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The first cryptocurrency to buy before it rises 150%, according to a well-known analyst
A closely followed crypto analyst believes that Dogecoin has a bright future.
Dogemoneta (DOGE -1.92%) has gone through some wild swings over the past three years. The cryptocurrency was launched in 2013 as a parody of Bitcoin (Bitcoin -0.42%) which takes its name from the Shiba Inu dog meme. It was worth just $0.01 at the start of 2021, but by May 8 of that year it had risen to a record high of $0.73.
That rally was driven by two main tailwinds. First, a mix of social media buzz, low interest rates and stimulus checks has sparked a buying frenzy of cryptocurrencies, meme stocks and other speculative investments in 2021. Second, celebrities like Elon Musk, Mark Cuban and Snoop Dogg jumped on the bandwagon. and promoted Dogecoin to their social media followers.
Image source: Getty Images.
But today Dogecoin is only worth around $0.16. Rising interest rates have driven investors away from speculative investments like cryptocurrencies, and many of the market’s smaller altcoins have collapsed as a new crypto winter begins.
Faced with these challenges, many investors may think it’s smarter to stick with “blue chip” cryptocurrencies like Bitcoin and Bitcoin. Ether. However, some investors believe that Dogecoin could still recover in the near future.
Altcoin Sherpa, the pseudonym of a closely followed crypto analyst with nearly 217,000 followers on investors could do right now. Let’s see if this outlook makes sense and whether investors should be more optimistic about this volatility memetic currency.
What is the bull case for Dogecoin?
Altcoin Sherpa’s bull thesis for Dogecoin is based on the belief that retail investors will buy it again, that it has great liquidity and low downside compared to other meme coins, and that it is more attractive than many of the smaller altcoins.
He also believes that one tweet from Elon Musk will be enough to “explode everything”. In the past, many of Musk’s tweets about Dogecoin, along with TeslaDogecoin’s acceptance of Dogecoin payments and the temporary change of Twitter’s logo to a Shiba Inu last year (before its rebranding to X) have driven up the price of the meme coin.
But Dogecoin has even fewer catalysts than other cryptocurrencies
Dogecoin may be more stable than other smaller altcoins, but it also has fewer long-term catalysts than Bitcoin and Ether. It is now accepted as a payment method in some businesses, but its volatile price still makes it more of a publicity stunt than a realistic payment option for most customers.
Regulators also don’t seem too impressed with Dogecoin. Last September, the New York State Department of Financial Services excluded Dogecoin from its “green list” of eight regulated cryptocurrencies, which include Bitcoin, Ether and six PayPal AND Twins. This exclusion suggests that this is still a highly speculative investment.
Furthermore, the Dogecoin blockchain platform cannot be used natively to develop decentralized applications. This is because it was originally forked from the Bitcoin blockchain, which does not support app development and uses the same energy-intensive proof-of-work (PoW) to mine its tokens.
In comparison, Ethereum, SolanaAND Cardan all use the most energy efficient proof of stake (PoS), which has been widely adopted for the development of decentralized apps and smaller tokens. Dogecoin supporters later launched Dogechain, a separate blockchain network to support Dogecoin-based apps, but it is not as widely used as other decentralized platforms.
There is also evidence that investors are simply losing interest in Musk’s views on Dogecoin. Last April, he randomly tweeted about his growing popularity, but his price didn’t move much. This waning interest contrasts with Altcoin Sherpa’s view that “all it takes” to lift Dogecoin would be another bullish tweet from Musk.
Investors should be skeptical about the future of Dogecoin
Dogecoin may have a better future than many of the smaller altcoins on the market, but I can’t say for sure that it will rise 150% in the near future. Interest rates are still high and the new Bitcoin ETFs and upcoming Ether ETFs could drive many investors away from smaller altcoins and meme coins even if the cryptocurrency winter ends.
So, instead of following pseudonymous crypto analysts with large social media audiences, investors should perform their own due diligence and understand that Dogecoin could easily experience a 50% drop in value before doubling or tripling in this challenging market.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Bitcoin, Cardano, Ethereum, PayPal, Solana, and Tesla. The Motley Fool recommends the following options: Short June 2024 $67.50 PayPal Calls. The Motley Fool has a disclosure policy.