Dogecoin: Fantastic Meme, Less Compelling as an Investment
Dogecoin (CCC:DOGE-USD) is one of the most fascinating cryptocurrencies out there. Despite being founded as a joke and having no central purpose when it was created, Dogecoin continues to gain attention.
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Recently, Elon Musk and other prominent celebrities have urged followers to take a look at Dogecoin. As a result of all this publicity, DOGE keeps on rising. It traded for under a penny per coin not that long ago. Now, it’s at more than seven cents each. For people that bought close to the 52-week lows, DOGE is up more than 1,000%.
While the price action is certainly encouraging, however, it’s still hard to see a fundamental reason to own it. Purely as an investment, Dogecoin is lacking in merit. However, since people generally own it for the memetic value, perhaps fundamentals don’t matter. So, can continued publicity and momentum keep DOGE rising for now?
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Dogecoin Fervor Continues To Spread
It’d be easy to dismiss the recent buzz around Dogecoin as just being due to Elon Musk’s charisma. Musk has been one of the most prominent DOGE boosters in recent weeks. However, Dogecoin excitement has also reached fairly unlikely places.
For example, consider Conagra (NYSE:CAG), which is a packaged foods company. Conagra is known for things such as Hunt’s tomato sauce, Reddi-Wip and Vlasic pickles. A cutting-edge company, Conagra is not. Yet, Conagra recently used Dogecoin for its marketing. In its latest conference call, Conagra highlighted the benefits of using Dogecoin for promotion of its Slim Jim meat sticks:
“As an example, the Slim Jim community online was built on memes. Given that fact, Doge and Dogecoin were a natural fit for our brand.
Since joining the online conversation about the do-good-everyday sentiment of Dogecoin, we’ve tapped into another channel for Slim Jim to engage with its community. We’ve seen a market uptick in audience interaction, including direct engagement and advocacy from the person that created Dogecoin as you can see on this slide.”
The numbers don’t lie. When a company like Conagra can get massive engagement for meat snacks, of all things, using Dogecoin, you know you have a phenomenon on your hands. Dogecoin has certainly captured the cultural zeitgeist.
Still Hard To Put Together An Investment Case
Our Alex Sirois recently outlined why Dogecoin’s price will never hit $10, even though optimists are throwing out that figure as a price target. For one thing, there’s still not much of an actual use case for Dogecoin. The project was created as a joke. One of Dogecoin’s developers now even feels regret seeing it turn into what he sees as a vehicle for pump and dump trading as opposed to just being something fun.
Yes, there are some actual places to spend Doge now, such as for Dallas Mavericks basketball game tickets. However, Mark Cuban, the team’s owner, appears to be accepting Doge as a stunt rather than as any long-term statement about Dogecoin’s potential value.
At $10 per coin, Dogecoin would have a market capitalization exceeding $1 trillion. Currently, just four American companies are worth that much. Even Ethereum (CCC:ETH-USD), the clear #2 in crypto, is worth just $250 billion now. The idea that Dogecoin is going to surpass that figure several times over seems utterly ridiculous.
The fact that DOGE is soaring on these sorts of wild price targets speaks to the general speculative mood. It’s hard to value Dogecoin on any sort of economic basis since the project wasn’t designed to do much other than be a fun diversion. Dogecoin has succeeded beyond anyone’s wildest dreams on that front.
Dogecoin Verdict
I love Dogecoin as a meme. It’s a great deal of fun, and the positive upbeat vibe is nice. It certainly stands out from the much more jaded communities you find around a lot of other altcoins.
That said, it’s unclear what value, if any, Dogecoin has in the long-term. It doesn’t really have any functional uses besides celebrities and companies embracing it as a clever marketing gimmick.
Perhaps there is some way to create value out of that for DOGE at some point. But it’s not like Dogecoin was ever intended to be some serious disruptive financial technology. Enjoy the memes, and if you want to trade a little, I couldn’t blame you. Don’t mistake DOGE, however, for being a credible long-term investment.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.
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