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Dogecoin’s Huge Drop Provides a Value Buying Opportunity

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·4 min read
In this article:
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  • Dogecoin (DOGE-USD) has fallen from its recent market capitalization of $22.94 billion on April 4

  • The recent decline should prompt investors to buy Dogecoin

  • Expect Dogecoin to shoot back up to a normal range once the market stabilizes

Concept art for Dogecoin (DOGE).
Concept art for Dogecoin (DOGE).

Source: Shutterstock

Dogecoin (DOGE-USD) is now the 10th largest cryptocurrency, according to Coinmarketcap. It has a market value of more than $11.5 billion. However, recently Dogecoin has taken a big hit. In the last month alone it has fallen over 35% from 14.26 cents to below 10 cents (8.6 cents) as of May 16.

This provides investors with a huge bargain buying opportunity. As a result, investors have the ability to buy in at a level that has not been seen since over a year ago in April 2021. That was when it was trading below 10 cents around 6.5 cents per DOGE crypto token.

Undoubtedly Dogecoin has been hit hard along with almost all other cryptos due to the sudden decline of the stablecoin UST or TerraUSD, and the Luna token. They have lost almost all their value.

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As a result, all cryptos have taken a deep dive. It also didn’t help that Coinbase Global (NASDAQ:COIN), the largest crypto exchange has lost almost 48% of its value in the last 10 days since May 4. That was when it was trading at $130.15 and by Sunday, May 15, it was down to $67.87 per share.

DOGE-USD

Dogecoin

$0.0869

Market Capitalization Declines

Moreover, the largest crypto of them all, Bitcoin (BTC-USD) has fallen 22.8% in the last month alone. It has dropped from $40,414, down to $29,518 as of May 15.

In fact, Bitcoin’s market cap has a recent peak of $812 billion as of April 21, down to $593.4 billion today. That works out to a loss of over $219 billion for the largest cryptocurrency.

So no wonder Dogecoin has fallen from a recent peak market cap of $22.94 billion on April 4, down to $11.5 billion as of May 16. That is a loss of $10.64 billion or over 46% in a little over one month.

That is the kind of decline that observant value investors can take advantage of. It is almost the definition of ” blood in the street” opportunities for these kinds of buyers.

And it may not last long. Once the market starts to show a slight indication of stabilizing, Dogecoin will shoot back up to a more normal range.

In fact, the “whales” seem to be coming out of the woodwork. Newsbtc.com reports that the @DogeWhaleAlert account, a monitor of large Dogecoin transfers, has discovered two recent large transactions. They totaled more than 100 million Dogecoins, which at today’s price would be close to $9.3 million. In fact, at the time the two transactions were worth $8,497,274 and $11,625,997, respectively. The second transaction was recorded on Robinhood Markets (NASDAQ:HOOD).

Where This Leaves Investors in Dogecoin

Cryptos are not like stocks. They don’t have fundamental metrics relating to cash flow, balance sheet equity, or even dividends and dividend yield.

This means that investors have to rely on relative measures like performance, or non-direct measures of value such as numbers of digital wallets.

For example, anyone can read the chart that Dogecoin has produced over the past year and a half. For example, from February 2021 to April 2021, the crypto was treaded water between four and six cents per DOGE crypto token. After this is when the cryptocurrency took off like a rocket.

Correlation with Bitcoin

So one might assume if the currency eventually falls a little further to around six to seven cents it could be a super buying opportunity. But, just in case, investors should begin averaging down into the crypto right now, assuming that it could spring back sometime soon once conditions warrant.

For example, some investors say that Bitcoin could begin a move back to $34,000 over the next week or so. If that happens, then Dogecoin is likely to follow suit as well.

The fundamental reason for that is there is a high correlation between the price of Dogecoin and Bitcoin’s price movements. In the stock market, this is called having a high “beta.” The beta between Dogecoin and Bitcoin is probably north of 90%, although it has not been measured consistently.

One study shows that it is around 0.65. This means that Dogecoin will move 65% of the way Bitcoin does, up or down. The problem is this is an average. At extreme points, the correlation is likely to be even higher, closer to 0.90.

That is a good enough reason to begin buying into DOGE crypto now, even if it might slowly move lower.

On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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