Elon Musk revived his influence on the dog face meme after Trump’s election victory.
Dogecoin (DOGE 2.34%) is a new cryptocurrency that uses a Shiba Inu dog as its mascot. It entered trading in 2021 at a price of $0.0046 per token, and in five months it surged 15,769% to a high of $0.73 amid the frenzy in the gaming industry. cryptography. Tesla CEO Elon Musk was a big supporter of Dogecoin at the time, and his influence partly fueled the rally.
But the meme token plunged 92% from that peak as the cryptocurrency sector fell into a bear market in 2022. Investor sentiment has improved significantly since then, with leading cryptocurrencies plan like Bitcoin (BTC 0.40%) reached new heights this year.
However, Dogecoin continued to struggle and it was trading near its 52-week low as recently as September. That was until Donald Trump won the November 5 presidential election, with help from Musk.
Dogecoin is now sitting on a 324% gain for this year, surpassing the 107% return generated by Bitcoin. Looking ahead, which one is the better buy?
Musk’s influence
Throughout 2021, Musk often shared Dogecoin-related memes on social media, particularly on X (formerly Twitter), which he now has. He even called it his favorite cryptocurrency, which investors took as an unequivocal endorsement.
Musk‘s influence on Dogecoin’s price movements reached its peak when it appeared on Saturday evening live on May 8, 2021, as investors speculated, he would make an even bigger and more public proclamation of his support. It turns out he was simply participating in a comedy skit – nothing of substance came from the event. Dogecoin immediately plunged, and it still has not regained the all-time high it reached over the weekend.
To Musk’s credit, he has tried to add some utility to Dogecoin to help support its value. At the end of 2021, he announced that Tesla would accept the token as payment for certain goods. This didn’t move the needle in terms of adoption, and its price continued to fall.
But Dogecoin appears to be back. Musk was a major backer of President-elect Trumpre-election campaign, and one of Trump’s first post-election announcements was his intention to form a new entity called the “Department of Government Efficiency” – DOGE for short – which appeared to be a reference to the favored cryptocurrency by Musk.
Musk will lead DOGE alongside Vivek Ramaswamy. Surprisingly, but not surprisingly, Dogecoin has more than doubled since November 5, although there is no indication that the new initiative – which will not be an official government department – will have a tangible connection to the token.
Image source: Getty Images.
Bitcoin has real tailwinds
Many enthusiasts predict cryptocurrencies could eventually replace traditional currency. Bitcoinfor example, is decentralized, so it cannot be manipulated by any person or government, and it relies on a reliable recording system called blockchain. However, consumers and businesses have not adopted Bitcoin in sufficient numbers to give it real utility as a currency.
In fact, according to Cryptwerk, only 8,952 merchants accept Bitcoin as payment worldwide. It’s much better than Dogecoin, which only 2,521 businesses are willing to accept, but if consumers can’t spend their crypto on everyday goods and services, they don’t have much reason to hold on to it. Without widespread adoption, it is very difficult for a currency to maintain its value.
There is a growing consensus that Bitcoin may serve better as a store of value than as currency, making it similar to gold. The United States Securities and Exchange Commission has approved a number of Bitcoin Exchange Traded Funds (ETF) this year, giving investors a simple and regulated way to park money in cryptocurrency.
A single Bitcoin is currently trading at around $92,000, but Cathie BoisArk Investment Management’s Ark Investment Management estimates the price could reach $1.48 million by 2030, based on eight potential use cases that could drive adoption.
Bitcoin becoming an accepted analogue of digital gold is one such use case, and Ark believes it will become part of the asset base of institutional investors, which is a real possibility now that spot Bitcoin ETFs are widely available. Ark predicts that businesses – and even governments – could choose to hold Bitcoin in their reserves alongside traditional cash, a potential hedge against negative economic events like inflation.
Interestingly, Trump said he was open to the idea of creating a Bitcoin reserve for the US government, meaning the world’s richest nation could become an active buyer of the cryptocurrency.
Dogecoin investors should learn from what happened after 2021
Even if Dogecoin While Bitcoin has gained three times as much in percentage terms this year, it still hasn’t reached its old peak. Meanwhile, Bitcoin continues to reach new highs and there is a strong case for further upside.
Dogecoin has little utility and lacks the support of institutional investors or regulators. So this is simply a vehicle for speculation. Investors should learn from what happened the last time a speculative frenzy drove the token higher: it suffered a 92% decline over the next year because there was no no fundamental behind its momentum.
As a result, Bitcoin is the best long-term buy. Even if it doesn’t reach a price of $1.48 million in the next six years as Ark Invest predicts, it has a strong track record of positive returns since its launch in 2009, and it should comfortably outperform speculative tokens like Dogecoin over the next six years. the long term.