Financial consulting firm The Motley Fool recently shared an article about Dogecoin. The article points out that investors can sell DOGE assets. Here are the details…
Is Dogecoin excitement over?
Every rise has a fall. Cryptocurrencies are no exception in this regard. The total market capitalization from the beginning of the year to date has dropped roughly 56 percent, ranging from $880 billion. However, not all coins are the same. Dogecoin faces certain challenges that could make it a particularly bad way for investors to bet on a potential recovery in the industry. So why? The Motley Fool points out that the ‘hype’ at DOGE is over
Originally created to mock wild speculation in the crypto industry, Dogecoin is the original “meme coin”; It is a type of cryptocurrency that relies on hype to attract investors rather than technical advantages. The asset has benefited greatly from the efforts of Tesla CEO Elon Musk, who frequently tweets in support of it. However, enthusiasm has proven unsustainable without the foundations to support it, according to The Motley Fool. In addition, difficulties at the macro level can make the situation worse.
As we have also reported as Kriptokoin.com , over $1 trillion in value has evaporated in the crypto ecosystem in a little over six months. This means investors have less money to throw in speculative assets like Dogecoin, which are often traded for other cryptocurrencies on exchanges. In the mainstream economy, the Fed is entering a tightening cycle by raising interest rates and shrinking its balance sheet. These moves can reduce capital and liquidity in the market. It can reduce the investor’s appetite for risky assets.
Dogecoin’s design is outdated
In the long run, macroeconomic challenges related to inflation and liquidity will likely be resolved. But competition could cause Dogecoin to continue to lag behind peers, even in a future cryptocurrency recovery. Since its launch in 2013, more meme cryptocurrencies have entered the market, often copying Dogecoin’s dog-based brand and its relationship with Elon Musk. Recently, the Shiba Inu (currently the 17th largest cryptocurrency) rallied over 60,000 percent in late 2021, possibly following a series of Musk tweets aimed at boosting Dogecoin.
While most of the competing meme coins are unlikely to maintain their long-term gains as they face the same shortcomings as Dogecoin, they highlight the asset’s weak economic ditch and lack of differentiation. Also, some of these new competitors have technical advantages. Unlike Dogecoin, which primarily serves as a way to store and transmit value, Shiba Inu is trying to create its own meme-coin ecosystem. This includes ways for investors to earn passive income (staking) by locking up their tokens in exchange for new ones. Shiba Inu is also working on a metaverse project designed to allow its users to create and enjoy gaming experiences on its network.
Bigger challenges coming?
With the cryptocurrency industry declining significantly in 2022, Dogecoin isn’t the only asset feeling the strain. However, according to The Motley Fool; The iconic meme coin is facing certain challenges that could cause it to underperform its peers during the bear market and possibly lag during a future recovery.
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