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Home » Why invest in Dogecoin? The Cryptocurrency ‘MEME’ Sponsored by Elon Musk (Tesla)

Why invest in Dogecoin? The Cryptocurrency ‘MEME’ Sponsored by Elon Musk (Tesla)

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Reasons to Invest in Dogecoin Today

Dogecoin has become one of the most popular cryptocurrencies. It started as a meme and its logo with the face of a dog has generating affection & interest from investors. But why should we invest in it? Chris MacDonald wonders in The Motley Fool.

Dogecoin offers investors the ability to make their first foray into the cryptocurrency market and learn from volatility. Also, the mining model, inflationary qualities, and links to Litecoin are intriguing.

What are the reasons that would invite us to invest in it?

Reasons to Invest in Dogecoin Today

1 – His popularity

The Dogecoin sub-Reddit has 2.2 million “subscribers” on its page. Among the most popular names that have endorsed Dogecoin are Elon Musk and hip-hop artist Snoop Dogg.

The popularity is the cornerstone for the speculative nature of the value for those who believe it will revalue over time.

The return it has provided to investors in the past year alone is a staggering 9,000%.

But investors are taking a very high risk basing their investment on current popularity. If another cryptocurrency gains investor support, it could lose all current interest.

2 – Ideal for beginner crypto investors

Although it seems a bit out of hand. Holding the investment for a long time allows newbies to experience what it is like to invest in the sector. Since it requires an important test of faith due to the technological transformation. If you are really, they will achieve their goal in the long term.

Investors must be willing to experience the ups and downs of a highly speculative security first-hand.

3 – Its positioning in the market

We mentioned this at the beginning of the article: mining model, the inflationary state and the links with Litecoin.

Dogecoin started with a Proof of Work consensus, but the environmental implications around mining are likely to shift its consensus method towards Proof of Stake.

In addition, it uses 2% less energy than Bitcoin and blockchains are verified with the Scrypt algorithm, the same one used by Litecoin. The latter is rare in the cryptocurrency universe.

The inflationary state is something that worries investors. For this to make sense, demand must exceed the natural inflation rate. Therefore, a fall in interest would lead to a collapse in value.

But investors have a data with which to estimate this, 5 million new tokens are created per year. Given the current supply is around 131.5 billion, this inflation rate is estimated at about 3.8% this year. Also, this inflation rate will decrease over time, as the denominator increases.

Having an idea of ​​the capital inflows will allow investors to analyse the probabilities of appreciation in value.

So, is it worth investing in Dogecoin?

Buying a small stake in Dogecoin within a well-diversified portfolio is ideal. It has upward potential, but it will be necessary to know how to handle volatility.

For some time now, cryptocurrencies have been revolutionizing the market. As an alternative to conventional currencies that are managed by public bodies and financial institutions. The first cryptocurrency was Bitcoin, but later others have emerged that have achieved extraordinary success. This is the case, for example, of what is currently happening with investments in Dogecoin.

This alternative, like the rest, constitutes a digital medium that can be exchanged. Thanks to which it is possible to make financial transfers using cryptographic methods. Each of these currencies has its own algorithm that controls the number of units that exist. Since in the same way as with traditional money, in this case cryptocurrencies can also be created.

How does the Dogecoin cryptocurrency work?

Dogecoin is a cryptocurrency that was born as a meme on the Internet in 2013. This joke consisted of an image of a dog to which phrases with grammatical or funny errors were added. Following this idea, a programmer created this new badge alternative using the image of the animal in the illustrations that refer to it.

Its system is based on Litecoin and works in a similar way to other cryptocurrencies. To make digital payments in this way. It is necessary to have a computer program capable of deciphering the algorithms to create units of this currency.

Unlike Bitcoin, in this case it is possible to generate Dogecoin and carry out transactions in a faster way. These two factors have influenced its growth potential since January 2021, reaching a rise of more than 5,000%.

However, this cryptocurrency not endorsed by any official company. Instead, it has a community of supporters who blindly believe in the project and drive its capitalization. In fact, it originally used primarily to support content creators, but today it performs the same function as any other 100% consolidated virtual currency to make payments and transactions in a matter of seconds and with very low fees.

Is it profitable to invest in Dogecoin?

Taking into account the extraordinary growth that Dogecoin has experienced during the first half of 2021. If it had invested in this cryptocurrency in January, the gains would be exorbitant. Specifically, having allocated 1,000 euros would translate into a profit of 121,000 euros.

In addition to the interesting profitability of this virtual currency, it is important to consider that anyone can become a miner, that is, they can generate their own Dogecoin units. However, it should noted that it not a widely used and widely used currency, so your tour may have an expiration period.

Cons of investing in Dogecoin

Before launching to invest in Dogecoin it is necessary to know some of the disadvantages that it presents:

  1. Some experts point out that it is a very popular virtual currency today, but that it does not offer a sufficient guarantee of reliability. This is due to the steep ups and downs you experience too quickly.
  2. It can be said that its development has occurred by chance. Since, at first, the objective was not to create a new payment system.
  3. There is no central authority that oversees the development of Dogecoin, but, by operating with open source, community members are responsible for making decisions and updating the program that guarantees its operation.

It is possible to make a lot of money with Dogecoin. If it invested at the right time, but likewise, there is also the possibility of losing everything.