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The final time I covered Dogecoin (DOGE-USD) for Looking for Alpha was late December 2022. I referred to as it my prime crypto bear choose for 2023. It was 8 cents on the time. Whereas the coin did finally commerce right down to below 6 cents final summer time, DOGE is at 11 cents as of article submission. As we learned with MakerDAO (MKR-USD) final 12 months, I do sometimes get these crypto calls unsuitable.
I am now of the opinion that DOGE could go greater. I nonetheless do not assume it is an incredible long-term funding. However I am prepared to improve from promote to carry. On this replace, I’ll once more reiterate a few of the logic from my final article and supply updates to some key community metrics which are surprisingly encouraging.
My Earlier Bearish Arguments
Within the closing abstract of my bearish view from late 2022, I could not justify the existence of a cryptocurrency that was created as a joke having such a major market capitalization. My view on the time was that the Dogecoin “meme” was getting stale, and the coin would underperform going ahead:
Dogecoin is a vital cryptocurrency for lots of the unsuitable causes. It was by no means meant to be taken critically nevertheless it street an enormous wave from a fraction of a penny in January of 2021 to over 73 cents just some months later. Within the time since, it has offered off greater than 90% nevertheless it nonetheless might have a lot decrease to go. The coin surged due to Robinhood consumers who now look like promoting.
However past simply my very own private opinion about what I believe a cryptocurrency community ought to goal to offer its person base, the truth in December 2022 was that DOGE wasn’t broadly getting used for any financial objective and the coin’s holder base was extremely centralized with Robinhood (HOOD) customers holding a few quarter of the coin’s whole provide.
DOGE Holder Focus (IntoTheBlock)
To be clear, with 65% of the cash managed by “whales” and “buyers,” the centralization challenge continues to be a significant concern of mine. And it is one of many large causes I nonetheless cannot carry myself to calling DOGE a purchase, as there’s fairly a little bit of provide that might be motivated to promote on any rip. Nonetheless, the utilization of the community does look like enhancing, partially, due to Bitcoin’s (BTC-USD) failure to be an affordable medium of change for smaller transactions.
Community Knowledge
Dogecoin initially happened in 2013 and with 10 years now within the wild, DOGE is taken into account to be one of many “OG” proof-of-work cash that features different payment-focused cryptocurrency networks like Litecoin (LTC-USD), Bitcoin Cash (BCH-USD), ZCash (ZEC-USD) and Dash (DASH-USD). I like to match DOGE with these cash when it pertains to community information as a result of they’re related makes an attempt at cryptocurrencies and are sometimes forks of (or forks of forks of) Bitcoin. One of many key methods to match them is with Each day Energetic Customers:
PoW Coin DAUs: 1 Yr (Coin Metrics)
I might encourage readers to enlarge the chart above, so the tendencies are simpler to see. However my common takeaway is that after Litecoin initially loved the DAU spike when Bitcoin’s on-chain transaction charges mooned in November and December, it’s now Dogecoin that’s exhibiting the strongest uptrend in common DAUs. Take into account the month-over-month modifications in DAUs between January and February within the desk beneath:
| November | December | January | February* | MoM | |
|---|---|---|---|---|---|
| Bitcoin | 944,824 | 858,542 | 870,251 | 871,792 | 0.18% |
| Dogecoin | 45,926 | 133,761 | 96,332 | 218,808 | 127.14% |
| Sprint | 54,467 | 72,688 | 51,930 | 56,312 | 8.44% |
| Litecoin | 223,099 | 772,862 | 690,742 | 354,397 | -48.69% |
| Bitcoin Money | 104,966 | 79,768 | 73,936 | 80,472 | 8.84% |
| ZCash | 9,257 | 8,209 | 10,600 | 8,876 | -16.27% |
Supply: Coin Metrics, Writer’s calculations. *As of two/27/24
Going again to the Bitcoin price spike, Dogecoin has gone from simply 46k common DAUs in November to almost 219k in February. The DOGE DAU development is admittedly extremely unstable, however the community has had extra DAUs than Sprint, Litecoin, Bitcoin Money, and ZCash every of the final 3 months. This utilization is resulting in a rise in charges:
Dogecoin (Token Terminal)
Whereas Dogecoin’s month-to-month charges are minimal in comparison with networks like Bitcoin or Ethereum, the expansion in each charges and DAUs is a transparent indication that there’s development in community utilization.
Most Worthwhile To Mine (CoinWarz)
What additionally could assist justify the continuation of the Dogecoin community for longer than I’ve anticipated is the truth that DOGE is traditionally a extremely worthwhile coin to mine. As of article submission, it is extra worthwhile to mine Dogecoin than Bitcoin Money.
Dangers
Nonetheless, there are many dangers in longing DOGE even at these ranges. There are 143.2 billion dogecoins in existence and there’s no provide cap on this coin.
DOGE Provide Development (TokenUnlocks)
There will probably be 172 billion by the top of the last decade as miners are paid out by new cash issuance. This is not the worst stage of coin provide inflation that can occur by 2030, however it’s nonetheless a reasonably vital stage of coin dilution. If the joke continues to be humorous by then, maybe there will probably be new consumers to absorb that offer. I actually haven’t any plan to be a type of consumers. Additionally, utility would not essentially equate to worth in public blockchains. Working example, Litecoin is used much more for funds than Dogecoin is and nonetheless has extra DAUs, but LTC’s market capitalization is a few third of Dogecoin’s.
The opposite danger to think about is the chance that this time actually is totally different. We’re shortly approaching a Bitcoin halving in April. The front-running demand for BTC is coming via ETF merchandise fairly than via on-chain retail buyers. It is attainable, if not going, that the “altcoin season” many in crypto have come to anticipate close to large Bitcoin rallies will not be almost as widespread as we have seen throughout earlier manias. Time will inform on that.
Abstract
My view has been that Dogecoin is a meme and nothing extra. Seems that might not be true. For higher or worse, Dogecoin has extra DAUs than different “OG” proof-of-work cash that I imagine provide higher performance and higher utility. We will not rule out the chance that consumers will as soon as once more flock to DOGE in some unspecified time in the future throughout 2024. Whereas I am nonetheless staying away, swing buying and selling DOGE could bear some fruit as Bitcoin shortly approaches a brand new all-time excessive.
Editor’s Observe: This text covers a number of microcap shares. Please pay attention to the dangers related to these shares.
