Should You Buy Dogecoin While It's Under $1?

However, the move was based entirely on speculation, and Dogecoin soon plummeted. Musk tried to support the community by accepting Dogecoin for certain items of merchandise at Tesla near the end of 2021, but it wasn’t enough to stop a 92% plunge by mid-2022.

Simply put, it’s almost impossible for cryptocurrencies like Dogecoin to maintain their value unless investors view them as true stores of value (like Bitcoin), or unless consumers and businesses use them in transactions. Dogecoin still hasn’t reclaimed its 2021 high, and just 2,503 merchants accept Dogecoin as payment worldwide (according to Cryptwerk), so the meme token isn’t ticking either of those boxes.

Based on Dogecoin’s current price per token of $0.44 and its total supply of 147.1 billion tokens, it currently has a market capitalization of $64 billion.

Simple math suggests that a price per token of $1 would give Dogecoin a market capitalization of $147.1 billion. That isn’t entirely impossible considering Bitcoin now has a market cap of $2 trillion.

Bitcoin has better fundamentals because it has a fixed supply, whereas new Dogecoins can technically be minted indefinitely. Plus, the SEC has approved dozens of Bitcoin exchange-traded funds (ETFs) this year, giving financial advisors and institutional investors a safer, regulated way to invest in the cryptocurrency.

However, it’s still just a vehicle for speculation — investors buy Bitcoin in the hopes it will trade at a higher price in the future, not because it produces earnings or has any intrinsic value.

Since the Trump administration is likely to be a friend to the crypto industry for the next four years, it isn’t outside the realm of possibility that Dogecoin blows past its previous all-time high of $0.73 and hits $1 in the near future. However, I think it will be a replay of 2021, so a steep plunge of more than 90% will probably follow eventually.

Dogecoin simply doesn’t have any real fundamentals to sustain its value over the long term, and since more tokens are constantly being minted, that supply will constantly eat away at the price per token. Investors should definitely be careful buying it here.

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Tesla. The Motley Fool has a disclosure policy.

Should You Buy Dogecoin While It’s Under $1? was originally published by The Motley Fool