As I watch the meme stocks soar to incredible heights yet again, presently defying everything that we know about the markets, it has become clear to me that no one knows where Dogecoin (CCC:DOGE-USD) will end up. It’s possible that DOGE, the joke cryptocurrency that’s no laughing matter now, could end up trading in single-digit territory.
Ordinarily, that would be a nightmare for your typical blue-chip investor. But with Dogecoin, context is everything. At the beginning of January, DOGE was trading hands at two-tenths of a penny. If you had bought a dollar’s worth of this junk coin at that time, you would be looking at $500 in the aforementioned scenario.
Of course, the Dogecoin fanatics are throwing much more than just a buck into this venture. If social media is any guide, at least a few have dumped their life savings into DOGE. Using Reddit parlance, these folks are known as the 100%-ers.
By every measure, most folks will presumably look at the euphoria of the cryptocurrency space and declare it a bubble. Certainly, they wouldn’t hesitate to go after Dogecoin with such a label, given the completely speculative nature of this “investment.” Browse social media posts about DOGE and you’ll even find people who are seemingly self-aware of their lunacy.
Indeed, to be specially educated (many of these social media warriors use much harsher language) is a virtue in this digital environment. It’s all fun and games during the decided bull market of DOGE this year. But at some point, the music ends, which is where my concerns lie.
Take it from me: I’m actually long Dogecoin in the sense that I’ve only sold a modest portion of my holdings. It has treated me well, but you’re probably not going to see me add to my position. Here’s why.
Dogecoin Like Other Cryptos Has Teething Problems
I’m going to get a lot of heat for saying this but likely for a majority of crypto investors, the underlying asset class is nothing more than a platform to make money. That’s it.
It amuses me that so many folks play holier than thou regarding virtual currencies. They’ll ramble on and on about blockchain protocols and mining nodes and smart contracts. Some of the best charlatans will mention something about Kubernetes. But at the end of the day, if this junk wasn’t making money, there will be very few people in the arena.
Worse yet, even if people genuinely focused on the utility of cryptos, the whole sector suffers from major teething problems. For instance, Dogecoin isn’t the most utilitarian asset. But theoretically, its underlying protocol allows for microtransactions. Thus, some DOGE advocates might reason, they’re jumping in early on a paradigm-shifting technology adoption narrative.
Except one glaring problem exists: every other cryptocurrency has a claim on peer-to-peer transactions. Sure, some are more expensive to use than others. But what would make Dogecoin so distinct compared to other viable (and numerous) competitors?
Heck, how would Dogecoin stack up against traditional transactional platforms? According to data from Statista.com, during a spike of activity in January 2021, 11 major cryptocurrencies totaled 9.74 million transactions in a day.
That might sound like a lot until you consider that Mastercard (NYSE:MA) processes 74 billion transactions a year, or almost 203 million transactions a day. That’s just one company. Imagine bringing Visa (NYSE:V), American Express (NYSE:AXP) and others into the mix.
True, cryptocurrency transactions may be more efficient, allowing again for extremely small transactions to go through, democratizing finance. But in exchange for that inefficiency, credit card companies offer you protection against fraud and other nefarious activities.
With crypto? You can’t even protect yourself against a lost password.
The Sharp Reality of Cryptos
And yes, decentralization seems like the greatest thing ever — until you desperately need someone to fix your problem. Having been in the crypto space for a darn long time, I can tell you that this sector is rife with issues.
That’s why I no longer consider myself an ardent supporter of cryptos. I just trade them as dispassionately as anything else. Because as soon as you start buying into these crazy stories, you lose the objectivity required to recognize stretched markets.
I prefer my way — using wild cryptos to buy my home and be financially free from debt obligations. I think that’s a lot better than writing stupid posts on social media. But to each their own.
On the date of publication, Josh Enomoto held a LONG position in DOGE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management and healthcare.