Dogecoin is an intriguing story on its own. It was created as a meme coin with no serious intention, back in 2013.
Both the name and the renowned Shiba Inu logo are based on the meme. Dogecoin differs from Bitcoin in the fact that it is infinite in number – 10,000 coins are mined every minute and more than 5 billion coins every year.
For most of its existence, Dogecoin was not very well known. However, from April 2021 it underwent a rally that made it among the top ten biggest cryptocurrencies by trading volume.
Although each Dogecoin is just worth pennies, the overall value topped $50 billion?
Will Dogecoin Will Fail?
Here are the following reasons why it is predicted that Dogecoin will fail in the long term:
1. It Is An Inflationary Currency
There is just too much Dogecoin around. Although there are billions of Dogecoin being held by people, there are more than 5 billion coins added just to each other.
Since there is not enough demand at all, even at the peak to buy Dogecoin, the price has to come down eventually and fail.
2. Non-acceptance Of Dogecoin
The coin is far from being even thought of used for commercial purposes. Although the coin is popular on social media, Reddit, and other trend-setting sites, businesses have strayed far from accepting it as a mode of payment.
Even now, Bitcoin and Ethereum are the most preferred cryptocurrencies by businesses.
3. Lack Of Institutional Backing
The reason why Bitcoin and Ethereum are among the top cryptocurrencies in the world is not just because of their use case, execution, or the team.
But a large part of it is thanks to institutional backing which involves a large sum of investments from multinational corporations.
Companies and rich individuals invest in cryptocurrencies in millions of dollars, which significantly impacts how the currency performs.
A lot of these institutional investors are staying away from Dogecoin due to a lack of use cases.
4. Not Very Decentralized
One reason for the popularity of cryptocurrency is its decentralized nature. The degree of decentralization is measured through the number of network nodes.
A node can be thought of as a computer that is connected to a network that verifies the transactions in the blockchain, thus keeping it secure. Dogecoin just has around 800 nodes at the time of writing, compared to Bitcoin which has 12000 nodes and growing.
5. Transactions Have Been On The Decline
This provides even more evidence that Dogecoin is just hype. During its peak of 2020 end and early 2021, it had around 35,000 to 55,000 daily transactions.
But towards the end of 2021, the average came down to just over 20,000 transactions every day. To put into perspective, Visa processes 24,000 transactions per second.
6. No Competitive Advantage
Let’s get it right – it’s not hard to create a cryptocurrency network and a coin. The difficult part is to make it popular.
There are 1000s of coins existing currently but we all know only a few. There is nothing special in Dogecoin apart from it being a meme-worthy coin, to have any sort of competitive advantage over other coins.
Even the tweets of Elon Musk did not have any factual reasons as to why Doge is the future. Looking at what it brings to the table at least – there is no future for Doge.
7. Friction From The Government
Crypto investors and enthusiasts argue that Dogecoin should be treated as a form of everyday currency rather than a tool to invest in.
Even if it is true, it is highly unlikely for countries to accept Dogecoin or any other cryptocurrency for that matter to replace or be accepted along with the local fiat currency.
For example, China has made it clear that it does not want any cryptocurrency interference with its Yuan which is, of course, backed by the Government.
Many such countries, big and small may not allow or even completely ban cryptocurrencies because the government won’t have control over it.
8. No Substantial Reasons To Support
Yes, there is some demand for Dogecoin agreed but it is more of a FOMO and nothing else.
The majority of Dogecoin is not bought for serious, commercial, or investment purposes.
The users do not believe in the project and note that Dogecoin also does not support NFTs which are seriously attracting interest from new crypto users.
9. Bubbles Burst Eventually
It’s not hard to think that all bubbles have to eventually burst. Trends do not last forever and neither does Dogecoin.
At the time of writing, cryptocurrency is going on a downslide and the value of Dogecoin has further slipped.
Being an extremely competitive space already, cryptocurrencies can make it only if they provide some significant value and use case which sadly, the Doge does not.
10. Issue With Branding
Here’s the absurd part – we all know Dogecoin was created with the intention of mocking Bitcoin, however, even the creators believe that while blockchain is an amazing technology, cryptocurrency is not a very good idea.
This makes a lot of cryptocurrency purists within the industry dislike Dogecoin.
They have been propagating that the coin was started as a joke, and should be treated like that. Serious investors and traders in the cryptocurrency world, avoid this coin.
Will Dogecoin Go Beyond $1?
Highly unlikely. The best-case scenario is Dogecoin crossing $1, but anything beyond that requires the currency to have an insane amount of market capitalization.
To put into perspective, Bitcoin has a market cap of $930 million and Ethereum has roughly $400 million.
If the Dogecoin has to reach $10 (keeping in mind 5 billion coins that are newly mined every year), then the market cap of Dogecoin has to be bigger than Bitcoin and Ethereum combined. This is almost impossible.
According to some other estimations, if Dogecoin has to cross $100 or even $1000 in value, then the market cap has to be bigger than the GDP of the largest countries in the world (China, USA, India, etc.)!
The numbers just do not make sense, therefore, it is highly likely, Dogecoin will stay where it is or just decline over time.
Should You Invest In Dogecoin?
The reason for investment depends on your objective from it, the funds you want to put in, and the situation of the market at the time of investment.
If you are looking to earn significant monetary benefits from Dogecoin, then it seems impossible.
The value of the currency will always remain low and many experts even believe it will never reach beyond $1.
Do remember that the coin was just created to mock the concept of Bitcoin and because of which it is extremely volatile and becomes a victim of random movements in the market.
Allocating funds for the long-term in Doge is not recommended. However, you can play bets on short-term spikes and dips and get the rush but even then the profits may be too low to make any sense as an investor.
Conclusion
Dogecoin will eventually fail. Unless the active community strategizes a way to keep the coin stable, attract governmental and institutional investment, the coin will just exist for fun.
If you are planning to invest in Dogecoin and other cryptocurrencies, please be mindful of the risk and volatility.
