2024 has been a fantastic year for investors around the world. THE S&P500 And Nasdaq Composite gained 23% and 29% respectively, supported by strong tailwinds in technology, healthcare and energy in particular.
However, another asset class that has held up strongly over the past year is cryptocurrency. BitcoinThe price of rose 120% and reached new all-time highs. And yet, another cryptocurrency is doing even better.
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Dogecoin (CRYPTO:DOGE) has skyrocketed 251% in 2024, significantly outperforming the S&P 500, Nasdaq, and even the king of crypto, Bitcoin.
I will explore what influenced the meteoric change in the price of Dogecoin. Additionally, I will explain why January 20 could be an important date for cryptocurrency and assess whether it is the right time for investors to buy.
Dogecoin has had an epic run, and…
The chart below illustrates the price performance of Dogecoin over the past year.
Dogecoin Price data by Y Charts
As the chart shows, the price of Dogecoin really started to gain momentum around the beginning of November. In fact, since Election Day (November 5), the price of Dogecoin has gained 112% as of January 13.
I don’t find the new enthusiasm around Dogecoin to be a coincidence. During President-elect Donald Trump’s election campaign, he frequently spoke of the need to reevaluate the federal budget and identify areas where spending could be cut. This notion was particularly applauded by two Trump surrogates, Tesla CEO Elon Musk and former Republican presidential candidate Vivek Ramaswamy.
Before the election, Musk frequently took to social media to tease the idea of creating a new federal agency called the Ministry of Government Effectiveness (DOGE). Musk has previously been a supporter of Dogecoin, despite his meme-like nature and lack of real-world utility.
Nonetheless, investors made the connection between the creation of DOGE and Musk’s “backing” of Dogecoin – fueling a cryptocurrency buying frenzy.
…the price could increase in January, but…
Although Dogecoin’s current price has fallen approximately 28% from its previous high of $0.47, the crypto still remains significantly elevated from previous levels. I believe the Dogecoin sell-off was caused by broader sell-offs in stocks and cryptocurrencies in general over the past few weeks.
However, January 20 could be the day Dogecoin starts to rally again.
The reason? Trump’s inauguration will take place on January 20.
Once Trump assumes the post of president of the United States again, Washington will undergo a makeover, highlighted by a Republican-controlled Congress and new cabinet members who will advise Trump in the White House. As such, after Trump’s inauguration, the idea of Musk and Ramaswamy running DOGE is becoming more of a reality.
Image source: Getty Images.
…such a decision does not necessarily make Dogecoin a wise opportunity
The Department of Government Efficiency (DOGE) acronym matching Dogecoin’s ticker symbol is a coincidence – although it’s reasonable to believe Musk did it on purpose. However, cryptocurrency and the idea of creating an agency responsible for reducing public spending are independent of each other.
Even if the price of Dogecoin starts to climb after the inauguration day, cryptocurrency remains a highly speculative investment opportunity. Additionally, any near-term rise in Dogecoin will be more rooted in narratives rather than actual underlying fundamentals.
In other words, DOGE and Dogecoin don’t actually overlap at the moment. For this reason, even if Musk and Ramaswamy create DOGE and manage to significantly reduce the federal budget, such actions have nothing to do with Dogecoin.
For these reasons, I would stay away from Dogecoin completely. While January 20 could very well be a day where cryptocurrency experiences an outsized shake, investors are best off staying on the sidelines and letting any narrative-driven volatility play out.
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Adam Spatacco holds positions at Tesla. The Motley Fool holds positions and recommends Bitcoin and Tesla. The Mad Motley has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.