It’s too early to say, but the cryptocurrency market may be set to bounce back after its recent crash. Does this make Dogecoin (CCC:DOGE-USD) a buy on the pullback? Yes and no. Thanks to its status as a “memecoin,” and the support it’s received from Elon Musk, this crypto that started off as a joke hasn’t fallen as much as you would assume during the recent market meltdown.
A continued crypto rebound, along with other factors (more below) could help it bounce back in the short-term. Perhaps even help it rally to price above its high water mark set in early May. But, long-term? The forecast is murky.
Why? With scores of altcoins out there with greater levels of utility, there’s little reason to believe this one will become widely used as a medium of exchange in DeFi (decentralized finance) transactions. Sure, for the time being, some businesses may accept it as payment, mainly as a gimmick.
But, chances are it’s not going to be a major currency in the blockchain economy. And, if it fails to gain critical mass, long-term price appreciation is going to be a challenge. In the near-term, diving into it could be a winning trade. But, as a long-term bet on the future of crypto? Stick to more solid names instead.
Dogecoin Doesn’t Hold a Candle to Altcoins With Greater Functionality
Even before this month’s market meltdown, crypto investor attention was starting to pivot away from Bitcoin (CCC:BTC-USD), and towards the altcoins. The largest of these, Ethereum (CCC:ETH-USD) may still be a long way from overtaking the still-largest cryptocurrency by market capitalization.
Yet, with its greater DeFi utility compared to BTC, it’s easy to see why investors were willing to bid it up until the recent crash, and are willing to dive back in as the dust settles. Other ones, like Cardano (CCC:ADA-USD) and Polygon (CCC:MATIC-USD) are still establishing themselves. But, both stand to become serious competitors to ETH, and have benefited as well from the rotation out of BTC.
In the case of ADA-USD, the upcoming protocol upgrades of its network could help materially increase its usage, and in turn, its valuation. With MATIC-USD, lower transaction fees and greater scalability may boost its DeFi use, which also will help increase its value over time. As it stands now, Dogecoin doesn’t have these advantages in its corner.
Yes, this may not be the case forever. Elon Musk could follow through with his recent statements, which imply he’s interested in helping to support upgrades that will make it a more serious coin. But, until his words turn into reality, it’s best not to take his statements too seriously. Even so, this doesn’t mean you can’t buy the dip today, and still profit. It may still bounce back sharply in the near-term.
Why Dogecoin Could Produce Profits in the Short-Term
Until it sees further upgrades, I wouldn’t bank on Dogecoin becoming a crypto on par with ETH, ADA or MATIC. Yet, there are some factors at play that could help it bounce back towards its highs, before all is said and done.
First, many may roll their eyes when Elon Musk tweets about Dogecoin. But, his tweets still move markets. Further statements made by him regarding upgrades to this coin will have a major effect on prices. This alone may be enough to kick off another round of speculation, and send prices well above today’s levels (around 35 cents).
Second, while it dominated the crypto headlines, Dogecoin has yet to become tradable on Coinbase (NASDAQ:COIN). Yet, this is set to change in a matter of weeks. Yes, even without a Coinbase listing, it’s been able to attract significant retail investor inflows. But, becoming even more widely available for trading, this too could help fuel speculative frenzy in it once again.
If only one of the two happens, it could help push up prices. But, if both happen? It may be enough to send Dogecoin on another epic parabolic run. However, while that’s good for those looking to dabble in this as a short-term trade, it does little to change the long-term forecast.
Bottom Line: Long-Term Potential Remains Questionable
There’s potential for Dogecoin to rally once again in the near-term. But, what if what we are seeing play out (a rebound in crypto prices) winds up being only a dead cat bounce? Don’t count on this making an epic rebound back towards its highs.
As for the long-term? Until it’s definite that Elon Musk, or anyone else, is going to help turn this “jokecoin” into something with more substance, don’t bank on Dogecoin being more than a near-term trading opportunity.