of The cryptocurrency market has long been a darling of active investors (perhaps more accurately described as speculators). Because of its variability. At its best, These digital assets have the potential to outperform traditional stock indexes. S&P500 or Nasdaq Composite.
At the time of writing, its price has increased approximately 340% since the beginning of the year. dogecoin (Doge -0.31%) This is a great example of the potential to create explosive millionaires. That said, the hype can keep rising just for a long time before reality sets in. Let's discuss whether Dogecoin's fundamentals can sustain continuous profits over the long term.
Why Dogecoin?
Dogecoin, introduced in 2013, is probably meme coina class of cryptocurrencies based on online jokes. Meme coins are typically not designed to improve real-world utility or shortcomings of other blockchain platforms. Having said that, their Market capitalization Because they tend to be smaller than mainstream cryptocurrencies, they can be volatile and provide explosive returns when industry sentiment is bullish.
Dogecoin had a relatively poor performance until 2021, after which it burst into the mainstream following supportive tweets. tesla Elon Musk CEO. Low interest rates and government stimulus in the wake of the coronavirus pandemic likely contributed to the asset's rise.
Despite starting as a joke, Dogecoin has had an impressive performance. As the chart below shows, the coin has gained 103,400% since its inception. Bitcoin It grew by 16,470% during the same period. But while Dogecoin has minted some pretty rich people, it has also destroyed a lot of wealth in the process. It is still down about 45% from its all-time high of USD 0.7376 in May 2021.
Dogecoin price data by YCharts
What's behind the recent rise?
Investing in Dogecoin can be considered a high-risk, high-reward path to the cryptocurrency industry, but potential investors should consider its fundamentals.
Similar to Dogecoin’s previous bull run in 2021, this asset’s latest move linked To Elon Musk, I'm rooting for you again Coin from X (formerly Twitter). The outspoken ally of the Trump administration will also be involved in an oversight federal agency called the Department of Government Efficiency (DOGE). It's probably no coincidence that the organization's name resembles Dogecoin's ticker symbol.
On a more practical level, investors may hope that Mr. Musk's influence in the new administration will result in a more favorable regulatory environment.
According to Time magazine, Trump will replace the incumbent. securities and exchange commission (SEC) Chairman Gary Gensler has announced that he will resign with the inauguration of Donald Trump as president. Gensler is said to have filed (or been accused of) several lawsuits against crypto platforms for alleged violations of securities laws. Targets also include virtual currency exchanges coinbase globalthe SEC filed suit in June for allegedly operating as an unregistered broker and exchange.
In the coming years, governments will help shape how the public interacts with digital assets. And many believe President Trump's proposed SEC Director Paul Atkins will take a less heavy-handed approach.
Should you buy Dogecoin?
Image source: Getty Images.
in near futurethe future of the virtual currency industry is bright. A more favorable regulatory environment could improve access to this fast-growing asset class and make it more palatable to large institutional investors. expected Buy and hold for the long term.
That being said, Dogecoin's fundamentals can be a challenge.
platform is designed Create 5 billion new coins yearly (Currently 147 billion copies in circulation). This built-in increase in supply could help Dogecoin function better as a medium of exchange. Improving liquidityHowever, that makes holding Dogecoin less attractive as a long-term investment. Although this cryptocurrency has created many millionaires, the risks of buying it at the top of the current bull market seem to outweigh the potential benefits.
Will Ebifang has no position in any stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.
