Dogecoin has climbed its way up to the Top 10 besty-performing cryptocurrencies in the world. Spearheaded by its "champion," Tesla CEO Elon Musk, the coin has performed considerably well overall.
Should you invest in Dogecoin?
What Is Dogecoin and How Does it Work?
Dogecoin began as a joke back in 2013 when two software engineers, Billy Marcus and Jackson Palmer, created it and named the crypto after the Shiba Inu dog meme. It was made to poke fun at Bitcoin, the largest crypto in the market, Pat White, CEO of Bitwave told Forbes.
In July 2020, a viral video on TikTok urged people to invest $25 in Dogecoin, temporarily pushing the price from approximately $0.0028 to $1. The developers of Dogecoin then warned people in a tweet when the spike had trading volume increase by 1,900 percent.
Cut to 2021, Doge is now being backed by Musk and a few other notable figures like Mark Cuban and Snoop Dogg. Devoted fans of the meme-coin and of Musk then set off to take Dogecoin "to the moon" by raising its price in the market.
Now, Dogecoin is no longer joke and has gained more than 5,000 percent increase since its birth, Frobes said. According to its website, Dogecoin is an open source peer-to-peer digital currency. It runs on the blockchain technology similar to Bitcoin and Ethereum, the two largest crypto coins.
All holders carry an identical copy of the Dogecoin blockchain ledger and all the transactions made using the decentralized digital currency. Cryptography is used on the network to keep all transactions secure.
Miners of Dogecoin use computers to solve complex mathematical equations to process transactions and record them on the Deogecoin blockchain. Miners earn additional Dogecoin from this "proof of work" system which they can hold or sell in the open market.
To own Dogecoin, the buyer must own a wallet that syncs with the blockchain. MultiDoge and Dogecoin Core are the two wallets the website recommends.
To get some more Dogecoin, you can buy them, "mine" them like mentioned earlier, and trade them. You can also be tipped in Dogecoin for participating in the Doge community.
just gonna leave this right here ... pic.twitter.com/k1lUf0HnLR— Coinbase (@coinbase) June 3, 2021
Owners of Dogecoin can use the cryptocurrency for payments and purchases, but Forbes commented that it is not a very effective store of value. The reason for this is mainly beciase there is no lifetime cap on the number of Dogecoins being mined and created.
In theory, there is an infinite amount of Dogecoin available if miners just keep mining for them. The cryptocurrency is highly inflationary by design which makes it very challenging for speculative price gains in Dogecoin to hold up over time.
Is Dogecoin a Good Investment?
There is very little incentive to hold the coin for the long term because new Dogecoins are released onto the markets every single day. Dogecoin is really a "spending currency," and not so much an "investing" currency.
Dogecoin's success is fairly new, only seeing a rally in the last few months. This should not be assumed to be sustainable growth in the long term considering the volatile nature of cryptocurrencies as a whole.
Trading Dogecoin in 2021 has been an exciting activity considering the gains a lot of earlier investors amassed. White is still wary and cautions traders not to consider Doge as a long term coin as the market could put downward pressure on the coin's value for long periods.
Dogecoin also holds more security risks compared to other major cryptocurrencies. It does not have the same security and code-level scrutinies as Bitcoin or Ethereum, and it does not have a particularly robust mining community which could be a potential vulnerability for a mining livel attach, White explained to Forbes.
If you are interested in purchasing the meme coin to join in on the Internet hype or learn more about the fastest-growing cryptocurrency, no one is stopping you. It does look like things are optimistic for the meme coin in the short term. However, volatility grants immunity to no one and so you must be able to protect yourself should anything go wrong with your purchases.
Like all other trades, cryptocurrency or otherwise, risks are involved and traders must take the time to learn and assess how to mitigate those risks.