Glauber Contessoto bought a quarter-million dollars worth of $DOGE in February of 2021. Two months later, he was a cryptocurrency millionaire. The problem? That probably won’t happen to you.
It’s exciting to hear about people getting rich off of Dogecoin and other meme-inspired coins — and the currency itself isn’t a terrible method of payment. But anyone investing in $DOGE for the long haul might be in for a rude awakening, one that could cost them thousands.
By the end of this 6-minute guide, you’ll know exactly what the differences are between $DOGE and more traditional cryptocurrencies and why you should invest in one over the other. Let’s go!
What is cryptocurrency
Despite all the buzz about cryptocurrency in the public zeitgeist, many people are still a little confused about what it actually is — that’s completely understandable. Simply put, a cryptocurrency is a form of digital money.
Instead of being backed and operated by a central government or bank, cryptocurrency is decentralized. That means every transaction made with a given coin is recorded on a public database (or ledger) that is simultaneously updated on a global network of computers. We call that ledger technology “the blockchain”.
Recently, crypto has become popular as an investment vehicle — you can buy, sell, and trade cryptocurrencies like Bitcoin and Ethereum (even Dogecoin) the same way you would trade stocks or Forex.
What are meme coins vs. real coins?
Firstly, what is Dogecoin?
Dogecoin is a cryptocurrency first launched in 2013 to introduce people to blockchain technology and parody the other Bitcoin clones of the time. The ‘Doge’ mascot is a Shiba Inu dog that was a popular meme in the early days of the Internet.
The ‘internet’s favourite coin’ has been used to raise money for charitable causes, send the Jamaican bobsled team to the Olympics in 2014, and more. However, outside of Internet meme culture and fundraising, Dogecoin was not designed to solve any real-world problems. Dogecoin, and other meme coins like it, differ from the more traditional cryptocurrencies we’re used to in a few significant ways:
Dogecoin doesn’t explicitly solve real-world problems, so market dynamics, speculation, and public perception are almost entirely responsible for its price. In other words, the coin is worth whatever you’re willing to pay for it. In contrast, traditional cryptocurrencies solve specific problems or have real-world applications — Bitcoin is a store of value like gold, Ethereum can execute smart contracts, etc.
As blockchain networks improve and new applications arise, the price of their native cryptos may rise. Dogecoin may rise or fall based on what Elon Musk is tweeting on a given day.
Bitcoin is primarily referred to as digital gold because of its limited supply. There will only ever be 21 million Bitcoins in existence — a feature designed to limit inflation. In contrast, there is no limit to the number of Dogecoins that can be minted — 10,000 new ones are created every minute.
Compromising a blockchain network is virtually impossible. The level of computing power you would need is unheard of — that being said, the more nodes (computers running the blockchain) there are, the safer the network. Our favourite meme coin has just over 1,000 nodes, whereas Bitcoin has close to 8,000 worldwide.
The Pros and Cons of Investing in Dogecoin
Although it wasn’t designed to compete with the likes of Bitcoin and Ethereum, there are a few reasons you might want to buy Dogecoin (and some other reasons you might not):
- Low barrier to entry. Buying Dogecoin is very approachable, as it has been trading between $0.003 and $0.30 over the past year.
- Welcoming community. Community and goodwill are central to the Internet-native coin community, with some describing the coin’s motto as ‘Do Only Good Everyday’.
- Low fees. If you plan on using the coin as payment, you’ll enjoy fees that are typically less than 1 $DOGE.
- Very fast. In the same grain, $DOGE transactions usually take around 1 minute.
- Unstable. The entire crypto market is volatile, but $DOGE is especially so. One tweet from Elon Musk or Mark Cuban can send you reeling.
- Unrestricted market cap. Effectively, an infinite amount of Doge can be produced — scarcity will never be a factor to drive price up.
- Concentrated. 0.002% of $DOGE holders own over 60% of the supply, meaning investing is far riskier for smaller investors.
- No direct applications. $DOGE doesn’t solve problems like Litecoin, Bitcoin, or Ethereum.
The Pros and Cons of Investing in Traditional Cryptocurrency
If you’re more inclined towards $BTC, $ETH, $ADA, etc., you’ll be faced with a different set of benefits and drawbacks:
Traditional crypto advantages
- Solves real problems. Bitcoin hedges against inflation, Ethereum enables NFTs, and more. These applications give the coins extrinsic value.
- More predictable. Crypto applications can indicate coin performance. For example, if NFTs grow in popularity, Ethereum is more likely to rise.
- Market cap. Limits on the amount of Bitcoin that can exist tee it up for more long-term value investing.
- Distributed. Larger entities control around 30% of the $BTC supply, and smaller investors hold around 23%.
Traditional crypto disadvantages
- High barrier to entry. Crypto standards like Bitcoin and Ethereum are worth thousands of dollars, and you’d need more starting capital to see good returns.
- High fees. Since traditional crypto is more widely used and popular, transaction fees can be much higher.
- It can be slow. Ether transactions can take between 5 to 60 minutes to settle.
Don’t Buy Dogecoin You Can’t Afford to Lose
Dogecoin isn’t inherently a lousy cryptocurrency — it simply wasn’t designed to be an investment. Buying $DOGE for future returns like you would regular securities is no different than playing roulette. If you’re interested in crypto trading, explore a wide range of options before settling on a specific coin or strategy.
One program that’s been working for students is The Plan with Dan Hollings. In The Plan, you learn to leverage cryptocurrency trading bots that automatically buy low and sell high in small increments to make you money passively.
Curious to know more? Check it out HERE
Frequently Asked Questions
Is it good to invest in Dogecoin now?
Dogecoin is not a good coin for investment. If you’re an expert grid trader or are highly in tune with internet culture and news, you might be able to make some money off $DOGE. If you’d like to buy Dogecoin to be a part of the rich and welcoming community, then there has never been a better time!
Will Dogecoin reach $1?
Dogecoin might reach $1; it might not. Making any predictions would be pure speculation. Although there have been many motions in the space — Musk’s approval, Mark Cuban’s adoption of the coin — its unlimited supply and volatility make it difficult to forecast its value.
Will Dogecoin make me rich?
Statistically speaking, $DOGE will probably not make you rich if you hold it long-term. That’s not to say it won’t, but forecasting the value of $DOGE is highly speculative. If you’re looking for short-term gains, day trading could potentially make you some money but at a high level of risk.