Dogecoin is heading towards its all-time high of $0.73 as of 2021, following President-elect Trump’s victory and Elon Musk’s role in the new administration.
Dogecoin (DOGE -5.08%) has soared 338% in 2024 so far, with most of that gain coming after former President Donald Trump’s re-election on November 5.
Tesla CEO Elon Musk was a major financial contributor to the Trump campaign, and he is also one of the main reasons for the renewed enthusiasm for Dogecoin, which I will explain in more detail in a moment.
Dogecoin is currently trading at $0.40 per token, which is still below its 2021 all-time high of $0.73. With the support of the world’s richest man and a pro-Trump administration crypto, is Dogecoin now destined to hit $1?
A speculative token with very little utility
DogecoinThe rise to $0.73 in 2021 was driven by pure speculation, and since speculative frenzies never last, it was no surprise that the token plunged as much as 92% from that high of 2022.
Simply put, Dogecoin has no real use: in fact, the two founders (Jackson Palmer and Billy Markus) launched the token as a joke in 2013.
According to Cryptwerk, only 2,519 merchants worldwide are willing to accept Dogecoin as payment for goods and services. A large portion of them are obscure Internet service providers, and even online gambling houses. If consumers can’t spend their tokens at their favorite stores, they have no reason to buy more. This makes it very difficult for Dogecoin to maintain its value.
Image source: Getty Images.
Elon Musk is Dogecoin’s most influential supporter
Musk called Dogecoin his favorite cryptocurrency in 2021, and he spent much of this year promoting it on social media using memes and humorous comments. He was a strong supporter of its rise to $0.73 – in fact, that high was set on May 8, shortly after it appeared on Saturday evening live.
Investors thought Musk would use the show to make a big statement of its support for Dogecoin, but that didn’t happen. Once it became clear that Musk had no real strategy to go along with all the memes and jokes on social media, Dogecoin’s value collapsed.
It continued to decline throughout 2022 and stabilized in 2023. It was even trading near its 52-week low in September of this year, but everything changed when Trump won the presidential race on November 5.
President-elect Trump is a big supporter of the cryptocurrency community, and his administration will likely approach the sector with a relatively light regulatory touch. But that’s just one reason for Dogecoin’s recent rise.
Asset appointed Musk and Vivek Ramaswamy to head a new agency called the Department of Government Effectiveness, or DOGE for short. The acronym refers to Musk’s favorite cryptocurrency, and while there are no concrete plans to bring Dogecoin into the department, the announcement alone fueled his rally.
Even Musk can’t help Dogecoin maintain a price above $1
Based on Dogecoin’s current supply of 146.8 billion tokens and its current price of $0.40 per token, it currently has a market capitalization of $58.8 billion. If it reaches its all-time high of $0.73, its market capitalization will reach $107.2 billion.
At a price of $1 per token, a simple calculation implies a market cap of $146.8 billion. I think this is a possibility with a sufficiently strong speculative rally over the next four years under the Trump administration. To be clear, I’m not predicting this will happen, just recognizing it as a potential outcome.
After all, Bitcoin has a market cap of $1.9 trillion at the time of writing these lines. It’s becoming a popular store of value, but like Dogecoin, it doesn’t have much use as a currency. Bitcoin is simply a place where investors put their money into the hope for higher prices in the future (in other words, it’s another speculative asset).
However, even if Dogecoin skyrockets 150% to $1, I don’t think it will be sustainable in the long term. I think a repeat of the 2022 drop would eventually be possible, as there are no concrete fundamentals supporting its value.
The Department of Government Effectiveness will be tasked with cutting costs across the federal government, with the goal of reducing unnecessary spending and paying down the nation’s $36 trillion debt. Aside from the name, DOGE has absolutely nothing to do with Dogecoin.
This is similar to the time Musk decided to accept Dogecoin as payment for some items in Tesla merchandise in December 2021. This was an attempt to give the token some utility, but it didn’t move the needle nor did it stop the steep drop in value that followed.
As a result, even if $1 is possible in the future, investors should take a cautious approach when purchasing Dogecoin. They should only invest what they can afford to lose.