The past few months haven’t been the best for cryptocurrencies, as the market value of the asset class has dropped by roughly a third since November and now sits at about $2 trillion. Investors are taking a risk-off approach to their portfolios, something we’ve generally seen in the stock market as well.
Within the realm of digital assets, popular meme coin Dogecoin (CRYPTO: DOGE) has experienced a dramatic price crash after it hit an all-time high of just under $0.74 last May. The dog-inspired token is now trading hands at about $0.13, which could be an attractive entry point for speculators who think it could skyrocket.
But I’m here to temper your expectations. Let’s dive into three key reasons why I believe Dogecoin will not reach $1 per token.
Image source: Getty Images.
The excitement is fading
Created as a fun alternative to the world’s most valuable cryptocurrency, Bitcoin, Dogecoin remained largely under the radar until the meme-stock craze took over markets last spring. Add the publicly displayed interest from prominent businessmen like Elon Musk and Mark Cuban, and Dogecoin had an astronomical run-up in the month of April last year.
But since then, DOGE has come crashing down. Cryptocurrencies, like certain pockets of the stock market, have become hotbeds for rampant speculation. Dogecoin’s price moves purely on hype and excitement from its followers, and this has faded with no sign of recovering.
Furthermore, headwinds that are buffeting the stock market, like inflation, interest rate hikes, and geopolitical turmoil, are pushing investors away from risky assets — a category Dogecoin definitely belongs in.
There’s no competitive edge
I don’t think there’s any doubt that the long-term viability of any cryptocurrency depends entirely on its promise of creating real-world utility. Bitcoin’s objective is to be a global internet-based currency that transcends borders and brings economic freedom to those who need it most. Ethereum, with its smart-contract functionality, is bringing forward a burgeoning ecosystem of decentralized applications.
Aside from being accepted as a method of payment at a ridiculously tiny number of merchants, Dogecoin lacks any serious competitive edge. Even its original two founders, Billy Markus and Jackson Palmer, stopped working on the network in 2015. If those closest to Dogecoin don’t believe in it, you shouldn’t either.
There are better blockchain projects out there with more developers working on them, making an investment in Dogecoin with the expectation of it hitting $1 per token nothing more than a gamble. That’s not how you want to treat your hard-earned capital.
The target valuation makes no sense
Imagine a scenario, no matter how farfetched, where DOGE gets to $1 per token. At this price, the entire network would be worth roughly $132 billion. This would make Dogecoin the third-most-valuable cryptocurrency in the world behind Bitcoin and Ethereum, based on the current valuations of the latter two networks.
Additionally, this situation would mean Dogecoin would be worth more than blue-chip companies like Block, Starbucks, and Target. If this sounds ludicrous, trust your gut. That seems incredibly unlikely. What’s more, there are numerous other meme tokens that speculators can bet on.
DOGE getting to $1 isn’t going to happen. Investors should look elsewhere for excitement.
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Neil Patel owns Bitcoin, Block, Inc., Ethereum, and Starbucks. The Motley Fool owns and recommends Bitcoin, Block, Inc., Ethereum, and Starbucks. The Motley Fool recommends the following options: short April 2022 $100 calls on Starbucks. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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