Written by Aditya Raghunath at The Motley Fool Canada
Dogecoin (CRYPTO: DOGE) It was one of the best performing cryptocurrencies in the first half of 2021. It gained over 12,000% of market capitalization in the first five months of 2021 but is currently trading below its all-time high of 80%. Despite the decline, the DOGE Token has gained a staggering 42,000% in the past eight years, valuing it with a market capitalization of US$20.32 billion.
Let’s see if Dogecoin can gain momentum in 2022 or if it will continue to track the broader markets this year.
Will Dogecoin reach $1?
If Dogecoin were to hit $1, the digital token would have to gain nearly 600%, which would be estimated to be over $130 billion. While cryptocurrencies are difficult to evaluate, you need to take a look at the real-world usefulness of their blockchain networks. for example. the Ethereum (CRYPTO: ETH) and Solana Blockchains (CRYPTO: SOL) allow you to create and execute smart contracts, while Dogecoin was created as a meme token.
Cryptwerk data shows that the DOGE token is accepted by less than 2,000 merchants globally, which is negligible given that there are more than 200 million companies worldwide.
Bitcoin (CRYPTO: BTC) has a first-mover advantage and remains the largest cryptocurrency in the world. Many publicly listed companies keep the BTC token on their balance sheets and are seen as an alternative tool for portfolio diversification.
By comparison, Dogecoin was launched back in 2013, making it one of the oldest cryptocurrencies, but its price movements are mainly influenced by celebrities like Elon Musk. So, a tweet from Musk may send the DOGE token higher, but those gains will also be reversed within a few trading sessions.
Instead, investors should note that Dogecoin is accepted as a form of payment to purchase certain items from Tesla Or to buy tickets from chain cinemas AMC Entertainment.
The DOGE symbol is a speculative bet
The total number of Bitcoin in circulation is limited to 21 million tokens, which makes it anti-inflationary in nature. However, there are already 130 billion DOGE tokens available for circulation, with this number increasing by five billion each year.
There are several catalysts that contributed to the excellent operation of the DOGE token in 2021. However, even after retreating 80% from its all-time high, Dogecoin’s valuation is very high and carries a significant investment risk.
Dogecoin is among the most searched cryptocurrencies in the world, but it does not have a competitive advantage that sets it apart from other digital tokens. Moreover, there are more than 15,000 cryptocurrencies in circulation, which means that blockchain networks must offer certain advantages that make them stand out from the crowd. While Dogecoin transaction fees are lower compared to Ethereum and Bitcoin, they are much higher than many other coins.
Data from Coinmarketcap.com indicates that 10 holders control 43% of all DOGE tokens in circulation, which can easily inflate their prices.
I bought $100 worth of Dogecoin back in September 2021 and prices have fallen 30% since then. For me, it is a purely speculative bet given the limited interest of the DOGE token and the volatility surrounding this asset class.
Post Should Dogecoin Be Part of Your Cryptocurrency Wallet in 2022? He debuted in The Motley Fool Canada.
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Foolish shareholder Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool owns and recommends Bitcoin and Ethereum. The Motley Fool recommends a Tesla.