Dogecoin (DOGE) Skyrocketed 251% in 2024, Outperforming Bitcoin and the S&P 500. Here's Why.

2024 was a stellar year for investors across the board. The S&P 500 and Nasdaq Composite surged by 23% and 29%, respectively, fueled by strong tailwinds in technology, healthcare, and energy stocks in particular.

However, another asset class that held up surprisingly well last year was cryptocurrency. Bitcoin's price soared by 120%, reaching new all-time highs. And yet, another cryptocurrency fared even better.

Dogecoin (CRYPTO:DOGE) skyrocketed by 251% in 2024, handily outperforming the S&P 500, Nasdaq, and even the king of the crypto realm, Bitcoin.

I'm going to delve into what influenced the meteoric change in Dogecoin's price. Additionally, I'll explain why Jan. 20 could be an important date for the cryptocurrency and assess whether now is a good time for investors to buy.

Dogecoin has been on an epic run, and...

The chart below illustrates Dogecoin's price action over the last year.

Dogecoin Price data by YCharts

As the chart shows, the price of Dogecoin really began to kick into high gear around early November. In fact, since Election Day (Nov. 5), the price of Dogecoin has gained 112% as of Jan. 13.

I don't believe the newfound enthusiasm surrounding Dogecoin to be a coincidence. During president-elect Donald Trump's time on the campaign trail, he spoke frequently about the need to reassess the federal budget and identify areas where spending could be reduced. This notion was championed by two Trump surrogates in particular, Tesla CEO Elon Musk and former Republican presidential nominee, Vivek Ramaswamy.

Leading up to the election, Musk often took to social media teasing the idea of creating a new federal agency called the Department of Government Efficiency (DOGE). Musk has previously shown support for Dogecoin, despite its meme-like nature and lack of utility in the real world.

However, investors connected the dots between the creation of DOGE and Musk's "support" of Dogecoin -- thereby fueling a buying frenzy in the cryptocurrency.

... the price could climb higher in January, but...

While the current price of Dogecoin has dropped roughly 28% from its prior high of $0.47, the crypto still remains considerably elevated compared to prior levels. I believe the sell-off in Dogecoin was caused by broader selling across both stocks and cryptocurrencies in general over the last few weeks.

However, Jan. 20 could be the day that Dogecoin begins to start rallying again.

The reason? Trump's inauguration will take place on Jan. 20.

Once Trump assumes the position of U.S. president again, Washington will get a makeover highlighted by a Republican-controlled Congress and new cabinet members advising Trump in the White House. As such, after Trump is sworn into office, the idea of Musk and Ramaswamy managing DOGE will become more of a reality.

Image source: Getty Images.

... such a move doesn't necessarily make Dogecoin a wise opportunity

The acronym for the Department of Government Efficiency (DOGE) matching the ticker symbol for Dogecoin is a coincidence -- although it's fair to assume that Musk did this on purpose. Regardless, the cryptocurrency and the idea of creating an agency to reduce government spending are separate.

Even if the price of Dogecoin begins to rally following Inauguration Day, the cryptocurrency is still a highly speculative investment. Moreover, any increases in Dogecoin in the near term will be driven more by narratives as opposed to actual underlying fundamentals.

In other words, DOGE and Dogecoin have no real overlap at this time. Thus, even if Musk and Ramaswamy create DOGE and are able to reduce the federal budget in a meaningful way, those actions have nothing to do with Dogecoin at all.

For these reasons, I would stay far away from Dogecoin altogether. While Jan. 20 could very well be a day that the cryptocurrency sees an outsized move, investors are best served sitting on the sidelines and allowing any narrative-driven volatility to play out.