factors such as when and how much to buy, as well as how your aims, experience, and finances might affect your investment decisions. We’ll discuss these factors later.

Is Dogecoin a good investment?

You will have to come to your own conclusion about whether or not Dogecoin is a good investment. We will help you in this decision-making process by going through some of the factors you may want to consider.

Any asset should have strong fundamental value in order to be classed as a good investment. There are many who believe that memecoins like DOGE don’t have any fundamental value. However, as well as the utility of Dogecoin, the strength and activity of its development team could point to strong fundamentals.

The Dogecoin Foundation was relaunched in 2021, comprising founder Billy Markus, developer Max Keller, Ethereum founder Vitalik Buterin, and a representative of Elon Musk. In addition to revamping Dogecoin’s websites, the Dogecoin team are launching a C-library to make it easier for developers to build Dogecoin-compliant products and an API to make it easier for platforms to accept DOGE payments.

It is also a good idea to consider what may affect the supply and demand of DOGE in the future, as these factors will determine its price. The DOGE supply is unlimited and increases with each block. Meanwhile, demand for DOGE comes from investors and people wanting to use it for payments. This demand can spike when Dogecoin receives social media attention or endorsements from celebrities such as Elon Musk.

Reasons to invest in Dogecoin

Price potential

Dogecoin has already shown it is capable of significant price appreciation, even more so than other popular cryptocurrencies. After starting 2021 worth about half a cent, DOGE surged by around 15,000% to peak above $0.70 in May of that year.

This means that someone who invested just $10 in Dogecoin at the start of 2021 could have sold their DOGE for a profit of about $1,400 just a few months later. The continued popularity of Dogecoin means that it has the potential to make more big price surges in the future.

These surges are often driven by hype. A coordinated social media campaign, like we have seen in the past, could drive up DOGE’s price in the future. Mark Cuban, Snoop Dogg, and Gene Simmons have already voiced support for Dogecoin, and further celebrity endorsements could have a strong effect on its future price. A single tweet from Elon Musk could potentially send DOGE’s value soaring.

Community

One of the attractions of investing in Dogecoin is that you can join a large, vibrant, and enthusiastic community of other Dogecoin holders, sometimes referred to as the “Doge army”.

This is one of the more fun crypto communities to be a part of. They are very active on social media sites such as Twitter and Reddit, often sharing jokes, memes, advice, and encouragement with each other.

As well as providing a source of support and amusement to each other, the Dogecoin community can be a powerful driver of DOGE’s value. In 2020, supporters of Dogecoin started a TikTok trend to attract new investors, and the price of DOGE more than doubled over the course of a couple of days.

Utility

Dogecoin aims to be the “currency of the people”, and the speed and low cost of transactions mean that it is much more suited to making payments than Bitcoin. This is what enabled Dogecoin to find utility as a tipping currency on sites such as Twitter and Reddit.

The Dogecoin community have found uses for the coin in a diverse range of projects. These include sponsoring Nascar drivers, funding Olympic athletes, and providing clean drinking water in Kenya.

DOGE holders don’t necessarily need to sell their coins, as there is a growing number of companies that accept Dogecoin payments, such as Tesla, AMC Theaters, GameStop, and Twitch. This number is only likely to increase as Dogecoin developers make it even easier for companies to integrate Dogecoin payments.

Accessibility

Dogecoin aims to be a welcoming currency that anyone can use, regardless of wealth, background, or experience. This differentiates it from traditional financial markets that may have minimum entry requirements when it comes to skills, experience, and capital.

There is no need to master a complex brokerage platform if you want to invest in Dogecoin. Anyone can sign up to an easy-to-use platform like eToro or Coinbase to buy DOGE in a matter of seconds.

You don’t need much money to invest in Dogecoin, as it has a low price per coin and is fractional, so you don’t need to purchase a whole number of coins. You can also trade it on a crypto platform at any time of the day or night, rather than being constrained to the trading hours of a brokerage platform.

Decentralisation

Dogecoin is dubbed “the people’s cryptocurrency” and aims to be a welcoming community that anyone can join. The project is open source and runs on a peer-to-peer network, so anyone can participate and send value to anyone else.

The Dogecoin network is run by people, rather than a central authority, as anyone can become a miner. This means that no one has the power to shut down Dogecoin, and there are no intermediaries such as banks or governments, making the process slower or more expensive.

The records of Dogecoin transactions and tokens are public, so anyone can access them. This information is stored and maintained by a network of computers, and the decentralised system is highly secure as there is no single point of failure.

Reasons not to invest in Dogecoin

Volatility

All cryptocurrencies are much more volatile than assets in traditional financial markets. Crypto investors will need a higher risk tolerance as prices can suddenly surge or crash without warning.

Dogecoin is even more volatile than many other cryptocurrencies, as its value is largely driven by hype. For example, after Dogecoin’s peak in 2021, its price crashed by more than 50% within the space of five days.

These sudden and dramatic price changes can be offputting for new investors, and watching them happen in real time can cause anxiety. You should study the price history of DOGE before investing so that you are prepared for the volatility. It is also wise to have an investment plan you can stick to and never invest more than you can afford to lose.

Uncapped supply

As price is dictated by the balance between supply and demand, it is a good idea to think about how these factors will change in the future when deciding whether an asset is worth investing in for the short or long term.

DOGE doesn’t have a capped maximum supply, as 10,000 DOGE are added to the supply every block to provide mining rewards. There are no plans to stop or reduce this, so the number of DOGE could increase forever.

This sets Dogecoin apart from Bitcoin, which is seen as a strong store of value because of its capped supply. The inflation of DOGE applies downward pressure on its price. This means that in order for DOGE to appreciate in value over time, demand for the coin must increase at a greater rate than its supply.

Risk of losing it

Regulators are still playing catch-up when it comes to crypto, so the risks of losing your investment are higher than in traditional markets. There are many unregulated platforms around, and using one could put your funds at risk if it has poor security.

There are a variety of criminals that operate in the crypto space and could try to get their hands on your DOGE. This could be attempted either by hacking into your wallet or platform, or by trying to get hold of your password or private key through phishing emails.

A hardware wallet like Trezor or Ledger is the most secure place to store your DOGE, and you should never reveal your passwords or private keys to anyone. You should also keep the seed phrase for your wallet somewhere safe and consider backing it up, as it will be the only way to recover your wallet if you need to.

Finally, whenever sending your DOGE to another wallet, make sure that the address is correct and that you use the correct network. Otherwise, your coins could be lost forever.

What to know before buying Dogecoin

Where to buy Dogecoin

This is an important decision to make, and the safest option is to choose a regulated platform as they have high standards of security. A regulated platform will require you to complete a KYC process, so you will need to prove your identity by uploading a photo ID, and possibly provide some form of proof of address as well.

You’ll need to find the platform that best suits your needs, as they may offer different features, such as copy trading or derivatives trading. Crypto platforms also differ when it comes to fees, tools, and the number of cryptocurrencies available.

Diversifying your portfolio

Diversification is a key part of risk management. As we have discussed, the price of DOGE can drop suddenly and substantially, which could leave you with a significant unrealised loss if it’s the only asset you hold.

It could therefore be beneficial to spread your capital over a variety of investment assets. These could be other cryptocurrencies, especially ones from different sectors of the crypto space. You can diversify even further by allocating some of your capital to non-crypto investments.

Storing your Dogecoin

Before buying Dogecoin, you may want to consider where you are going to keep it afterwards. Free web wallets provided by crypto platforms are the most convenient option for traders and small investors. However, they are also the most vulnerable to hacking, which is why it is important to choose a regulated platform with strong security.

Long-term investors, especially those with large holdings, should consider using a hardware wallet like Trezor or Ledger, as they are the most secure. You will need to spend some money to acquire one, though. You can also download a software wallet on your computer or mobile, which is free and is in between a web wallet and a hardware wallet when it comes to security and convenience.

Is now a good time to buy Dogecoin?

If you are planning to dollar cost average into Dogecoin or invest for the long term, then you will believe that its value will ultimately rise, so the exact timing of your purchase isn’t too important. Traders and short-term investors, on the other hand, might aim to purchase DOGE when its price is about to rise. This could be affected by the factors discussed below.

Other cryptocurrencies

The price action of DOGE may be affected by the performance of other cryptocurrencies in the market. Bitcoin can have a significant impact on other cryptocurrencies as it has a huge market dominance.

The price of Bitcoin has so far seen huge surges to new all-time highs followed by significant crashes, and this happens roughly every four years. If we look at the crypto market as a whole, we see that most coins have also followed this pattern, including Dogecoin. A surge for Bitcoin, or the crypto market in general, could therefore precede a surge for DOGE.

Project developments

Upgrades and developments to Dogecoin could improve the cryptocurrency’s efficiency and utility, which could increase adoption. The Dogecoin Trailmap provides an overview of upcoming and ongoing projects, and the deployment of these projects could potentially lead to a rise in demand and, therefore, price.

On top of this, the Dogecoin community sometimes comes together for projects such as sponsoring Nascar drivers. Activities like this can raise awareness of Dogecoin in the mainstream press and so could cause an influx of new DOGE investors.

Social media

Social media has been a major driver of DOGE price changes in the past, more so than for many other cryptocurrencies. The Dogecoin community is very active on social media, and trends they start can influence price, such as the TikTok trend that caused a price spike in July 2020.

Celebrities mentioning Dogecoin on social media can also have an effect, particularly Elon Musk. His DOGE-related tweets have often caused a surge in interest in the cryptocurrency. Monitoring social media could therefore be a good way to anticipate price changes.

Is it too late to buy Dogecoin?

Following the huge crash in DOGE’s price in 2021, many would-be investors may feel that they’ve missed their opportunity to invest. However, there were similar crashes at the start of 2014 and 2018, and anyone who invested back then could clearly still have made huge profits in the following bull run.

Although no one can be totally certain what the future holds, Dogecoin’s price history shows a pattern of bull runs, so it would be reasonable to expect that this might happen again in the future.

Also, the nascent nature of the crypto market means that the vast majority of the population doesn’t own any DOGE, so you still have the chance to be a relatively early investor. This could be fruitful if Dogecoin achieves mass adoption in the future.

The constant innovation and growing acceptance of the crypto industry, coupled with the enthusiasm and project developments within the Dogecoin community, could suggest that DOGE still has strong price potential.

How much Dogecoin should you buy?

This is a question that needs to be answered on an individual basis as it depends on personal factors such as your financial situation, experience, and strategy.

Most importantly, you should only invest an amount you could afford to lose due to the volatility and risks associated with Dogecoin. You should make sure that the amount you invest leaves you with more than you need to cover living expenses. You should also take medium to long-term expenses into account, as you could end up needing to hold onto DOGE for years to achieve your profit goals.

New investors should consider starting by investing small amounts while they familiarise themselves with their platform and learn more about Dogecoin and investing.

When it comes to strategy, the easiest one to employ is a dollar cost averaging strategy. This would involve buying the same amount of DOGE at regular intervals regardless of price. You could decide to use a portion of your monthly income, for example, as long as it leaves you with more than enough to live on.

Other strategies may involve investing a certain percentage of your allocated capital whenever you get a certain signal from a technical indicator, like the relative strength index, for instance.

Final Thoughts

Whether or not you should buy Dogecoin is ultimately a decision you will need to make yourself, but this guide should provide you with the information you need to ascertain whether DOGE is the right investment for you.

We have covered aspects such as when to invest in Dogecoin, how much to buy, and where to store it. The first step of the investment process, though, is to sign up to an online crypto exchange. You can find some of the best options in the ‘Where to buy Dogecoin’ section and click on one to get started.