“People are trying to recapture that magic that Bitcoin created for those who were there early,” said Michael O’Rourke, chief market strategist at JonesTrading. “The key differentiator here is Bitcoin is going to be capped, there’s going to be a limited number of coins.”
Since its start in 2009, Bitcoin has had a fixed supply of 21 million coins that will ever be minted. Not so for Dogecoin: There is no limit to the amount that can be created.
Ardent enthusiasts might use this fact to draw comparisons between Dogecoin and fiat currencies. Of course, there isn’t a Bitcoin-like cap on the number of, say, dollars that the U.S. government can print. Yet while Dogecoin has a lot of memes and jokes behind it, the dollar has the U.S. economy and population. O’Rourke says this explains why there is so much trust in the dollar.
“I still don’t know what the purpose of Dogecoin is other than a speculative instrument,” he said. “You’re speculating on something that is there just because people are speculating on it. That’s a very dangerous mix.”
Plus, there was a campaign to rally Dogecoin’s price up to 69 cents on or by April 20—the 4/20 holiday associated with weed smoking.
Dare You Doge?
So, should you get in on the Dogecoin action?
“It’s almost irresponsible to lend credence to the speculation by even asking that question,” said David Trainer, chief executive of New Constructs, an independent securities research firm based in Nashville.
But people are asking it after seeing their friends’ pocket money without doing all that much work or research. Trainer says everyone’s situation is different.
“If you have excess funds that you like to speculate with instead of betting on the Yankees, and you want to put it into cryptocurrencies, then maybe, yeah, that would make sense,” he said. “As long as you’re not afraid to lose it all.”
What may be clouding investors’ vision, Trainer says, is the fact that for all the recent talk of how overvalued some stocks and cryptocurrencies are, the excitement has really yet to subside. It’s unclear how much longer this can go on for.
“I think the root cause of all this is that people have forgotten the difference, the distinction, between investing and speculating,” he said.
Some have compared the Dogecoin surge—with its memes and explosive growth—to the burst of interest in GameStop Corp. earlier this year. But Brent Weiss, a financial planner and co-founder of Facet Wealth in Baltimore says Dogecoin falls into an entirely different—even less serious—investment category.
“When it comes to Dogecoin as a cryptocurrency, that is an absolute joke,” he said.
Weiss is no fan of GameStop as an investment, either, but says that at least with stocks for the video-game company, there was an underlying company with tangible underlying assets.
“Every Doge has its day,” Weiss said. “But today is not the day to make Doge part of your portfolio.”
This article was provided by Bloomberg News.