Dogecoin (DOGE), marked by its dramatic 11.06% drop, started its journey in the crypto world as something of a joke, invented by two friends in 2013. They drew inspiration from the viral “Doge” meme that was lighting up the internet at the time. Despite its origins, Dogecoin has managed to become a hot ticket for high-risk investors, even though its real-world applications are minimal. Surprisingly, it managed to outshine well-known cryptocurrencies like Bitcoin, Ethereum, and XRP in 2024.
As you can see from the chart, most of Dogecoin’s success came after November 5, the day Donald Trump secured his presidential victory, riding on promises of crypto-friendly policies. Investors enjoyed an extra boost when Elon Musk entered the scene, but more on that shortly.
Despite its prior success, Dogecoin’s price has tumbled 55% from its post-election peak. The question now is whether this drop presents a buying opportunity or if it’s a signal to step back. Let’s dive into the details.
Stepping back for a moment, let’s explore the so-called “Elon Musk effect.” Musk’s support for Dogecoin started back in 2019. He often posts memes about it and engages in playful exchanges with other enthusiasts. In fact, Tesla, his brainchild, even accepts Dogecoin for some merchandise.
Back in May 2021, Musk even capitalized on his Saturday Night Live appearance, which featured a skit centered around Dogecoin. That night, the cryptocurrency reached a dizzying high of $0.73. The cryptocurrency was up an astonishing 15,769% for the year. However, what goes up must come down; Dogecoin lost over 90% of its value soon afterward. This should come as no surprise, given Dogecoin’s speculative nature, lying mostly dormant throughout 2023 and into 2024.
However, November’s presidential election changed that. Trump’s promise to turn America into a crypto hub sparked a resurgence, even hinting at regulatory relief as the U.S. Securities and Exchange Commission slowed some of its legal proceedings against crypto firms. After Trump’s win, Musk was announced as the head of a new initiative called the Department of Government Efficiency, whimsically abbreviated as DOGE. While unrelated to crypto, the name itself was enough to fuel Dogecoin’s surge in value.
Still, the elephant in the room remains: Dogecoin’s limited practical use. For any currency to thrive, it must be widely adopted by businesses. Yet, globally, just 2,025 companies accept Dogecoin, primarily minor players in the online and crypto sectors. In contrast, more established cryptocurrencies like Bitcoin face their own challenges in adoption, but Bitcoin’s capped supply and decentralized nature give it a reputation as a digital version of gold.
On the other hand, Dogecoin’s supply is technically infinite. Although the annual creation of new tokens is capped, there’s no final limit, meaning the supply is on an endless path upward. This undermines its potential to become a reliable store of value.
The déjà vu of 2021-2022 is hard to ignore. Dogecoin has slid 55% from a recent high of $0.47. It’s nowhere near its 2021 peak, indicating investors are perhaps more cautious this time. There seems to be nothing tangible to support Dogecoin’s value right now. Musk’s Department of Government Efficiency has no ties to Dogecoin, and even in a friendly regulatory environment, Dogecoin’s future use cases remain vague.
In my view, this recent dip should serve as a cautionary sign. Currently, Dogecoin is trading at $0.21, but given its 2022 low of $0.057, there’s potential for further declines. As always in the world of finance, tread carefully.
