Dogecoin: Can the Meme Coin Continue to Make Millionaires?

With its price up by about 340% year to date at the time of writing, Dogecoin (DOGE -1.99%) is an excellent example of this explosive, millionaire-making potential.

The cryptocurrency market has been a hotbed of activity in recent years, with some digital assets posting triple-digit gains. At their best, these assets can trounce the performance of traditional stock market indexes like the S&P 500 or Nasdaq Composite. But while some coins may be designed to improve upon the shortcomings of other blockchain platforms or to provide real-world utility, others serve no purpose beyond being the punchline to an online joke. These are known as meme coins.

Meme coins have a smaller market capitalization than mainstream cryptocurrencies, making them more volatile and capable of posting explosive returns when industry sentiment is bullish. They also tend to be favored by smaller investors who are looking for outsized gains. That said, their lack of fundamentals also makes them more susceptible to large price declines when the market turns bearish.

Dogecoin is likely the first of the meme coins, having been introduced in 2013. It was created by software engineers Billy Markus and Jackson Palmer, who sought to create a fun and lighthearted alternative to the serious and often-technical world of cryptocurrency. The coin features the image of a Shiba Inu dog from a popular meme and has a total supply that is designed to increase by 5 billion units each year (147 billion units are now in circulation).

Dogecoin began 2023 with a price of $0.070. As of this writing, the coin trades hands at about $0.11, up roughly 340% year to date. To put this in perspective, Bitcoin has gained about 23% and the S&P 500 index has fallen by about 1% over the same span of time.

Dogecoin is a poor performer relative to other digital assets, having gained only about 45% since bottoming out at $0.047 in December 2022. That said, it has outperformed the broader stock market and most other cryptocurrencies, which have posted losses of varying degrees.

Despite starting as a joke, Dogecoin has shown impressive performance. As the chart below shows, the coin has risen 103,400% since its inception, while Bitcoin has grown 16,470% during the same period. But while Dogecoin has minted its fair share of millionaires, it has also destroyed a lot of wealth in the process. Prices are still down about 45% from their all-time high of $0.7376, reached in May 2021.

Dogecoin Price data by YCharts

What is behind the latest rally?

While investing in Dogecoin can be considered a higher-risk, higher-reward way to play the cryptocurrency industry, potential investors should consider its fundamentals. Like Dogecoin's previous bull run in 2021, the asset's latest move is linked to Elon Musk, who is once again supporting the coin on X (formerly Twitter). The outspoken ally of the Trump administration will also be involved in a watchdog federal agency called the Department of Government Efficiency (DOGE). The organization's name's similarity to Dogecoin's ticker symbol is likely no accident.

On a more substantive level, investors may expect Musk's influence in the new administration to lead to a more favorable regulatory climate.

According to Time, Trump will replace the current Securities and Exchange Commission (SEC) chairman, Gary Gensler, who said he will resign when Donald Trump takes office as president. Gensler is credited (or blamed) for bringing several lawsuits against cryptocurrency platforms for alleged violations of securities laws. Targets included crypto exchange Coinbase Global, which the SEC sued in June for allegedly acting as an unregistered broker and exchange.

During the coming years, the government will help shape how the public interacts with digital assets. And many believe that Trump's proposed SEC head, Paul Atkins, will take a less heavy-handed approach.

Is Dogecoin a buy?

Dogecoin has been on a tear in recent weeks, and some investors are wondering if it's still a good buy. The coin has gained over 340% year to date, and it's now the ninth-largest cryptocurrency by market capitalization.

There are a few things to consider before buying Dogecoin. First, the coin is highly volatile, and its price can fluctuate wildly. Second, Dogecoin has limited utility and is primarily used for tipping and small payments. Third, the coin's supply is designed to increase each year, which could put downward pressure on its price over the long term.

Despite its limitations, Dogecoin has outperformed many other cryptocurrencies and the broader stock market in recent years. If you're looking for a volatile and potentially rewarding investment, Dogecoin could be an option to consider. But be sure to do your own research and invest only what you can afford to lose.