What Is The Future of Dogecoin and Is It Worth Investing In It?

 

Dogecoin, a minable cryptocurrency that started as a meme coin in 2013 is now ranked at number 5 when compared to other cryptocurrencies and has a market capitalization of $55 billion. Not much of a meme now eh?

Dogecoin similar to its industry leading peer Bitcoin, is a speculative currency in nature.  This can be referenced from Dogecoin's astronomical percentage growth in the last 12 months, rising by a staggering 16452%. Wow that's crazy isn't it?

David Kimberly, an analyst at U.K investing app Freetrade referred to Dogecoin's speculative bubble as 'a classic example of greater fool theory at play'. 

He goes onto to say that, 'people are buying the cryptocurrency, not because they think it has any meaningful value, but because they hope others will pile in, push the price up and then they can sell off and make a quick buck'. 

This means that investors who don't get out in time by selling their long positions might be left holding the bag at the end. Its a classic case of 'pump and dump'. Much of the hype of Dogecoin also has to do with well known billionaires; Elon Musk and Mark Cuban posting tweets in support of the cryptocurrency.

According to a recent survey by 'College Finance' an education website, 43% of current college student and recent graduates out of a total of 560 survey participants, were likely to invest in Dogecoin.

This hype might continue as long as more people keep investing in the coin thinking of it as a 'get rich quick' scheme. Once it reaches a price level that majority coin holders are targeting as their exit point, that's when the music stops.

Remember, human beings have been well known to document herd mentality in multiple situations with markets and investments being one of them. The Dogecoin hype led by billionaires and influential influencers could rally the coin to new highs and a lot of investor could end up making decent amount of return on their investment, given if they exit at the right time and are not the last one's out.

Let's talk about the price movement of Dogecoin in the next few days. Unfortunately if you are one of those investors who are looking for Dogecoin's price prediction into the future a few years from now, no one would be able to give you an accurate prediction or even a prediction that might make sense. The only predictions that you might get would show the price of Dogecoin increasing indefinitely.

A few metrics that I use to estimate the price of a crypto a few days from now are: RSI, MACD, Buy Sell Volume vs Price and the trading charts on a whole.

I have been analyzing various crypto's using the 'Buy Sell Volume vs Price' analysis and interesting found it to be a useful price indicator in most cases, the price follows the volume. The logic is simple, if we see a buying pressure in the last few days, it has a higher probability of leading the price higher and vice versa. I am sure it's not a unique analysis, many of you might already be using this technique.

The chart above shows the running volume in comparison to the close price of Dogecoin. As a reference, it can be seen from the chart that the sell volume took precedence over the buy volume in mid April and the price followed a couple of days later. 

Currently at the end of April, the chart shows a growing gap between the price and the volume line. If the selling pressure continues, it could drag the price of Dogecoin lower in the short term. This could trigger a 'Fear of Missing Out (FOMO)' effect whereby investors who haven't purchased the coin as yet, might get in at the lower price along with existing coin holders looking to accumulate more coins. This could resume the upward price movement of the crypto coin.

On the day scale, the RSI currently sits at 67.57 which is very close to the overbought range. RSI above 70 indicates the currency being overbought and below 40 indicates oversold. In Dogecoin's case, it crossed the 70 mark today and reverted to a level below 70. This could again indicate a short term downward trend in price.

MACD on the other hand indicates an upward movement in price, but this could change if a higher selling volume kicks in.

Overall, Dogecoin could prove to be a better store of value if its primary nature shifts from a speculative currency to a store of value or to be used to conduct transactions on various platforms. Dogecoin can currently be used as a tipping system on Reddit and Twitter. 

A considerable number of Dogecoin investors are betting on the coin being accepted as a medium of transaction on Amazon, whether their wish turns into a reality in the future, is not yet known or clear. 

Investing in Dogecoin in my opinion is entirely based on the mindset of the investor, their risk profile and what they are planning to get out of the investment. Let me know in the comment section if you would or wouldn't invest in Dogecoin. 

Note: Trading decisions should not be based on the opinion in this article, investors should conduct their own due diligence before buying the cryptocurrency. This article is purely based on my own research and understanding of the cryptocurrency in the article.