At the time of writing, dogecoin has shaved off almost 40% of its value from its previous high of $0.74. Is this correction an opportunity or the end? What do the charts say about Dogecoin?
Jokes aside, while multiple catalysts have allowed for this altcoin to increase by almost 15X in just over 100 days, does dogecoin still have room to grow and what do the charts tell us about its current growth trajectory?
In this article, we’ll be focusing on the fundamental aspects of dogecoin, how I see it now and how I think it will perform in the future.
What is Dogecoin?
At this most basic level, here is a quick summary of dogecoin since its inception.
- Dogecoin was created by IBM software engineer Billy Markus from Portland, Oregon and Adobe software engineer Jackson Palmer,
- Guiding principle was to create a peer-to-peer digital currency that could reach a broader demographic than Bitcoin.
- Dogecoin was officially launched on December 6, 2013, and within the first 30 days there were over a million visitors to Dogecoin.com
For an exact timeline of the rise & fall of dogecoin since 2013, refer to this.
In a nutshell, here’re some common phrases used to describe dogecoin:
- Created to transact faster than bitcoin.
- Unlimited supply.
- Fun, less intimidating than other cryptocurrencies.
- Honest – Altcoin with no ulterior motive. (Doesn’t seek to disrupt block chain or any ambitions to overtake bitcoin etc.) It is exactly what it is, a coin with a Shiba Inu Dog as its mascot.
How did dogecoin manage to come this far? (Catalysts for its current bull run)
“The joke is on Wall Street this time … What you have is a situation where teens on TikTok are outperforming even the smartest suits by thousands of percentage points.”
Mati Greenspan, Portfolio m=Manager and founder of Quantum Economics
When I first heard of dogecoin in the media I laughed and bought into it with the attitude that “ok since everyone is doing it, might as well” (typical millennial FOMO).
At one point in time, it fell by almost 30% and when I saw that, I laughed to myself again because “seriously, what can you expect from a coin with a dog as its mascot?” Even now as I look at that very same dogecoin, I’m still taking this whole thing pretty lightly because at the end of the day, it is a coin with a dog as its mascot.
The point here is that dogecoin has reached a level of social acceptance where we have people buying into it with no motives or expectations. Despite the many catalysts out there, in my opinion, the single most important catalyst for dogecoin is how traders have now bought into something with no consideration as to how such an “asset” would perform in the future.
I attribute these three factors to dogecoin’s current (high) level of social acceptance:
1) Celebrity Endorsement
When you have one of the most influential and wealthiest person in the world endorsing dogecoin, its is difficult to say that such a coin is “obsolete” or unworthy of the spotlight.
Elon Musk, CEO of both Tesla and SpaceX has spent years promoting dogecoin. While the actual reasons to how the token had captivated him remains unknown, he has publicly endorsed dogecoin on multiple occasions in person, as well as on social media.
In addition to the examples above, Elon brought dogecoin to public attention again just yesterday when he hosted the comedy show Saturday Night Live.
Other celebrities who have endorsed dogecoin include Dallas Mavericks’ owner, Mark Cuban.
“Because Doge is the one coin that people actually use for transactions. We take many others via @BitPay . But people spend their Doge and that means more businesses will start taking it. The greatest inhibitor to its growth is that you can’t spend the Doge you buy on Robinhood“
Mark Cuban – 26th April 2021 via Twitter
His bullish stance on dogecoin and how it can be used as a stable medium of exchange has recently seen some progress with sporting goods company, Wooter Apparel, which is now accepting dogecoin as a method of payment on their platform.
This comes not long after medical supplier leader, CovCare, began accepting dogecoin as payment back in February 2021.
SpaceX has announced a dogecoin funded lunar mission on 10 May 21, named “DOGE-1 Mission to the Moon”.
2) Price & Accessibility
With the token priced so low, I would certainly attribute price as one of the reasons to why dogecoin has received so much mainstream attention. Say at the price of ~$0.50, figuratively speaking a kid could skip lunch and use the money to buy a couple of dogecoins. (Kids reading this, please don’t do that).
At such a low price, the barriers to entry are most certainly lowered.
To top it off, even stock brokerage companies are allowing their users to trade dogecoin on their platform.
These factors combined have allowed any regular person to join the dogecoin bandwagon. With just $1 and an app, you can now be on board the dogecoin rocketship to the moon.
3) Where we are now (Chart Analysis)
While some may buy into dogecoin with little to no regard for its short term performance, such a mindset is certainly not encouraged as it would almost be regarded as gambling.
In fact, I would state upfront that in my own personal opinion, dogecoin is definitely not the best instrument as a long term investment. In the words of Elon Musk, “people should not invest their life savings into cryptocurrency”.
Disclaimer:
My analysis of the dogecoin chart is based on the sole study and research of myself and are merely my written opinions and ideas. Therefore the information presented is as such strictly for educational purposes and/or for study or research only. This information should not and cannot be construed as or relied on and (for all intents and purposes) does not constitute financial, investment or any other form of advice.
At the time of writing, dogecoin is currently trading at $0.45 which is the previous resistance observed on the 16 April 2021. It has now turned into a support.
This price point is an area of great importance for two reasons:
- it was a resistance-turn-support zone previously,
- it was where price reflected off the short-term trend line in the past month.
I do not expect dogecoin to be breaking its high of $0.74 anytime soon due to the current sell down which had completely erased its gains for the past week.
This is known as a “bearish engulfing pattern” and what it means is that sellers have outnumbered buyers, pushing prices down aggressively. In dogecoin’s case, it took sellers only 2 days of trading to erase almost 4 days of gains from buyers.
Given how the signal line in the MACD is still moving up, this indicates that there is still strength left for buyers.
I would expect a minor move to the upside, followed by a deeper correction (purple arrow) into the near term support zone at $0.25 (yellow area).
Taking all things into consideration, history has proven time and time again that such parabolic moves to the upside are almost certain to fall at some point in the future.
While dogecoin makes for a fantastic opportunity in the short term, I strongly believe that readers can find instruments with less volatility & speculation which are more suited for investment on a longer-term horizon.
To the Moon? (Suitability as a long-term investment)
Despite short term fluctuations, an ideal instrument is one which will continue to outperform the market and increase in value over time.
Unfortunately, in comparison with other cryptocurrencies such as bitcoin, I do not think dogecoin would make a sound long-term investment due to the following,
- No other functions
Unlike Ethereum which has an actual use case for programmers on the Ethereum platform, there is no actual use case for dogecoin apart from the few companies which are starting to accept dogecoin as a medium of exchange.
Even so, the use of dogecoin is not exclusive and companies which accept dogecoin can easily accept other cryptocurrencies as well making this “edge” less valuable for dogecoin.
- Supply
When comparing the value of any instrument, the laws of demand and supply are crucial. In the case of cryptocurrencies, by and large, the less supply makes it more valuable.
A fundamental reason why bitcoin is priced so highly, is due to its limited supply.
Another significant difference is the absence of any lifetime cap on the number of Dogecoins that can be created. There is a lifetime cap of 21 million Bitcoin that limits the maximum possible number of coins that can be created. This means that miners are forced to work harder and longer over time to earn new Bitcoin, and to a degree it helps guarantee Bitcoin’s ability to hold and grow its value over time.
David Rodeck, Benjamin Curry – Forbes Contributor, Editor
In the case of dogecoin, unfortunately there is no end to its supply and this was a deliberate move by dogecoin founder Jackson Palmer “(who) announced that the limit would be removed in an effort to create a consistent reduction of its inflation rate over time.“
- Concentrated Ownership
While the media enjoys shining the spotlight on any good news surrounding dogecoin, there is one problem with dogecoin not often mentioned and that is how concentrated its ownership is.
The world’s biggest holder of Dogecoin owns 28% of the cryptocurrency – a position now worth $2.1 billion
Markets Insider – 17th February 2021
Markets Insider reveals that an unknown person or entity owns over 28% of all dogecoin currently in circulation. To add more perspective to this matter, 65% of all circulated dogecoin is kept in less than 100 wallets around the world.
This is extremely alarming as the problem with concentrated ownership is that there could be a telegram group chat out there with these 100 individuals/entities. If someone initiated a sell and all these individuals/entities cashed out at once, we’re pretty much looking at one of the largest cryptocurrency crashes in history. I can only speculate the spillover effect such an event may have on the rest of the cryptocurrency industry.
My thoughts
I don’t think that the dogecoin rally is over therefore I believe that there still may be opportunities for DISCIPLINED short-term trades to make profit. However as a long term investment, I certainly would not recommend dogecoin unless you truly believe that dogecoin can be a mainstream currency one day.
For short term trades, do not buy into this coin without a plan. Always have a plan be it a stop-loss or a limit sell order when a key support level is broken. Most importantly, if the trade is going as planned, always take profits off the table as the price moves higher.
The cryptocurrency industry is still fairly new to many and while I’m far from an expert of sorts I warmly welcome any comments or questions from our readers.
On a side note, if you’re like me and you love free things, do check out this article on cloud mining which I wrote previously. At present I’m about halfway through before I can cash out and I will be writing another article soon on the withdrawal process.
I am cautiously vested in dogecoin at the time of writing.