Cryptocurrencies have made a noticeable impact on the investing world in recent months. Dogecoin is a cryptocurrency in the same vein as Bitcoin.
Although it has existed since 2013, it has recently acquired popularity. Elon Musk has been credited with driving the price of Dogecoin higher through his tweets, and many ordinary investors are jumping on the cryptocurrency bandwagon.
Cryptocurrencies are the hot new thing, and some investors stand to profit handsomely.
Dogecoin: Weighing the Pros and Cons
In general, cryptocurrency is a challenging investment because of its tremendous volatility. Dogecoin’s price soared roughly 400 percent in a matter of days earlier this year. A few weeks later, its price had fallen about one-third from its peak.
Like the GameStop tragedy earlier this year, Dogecoin’s price has skyrocketed, but the fundamentals remain the same. Few companies accept Dogecoin as payment, and unless this situation changes, Dogecoin will fail to thrive in the long run. Even if cryptocurrencies as a whole finally gain public acceptance, Dogecoin may or may not do so.
Dogecoin is particularly hazardous since it lacks the legitimacy of other cryptocurrencies, most notably Bitcoin. It began as a joke based on a meme and quickly gained popularity when investors in online forums like Reddit started supporting it.
Dogecoin may prove to be a profitable short-term investment. Without a doubt, if you had invested in mid-January and sold at the optimal time, you could have profited handsomely.
On the other hand, short-term investing is extremely dangerous and a surefire way to lose a lot of money. Timing the market is nearly tricky, but it becomes even more complicated for a speculative investment with questionable fundamentals like Dogecoin.
If you are unwilling to retain an investment for an extended period, it is probably not worth investing. Dogecoin is a hazardous investment because it lacks a track record, and there is no way to predict where it will go in a few years. As a result, it’s generally prudent to avoid it for the time being.
A Safer Investment Choice
While Dogecoin may not be a suitable fit for most investors, there is a safer alternative: crypto stocks.
A crypto stock is a company with some connection to cryptocurrency. Whether it invests in it, accepts it as a form of payment, or develops the technology that underpins it. NVIDIA is a technological business that does not directly deal with cryptocurrency but instead powers the computational aspect of the technology. Tesla, for example, recently invested $1.5 billion in Bitcoin, and CEO Elon Musk revealed that people can now purchase Teslas using Bitcoin. Additionally, Shopify enables retailers to accept cryptocurrency as a means of payment.
The key to investing in cryptocurrency stocks is to select companies based on their business fundamentals. In other words, avoid investing in them solely because they are crypto-related.
Dogecoin is a high-risk, volatile investment that is not suitable for everyone. Consider investing in this cryptocurrency only if you have a high-risk tolerance. And, if you do decide to invest, invest only funds that you can afford to lose. The best course of action for everyone else is to invest in suitable long-term investments.
Excellent investments will continue to be exceptional regardless of what happens to cryptocurrencies. Even if the crypto market collapses, good businesses should be able to thrive. It can help you mitigate risk while still participating in the cryptocurrency revolution.
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