I bought Dogecoin for 5 cents. Here’s why I’m never buying again.
I started writing for InvestorPlace full-time in April 2021. It was my first job after college, and to say I was nervous would be an understatement. I was frankly out of my element. I had a very limited background in finance and found the prospect of reporting financial news overwhelming. Yet, I persevered, thanks to my will to perfect my craft. I can also attribute my success to one particular asset – Dogecoin (DOGE-USD).
I quickly realized that I not only had to become an expert in finance, but also an expert in cryptography. Bitcoin (BTC-USD) was everything everyone wanted to read because it added thousands of dollars to its value. To start learning more about the world of crypto, I needed to retreat into space; but buying Bitcoin would simply have been too expensive. Instead, I bought a small bag of DOGE.
Memes – the essence of modern humor – are hard to “get”. Especially to those who didn’t grow up in the internet age, the post-ironic, hyper-niche world of meme culture seems disjointed and woefully unfunny. But, without the existence of memes, people would not have earned millions of dollars trading crypto. Indeed, Dogecoin meme investing was my first experience – and that of many other investors – in digital assets. And, like it or not, it is one of the most important assets of this decade.
Musk and Memes go to the moon
Most people would consider DOGE a failure. Trading at just 7 cents apiece, it’s not “over the moon” as fanatics might have expected. It doesn’t have a centralized core like its Layer 1 peers, its network doesn’t host a bunch of dapps or have a flashy proof-of-stake system to make it work cheap and elegant. Then again, neither is Bitcoin.
On paper, Dogecoin is exactly the same project as Bitcoin. These are two assets – coins – built on Layer 1 networks to facilitate peer-to-peer transactions. In reality, they were not built for the same purpose. I knew Dogecoin was a joke, and jokes are cheap, so Dogecoin was where I bet my dollars.
Beyond its price, what sets Dogecoin apart from Bitcoin is its customer base. The asset’s association with the likes of Elon Musk has sparked a frenzy that may never be seen again.
Celebrities and brands have latched onto Dogecoin with fervor. Through these associations, people have also acquired their first look at non-fungible tokens (NFT) and learned how crypto could be a government-regulated fiat substitute. Interested investors also had little trouble finding DOGE, compared to other cryptos. It was one of the few crypto assets traded on Robin Hood (NASDAQ:HOOD). The fact that buyers did not need to create a wallet or register with a crypto exchange certainly contributed to the price storm.
Dogecoin caught fire. Interest led to entry as billions of dollars poured into the project, put there by many who had never even heard of blockchain until that first week of April 2021. I was one of these people. When I bought Dogecoin it was trading at around 5 cents. A few weeks ago, it was only a penny. And who could resist gains multiplied by four? Certainly not me.
I bought my DOGE because I heard a friend’s brother invested in DOGE in 2020, and it paid off. He put maybe $100 in the asset and forgot about it. This was not a person who checked Robinhood with religious fervor like the same stock traders of that time.. But he fell on hard times. He went to check his account and sold some assets, and was stunned to see that DOGE’s holdings were $100 in several thousand. Never before had I heard of this measure of success so close to my social circle.
His story was not unique and he was by far not the person who got the most out of DOGE at that time. Indeed, hundreds of people have become millionaires out of the currency. The meme was slowly changing. It was all fun at first, with Elon Musk and Mark Cuban pumping the coin and holders seeing how high it could go. Yet there were tears at the seams, prices were rising, investors were arriving too late, and the celebrity hype was not working like it used to. There were signs on the horizon that Dogecoin would not hold out for long.
As for me, I have never made any money with the coin. While I bought it very early, I sold my miserable bag fairly quickly. I couldn’t own the assets I was covering for work and, wanting to continue chronicling the DOGE saga and crypto as a whole, I had to sell.
The unlucky legions of investors caught holding the bag could experience the hard lesson of investing in speculative assets. As I said, Dogecoin was not here to change the world. He was brought to life to laugh at what he has become. So when the hype train ran out of steam on an incline, it fell back (almost) back to where it started.
The volatility piqued my curiosity. Mark Cuban was trying to do something serious with Dogecoin when his NBA team started accepting the coin as payment for tickets and merchandise. A whole wave of companies with DOGE-HODLing owners accepted the coin as payment in hopes that their investments would take off. Businesses have even sprung up, currency theme. Apps like Flexa provided workarounds where one could shop at big box stores and pay indirectly with DOGE.
A morbid curiosity led me to launch the InvestorPlace editors a story in which I lived on Dogecoin for a week. I provided a list of retailers and ways I could potentially swing it. The goal was to see if, even in a world built by the sheer will of Cuba, Musk, and the Doge military, Dogecoin could truly thrive as a medium of exchange. I figured that with the price fluctuations, the allocation I would use would not last a day. Fortunately, for my health, this idea was rejected.
This surge and fall in Dogecoin prices would inadvertently change the face of crypto forever. If it wasn’t on regular investors’ radars before, it certainly was now. $100 in DOGE a few months ago was now worth thousands. Suddenly, the joke motto had become many people’s first exposure to digital assets.
And yes, it may be hard to believe, but almost everything that has happened in crypto since then can be traced in some way to Dogecoin. If investors hadn’t had the low-stakes purchase of crypto they made with DOGE, there’s no doubt there would have been fewer people hoarding in Bitcoin raise its prices. There would be fewer customers on exchanges like Binance. In fact, it was DOGE that investors flocked to when the global crypto market cap topped $1 trillion for the first time.
More important than the investment gains, however, is that people have learned from Dogecoin about the possibilities of a world beyond the Euro and the US Dollar. Millions of people understood what cryptocurrencies were trying to accomplish and flooded decentralized finance (DeFi) networks like Ethereum (ETH-USD).
A new problem has emerged following the rise of Dogecoin. The developers were trying to replicate the speculative model. Some hoped to pick up the pieces by reorganizing the community and trying to build on it. shiba inus (SHIB-USD) East such a project. Others hoped that the low effort required to make a copy token could lead to easy money, and ripped off the thousands of green crypto investors now in the space.
While Dogecoin introduced many people to cryptocurrency, it also made way for scams totaling billions in losses. Jackson Palmer, one of the co-founders of Dogecoin, left the project a long time ago and quit social media in 2019. But following the success of Dogecoin, he resurfaced to criticize the role of his project in creating a vicious circle of rug draws.
It’s time for Dogecoin to bow out in style
The two years since “Dogecoin Mania” have given me plenty of time to reflect on DOGE. I have come to the conclusion that this is perhaps the most important crypto asset. And yet, I don’t think he needs to come back into the limelight again.
The asset has proven to be key to the growth of the crypto industry. He was in the right place at the right time with his Robinhood roster. Pandemic-era monetary policy that relied on speculative investing contributed to this perfect storm. Crypto’s rise into the mainstream would not have happened without DOGE.
But should we leave the door open to projects like Dogecoin? DOGE and the thousands of tokens it inspired do not offer functionality. And as I’ve learned since 2021, when a project gets investors excited, it does more harm than good. Dogecoin has achieved its assigned goal with this run in 2021: Crypto is now successfully in the mainstream.
As for me, I will never buy DOGE again. If I invest in cryptocurrencies in the future, I will focus on assets with real utility. And I would encourage other investors to do the same.
As of the date of publication, Brenden Rearick did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.