In the last couple of years, the cryptocurrency market witnessed a massive rise and a subsequent steep fall. During the last bull period in 2021, it seemed as though every crypto gained in price, and one of the best performers was the now-famous Dogecoin (DOGE 327.85%).
At one point in 2021, Dogecoin rose by more than 6,400% for the year when it climbed from just under a penny to nearly $0.65. On Monday afternoon, it was trading in the $0.09 to $0.10 range. Optimistic fans of the meme coin might hope that if this crypto winter thaws, Doge could make another monumental rally and potentially reach the coveted valuation of $1.
Those hopes look to be futile. Here are three reasons why:
1. A lack of utility and practical use cases
One of the main reasons why Dogecoin may struggle to reach $1 is its lack of practical use cases and utility. While the token has attracted a lot of attention, it has yet to prove its usefulness as anything other than a speculative investment vehicle or a means of exchange.
Unlike some other cryptocurrencies like Bitcoin and Ethereum, which have wide ranges of practical uses such as facilitating cross-border transactions and powering decentralized applications, Dogecoin does not.
And it seems like it might just stay that way. There has been little interest in Dogecoin from developers.
While not a token I’d recommend, its fellow dog-related meme coin Shiba Inu (SHIB 187.00%) has plans in the works to unveil new features such as the ability to trade non-fungible tokens (NFTs), allow users to trade cryptocurrencies on its own decentralized exchange, and give holders the ability to stake their SHIB and earn rewards. Plus, there are even talks of developing a Shiba Inu metaverse.
Without any practical use cases, the chances that Dogecoin will see significant adoption from consumers continue to dwindle. That makes its odds of hitting the $1 mark increasingly slim.
2. Inflationary supply
Likely the single largest factor that will dash Dogecoin lovers’ hopes of it reaching $1 relates to the token’s supply. Unlike Bitcoin, which has a fixed lifetime supply cap of 21 million coins, or even Ethereum which has a burn mechanism to offset the creation of new ether, Dogecoin has an uncapped supply. An unlimited number of the tokens can be created.
What this means is that demand for Dogecoin must outpace its ever-increasing supply. Considering that Dogecoin lacks any real utility, it seems like a long shot that demand will even keep up with supply. This could make it difficult for Dogecoin to maintain its value as ever more coins are minted and enter circulation.
3. Speculation-driven price appreciation
Another challenge that Dogecoin faces is that much of its recent price appreciation was driven by pure speculation rather than fundamental value. The truth of that phenomenon seems to get clearer by the day.
Typically, Dogecoin’s price only appreciates when it is favored with a moment of hype or social media buzz. Usually, that buzz is triggered by Tesla CEO and self-proclaimed Dogecoin lover Elon Musk making comments about the meme coin.
When the token’s price soared to an all-time high of more than $0.70 in May 2021, it was in large part due to Musk’s posts on Twitter, which praised the meme coin. The hype eventually culminated with Musk’s appearance on Saturday Night Live, where he proclaimed himself “The Dogefather.”
Since it touched that peak, Dogecoin has been in relative free fall. A look back at those occasions when its price has briefly rallied since shows that in each case, the spikes in price were primarily related to events unconnected to the crypto’s actual utility. One of those was Musk’s acquisition of Twitter. Another was when Musk hinted at integrating payments into Twitter, and Dogecoin hopefuls were optimistic that he would choose the meme coin. And most recently, on April 3, Twitter exchanged its bluebird logo for the Dogecoin logo and the token shot higher by more than 20% in a matter of minutes.
Outside of these instances though, Dogecoin’s price has been unable to muster any particular momentum.
While Dogecoin has benefited from plenty of hype in recent years, it will be a significant challenge for it to reach a value of $1. Its lack of practical use cases and utility, inflationary supply, and inability to provide any of its own price appreciation all make it unlikely that Dogecoin will increase by more than 1,100% to reach the $1 mark.